While the Coronavirus outbreak has been a tragedy for the markets and life in general, it has opened up an opportunity for very profitable trades. Small cap companies that were headed nowhere now have a shot of life as they try to use their technology or manufacturing capacity to help the health care system deal with COVID-19. We are issuing a trade alert on EastWest Bioscience Inc. (HBOSF) (EAST.V) and one on Mission Ready Solutions Inc. (MSNVF) (MRS.V) which has pulled back to an ideal level a few days after its COVID news.
On February 27, we issued an alert on Vaxil Bio (VXL.V) (VXLLF) as the next big Coronavirus play hidden on the TSX Venture. VXL rose from $0.08 to as as high as $0.34 in the days following our alert before settling at $0.10. On March 13, we issued an alert on Lattice Biologics Ltd. (LBL.V) (LBLTF) at $0.05. It rose as high as $0.21 in the days following our alert and sits at $0.07 now. On May 12, we issued an alert on Therma Bright Inc. (THRM.V) at $0.03 and so far it has not moved and sits at $0.025. We are up to 888 followers on our ValueTrades blog despite not giving out a lot of alerts, a fact that we think is indicative of a successful, diligent and prudent stock picking history. If you like our picks you can also follow this blog by clicking the follow button on the top of the left hand panel. You can follow us on Twitter @StockTradePicks which has over 4,000 followers.
EAST is up 100% to $0.03 on over 5 million shares traded in mid-afternoon trading after the announcement that its hand sanitizer received Health Canada approval. This is big news as EAST has only a $2.5 million market cap with 85 million shares outstanding. CEO Rodney Gelineau recently purchased EAST shares on the open market at $0.015 and owns a total of 15 million, or 18% of total shares outstanding. The comparable company in the United States is Youngevity International, Inc. (YGYI), which has more than doubled in price since April 6th when it announced FDA approval for its hand sanitizer product. YGYI has added and kept $25 million in market cap since approval. Even when accounting for a market that is one-tenth the size of the United States, EAST's news justifies at least a $2.5 million market cap increase, or $3.5 million Canadian. We have seen examples in Canada such as MedMira (MIR.V) (MMIRF) and Datametrex AI (DM.V) (DTMXF) which trade far greater than 10% of comparable stocks in the United States. DM trades at a $30 million market cap and MIR at $200 million; the latter being comparable in size to Aytu BioScience, Inc. (AYTU). DM has achieved Health Canada approval while MIR is seeking FDA EUA approval for their COVID-19 test kits. Given these circumstances, we can see EAST trading in the $5 million to $10 million market cap range, or $0.06 to $0.12 per share.
We have also initiated a position in MRS at $0.125 with a target price in excess of $0.20. MRS trades at a market cap of $24 million CAD, just 1.0x revenue of a recent contract award with FEMA announced last week. The stock moved from $0.055 to as high as $0.19 before pulling back to $0.12 today, which we think is an ideal level to get in. The FEMA contract calls for $24 million to $36 million of personal protective equipment to be delivered by the end of September. So there is great potential for add-on contracts down the road before the end of the year. MRS has a 12% gross margin on existing business in its last quarter, with a $3.3 million net loss on $5 million in revenue. Growth has been heavy as it is currently fulfilling $75 million worth of contracts. Assuming a 10% gross margin on at least $100 million in revenue for 2020, $10 million in gross margin could be enough to make the company profitable. The FEMA contract also signifies a major development which the market is overlooking. MRS lost the right to bid on special operation equipment government contracts in the U.S. last year, an event that caused the stock to drop from over $0.20 to $0.05. The successful performance of this FEMA contract would be a substantial boost to getting back into the good graces of the U.S. Federal Government bidding process.
Disclosure: We are long EAST.V, MRS.V
What's next for microcap stocks? TradeMiner identifies seasonal trends and market cycles, the Penny Stock Prophet and Microcap Millionaires finds the next big small cap plays in various industries while Addicted to Profits makes trades from a Canadian perspective.
There are also some good books available on microcap stocks and day trading such as:
Mastering Microcaps: Strategies, Trends, and Stock Selection (Bloomberg Professional Library)
The Little Black Book of Microcap Investing: Beat the Market with NASDAQ/AMEX Microcap Stocks, OTCBB Penny Stocks, and Pink Sheet Stocks
Microcap Magic: Why The Biggest Returns Are In Stocks You've Never Heard Of
How to Day Trade for a Living: A Beginner’s Guide to Trading Tools and Tactics, Money Management, Discipline and Trading Psychology
How to Day Trade: A Detailed Guide to Day Trading Strategies, Risk Management, and Trader Psychology
A Beginner's Guide to Day Trading Online (2nd edition)
Stock Investing for Beginners: Marijuana Stocks
Here are some other good stock market resources. This includes technical analysis and day trading, dividend stock investing, gold and commodities, sector rotation, options trading and microcap trading strategies:
The dividend stock report from dividendstocksonline.com
On February 27, we issued an alert on Vaxil Bio (VXL.V) (VXLLF) as the next big Coronavirus play hidden on the TSX Venture. VXL rose from $0.08 to as as high as $0.34 in the days following our alert before settling at $0.10. On March 13, we issued an alert on Lattice Biologics Ltd. (LBL.V) (LBLTF) at $0.05. It rose as high as $0.21 in the days following our alert and sits at $0.07 now. On May 12, we issued an alert on Therma Bright Inc. (THRM.V) at $0.03 and so far it has not moved and sits at $0.025. We are up to 888 followers on our ValueTrades blog despite not giving out a lot of alerts, a fact that we think is indicative of a successful, diligent and prudent stock picking history. If you like our picks you can also follow this blog by clicking the follow button on the top of the left hand panel. You can follow us on Twitter @StockTradePicks which has over 4,000 followers.
EAST is up 100% to $0.03 on over 5 million shares traded in mid-afternoon trading after the announcement that its hand sanitizer received Health Canada approval. This is big news as EAST has only a $2.5 million market cap with 85 million shares outstanding. CEO Rodney Gelineau recently purchased EAST shares on the open market at $0.015 and owns a total of 15 million, or 18% of total shares outstanding. The comparable company in the United States is Youngevity International, Inc. (YGYI), which has more than doubled in price since April 6th when it announced FDA approval for its hand sanitizer product. YGYI has added and kept $25 million in market cap since approval. Even when accounting for a market that is one-tenth the size of the United States, EAST's news justifies at least a $2.5 million market cap increase, or $3.5 million Canadian. We have seen examples in Canada such as MedMira (MIR.V) (MMIRF) and Datametrex AI (DM.V) (DTMXF) which trade far greater than 10% of comparable stocks in the United States. DM trades at a $30 million market cap and MIR at $200 million; the latter being comparable in size to Aytu BioScience, Inc. (AYTU). DM has achieved Health Canada approval while MIR is seeking FDA EUA approval for their COVID-19 test kits. Given these circumstances, we can see EAST trading in the $5 million to $10 million market cap range, or $0.06 to $0.12 per share.
We have also initiated a position in MRS at $0.125 with a target price in excess of $0.20. MRS trades at a market cap of $24 million CAD, just 1.0x revenue of a recent contract award with FEMA announced last week. The stock moved from $0.055 to as high as $0.19 before pulling back to $0.12 today, which we think is an ideal level to get in. The FEMA contract calls for $24 million to $36 million of personal protective equipment to be delivered by the end of September. So there is great potential for add-on contracts down the road before the end of the year. MRS has a 12% gross margin on existing business in its last quarter, with a $3.3 million net loss on $5 million in revenue. Growth has been heavy as it is currently fulfilling $75 million worth of contracts. Assuming a 10% gross margin on at least $100 million in revenue for 2020, $10 million in gross margin could be enough to make the company profitable. The FEMA contract also signifies a major development which the market is overlooking. MRS lost the right to bid on special operation equipment government contracts in the U.S. last year, an event that caused the stock to drop from over $0.20 to $0.05. The successful performance of this FEMA contract would be a substantial boost to getting back into the good graces of the U.S. Federal Government bidding process.
Disclosure: We are long EAST.V, MRS.V
What's next for microcap stocks? TradeMiner identifies seasonal trends and market cycles, the Penny Stock Prophet and Microcap Millionaires finds the next big small cap plays in various industries while Addicted to Profits makes trades from a Canadian perspective.
There are also some good books available on microcap stocks and day trading such as:
Mastering Microcaps: Strategies, Trends, and Stock Selection (Bloomberg Professional Library)
The Little Black Book of Microcap Investing: Beat the Market with NASDAQ/AMEX Microcap Stocks, OTCBB Penny Stocks, and Pink Sheet Stocks
Microcap Magic: Why The Biggest Returns Are In Stocks You've Never Heard Of
How to Day Trade for a Living: A Beginner’s Guide to Trading Tools and Tactics, Money Management, Discipline and Trading Psychology
How to Day Trade: A Detailed Guide to Day Trading Strategies, Risk Management, and Trader Psychology
A Beginner's Guide to Day Trading Online (2nd edition)
Stock Investing for Beginners: Marijuana Stocks
Here are some other good stock market resources. This includes technical analysis and day trading, dividend stock investing, gold and commodities, sector rotation, options trading and microcap trading strategies:
The dividend stock report from dividendstocksonline.com
The dividend stock report from Dividend Stocks Rock
Goldmasterinvesting.com Ocean Of Gold Report for the top 15 gold mining companies
Trader Review
The Trader's Academy Club
The Wealth Builder's Club from beatthemarketanalyzer.com
MyBB: A Forum For Investors and Traders
Spartan Trader Forex Academy Live Daily Trading Room
And try the Z Code System if you're looking for other ways to make money systematically outside of the stock market.
Goldmasterinvesting.com Ocean Of Gold Report for the top 15 gold mining companies
Trader Review
The Trader's Academy Club
The Wealth Builder's Club from beatthemarketanalyzer.com
MyBB: A Forum For Investors and Traders
Spartan Trader Forex Academy Live Daily Trading Room
And try the Z Code System if you're looking for other ways to make money systematically outside of the stock market.
For those who are interested in trading bitcoin and other cryptocurrencies, here are some links to valuable reports and strategies:
