Wednesday, 26 July 2017

Isodiol: A Profitable Cannabis Company

On Sunday we recommended Isodiol International (LAGBF) which also trades in Canada under the symbol ISOL. The stock on both sides of the border rose over 20% on Wednesday. Since our recommendation, ISOL has risen from $0.23 to $0.30 CAD in three trading days. If you like our picks make sure to follow our blog by clicking the follow button on the top of the left hand panel.



ISOL was up on a follow up announcement of Q1 results that confirmed profitability for the quarter:

"VANCOUVER, BC / ACCESSWIRE / July 26, 2017 / Isodiol International Inc. (CSE: ISOL) (OTC PINK: LAGBF) (Frankfurt: LB6A) (the "Company" or "Isodiol") a global cannabis innovator, specializing in the development of pharmaceutical and consumer products, announces the operational numbers of its wholly-owned subsidiary for the period from April 1, 2017 to June 30, 2017. Iso International LLC recorded unaudited fiscal Q1 profits of $897,596 based on revenues of $4,919,693 CAD.

Marcos Agramont CEO of Isodiol stated, "Demonstrating Q1 profitability is a major milestone for our company and our investors. The cannabis industry on a whole will be legitimized by demonstrating successful commercialization and operating in an environment which promotes the cannabis movement. We have developed product lines and brands which will generate revenues and profitability and now we're positioned to begin exploring additional expansion opportunities. Vertical integration, expanding product distribution channels and out-of-state manufacturing and processing are all opportunities we will aggressively develop and execute."

About Isodiol International Inc.

Isodiol International, Inc. is the market leader in pharmaceutical grade cannabis compounds and the industry leader in manufacturing and development of consumer products. Isodiol's nutraceutical division is the pioneer of many firsts for Hemp-derived cannabidiol (CBD), including 99% pure crystalline isolate, micro-encapsulation, and nano technology for the highest quality consumable and topical skin care products.

Isodiol's growth strategy includes the development of over-the-counter and pharmaceutical drugs, seeking joint ventures and acquisitions to expand its portfolio of brands and subsidiaries and will aggressively continue International expansion into Latin America, Asia and Europe."

The results are unaudited and will remain so until the annual report. Maybe some investors will remain skeptical until then as there could always be write-offs and accruals demanded by the auditors that could impact profitability on the entire year. However, this concern would be the same for all cannabis companies and microcap stocks in general when it comes to the quarterly results. The company is due to release its unaudited financials in the next few weeks so that will provide more clarity.



On Sunday we said that we believe that ISOL could be a $2.00 stock and figured it will be at least $1.00 by the end of the year. The following chart should provide more clarity around that. This chart compares ISOL to some of the most popular cannabis stocks trading in Canada. That is Canopy Growth Corporation (TWMJF), Aurora Cannabis Inc. (ACBFF), Aphria Inc. (APHQF), OrganiGram Holdings Inc. (OGRMF), Supreme Pharmaceuticals Inc. (SPRWF) and Emblem Corp. (EMMBF).

These are the last reported quarter results which we then annualized (multiplied by 4) to come up with their revenue and earnings multiples. We used this format because revenue is growing quickly for many of these companies and using the trailing four quarters would understate the current revenue run-rate. While this method may not be perfect and may not fairly present the investment case for each of the other companies listed, it clearly shows the investment case for ISOL. All figures are in $CAD. We took all this data from news releases or SEDAR filings manually (SEDAR is the Canadian equivalent to EDGAR) and we are human and might have made an error. So don't just take our word for it, compile this data for yourself.


ISOL has a revenue multiple of 2.6x. The next lowest multiple belongs to WEED at 25.8x, nearly ten times higher. The rest of the companies have revenue multiples above 40. ACB has the thinnest of profit margins but the rest have negative earnings while ISOL has an earnings multiple of 14.5x when Q1's great result is annualized. So while the other cannabis companies trade at very aggressive multiples because of the growing medical marijuana industry and movement towards legalized recreational use, ISOL is trading at valuations similar to a boring, old retail stock.

ISOL has similar revenue and higher profits to ACB and APH last quarter but it trades at barely over 5% of their market caps. Put another way, ISOL has to move 15-20 times higher, or $4.50 to $6.00, to align with those companies on a revenue multiple and will still operate at a higher profit level.

Does the market wish to give the major MMPR growers like WEED and ACB a premium versus something like ISOL which concentrates on CBD and cannabis-infused products? Perhaps. But is that premium justified at 10-20x? We think not. We think that the extreme discount for ISOL is from three factors, none of which are going to be permanent depressors of the stock:

1. It's a newly-formed company after Laguna Brands went on a shopping spree. So it is under the radar compared to Aurora and Canopy which are household names in the industry.

2. Some people may be waiting to see a full set of (unaudited) financial statements instead of relying on a press release to see if profits truly mean profits instead of something else (EBITDA or gross margins or comprehensive income). They may find it too good to be true that a cannabis company can have such a strong start at this early stage.

3. With all the acquisitions, the share count has risen substantially to 173 million over the last few months. Even though these acquisitions were very smart, it still has created a lot of cheap paper that needs to be absorbed by the market. That's okay, we absorbed more of that cheap paper upon today's news.

Disclosure: We are long ISOL on the Canadian Stock Exchange

If you're interested in making money investing or trading the stock market, here are some good resources to assist you. This includes technical analysis, investing in the weed sector, dividend stock investing, gold and commodities, sector rotation, options trading and microcap trading strategies.

Marijuana stocks were lightning hot last year, the cream of the performance crop in the microcap sector. Microcap Millionaires can show traders how to make big gains in this sector as well as many others in the microcap and penny stock world.

Click Here for Microcap Millionaires Free Video: How To Score Up To 1,400% Gains With "Weed Stocks" in 2017

Learn How to Maximize the Dividend Return of Your Portfolio With Access to a List of the Top 100 Dividend Stocks

If you are interested in improving your investment returns through dividends then dividendstocksonline.com might be a useful resource for you. Their simple stock filter ranks each company's dividend by return and sector but the key to investing in dividend stocks is sustainability. The site provides additional information in order to help you make that determination such as 5-year dividend growth rate, 3-year income growth rate, payout ratio, 1-year return and DSO rating,

Additional benefits include:

  • The ability to get the top dividend ratings for stocks going ex-dividend each month so you know when to buy and sell them to collect as many dividends as possible.
  • Split your portfolio between safe dividends, growth dividends and high-yield DRIPs so you can better refine your risk vs return profile.
  • Finally, get REIT and international stocks' dividend ratings in order to diversify your portfolio. 

Click here for the dividend stock report from dividendstocksonline.com


Seven Proven Dividend Investing Principles, One Website

Dividend Stocks Rock follows seven principles in order to maximize the returns on dividends:

  • High Dividend Yield Doesn’t Equal High Returns
  • Focus on Dividend Growth
  • Find Sustainable Dividend Growth Stocks
  • The Business Model Ensure Future Growth
  • Buy When You Have Money in Hand – At The Right Valuation
  • The Rationale Used to Buy is Also Used to Sell
  • Think Core, Think Growth

You can find out more about these seven principles by visiting their website


Top-Rated Signals for Binary Options

If you're interested in trading options, both calls and puts on certain large cap stocks, binaryoptionsprosignals.com sends real-time trading signals on a select group of stocks, forex pairs and commodities. The site claims over 70% accuracy thanks to a combination of trading algorithms and technological advances which allow it to produce signals through predictive software.

The report currently sends out alerts on Apple, Google, IBM, JP Morgan Chase, Coca-Cola, ExxonMobil, Facebook, Alibaba, Dow Jones, and S&P 500. Click here for access to the top rated signals for binary options



The Top 15 Gold Mining Companies


There are a ton of gold stocks out there so it may be overwhelming for a novice or casual investor to figure out which stock is the best. This 250+ page investment report showcases the top 15 gold companies to invest in right now from an author who lives in South Africa, a top 5 country in the world when it comes to mining gold along with other minerals. His first hand experience being "on the ground" and "in the mining field" gives him special insight into the industry that regular investors may not have. Click here for the Goldmasterinvesting.com Ocean Of Gold Report





WallStreetWindow: Your Game Plan For Trading Gold

For anyone interested in trading gold and silver, WallStreetWindow's Gold Trading Program is a must-read.


TraderReview: Professional Daily Market Strategy Newsletter

Learn to trade stocks, options, commodities and forex profitably with Trader Review's  secret charting methodology with instant portfolio access to their picks.

Z Code System: For something a little different

Try the Z Code System if you're looking for other ways to make money systematically outside of the stock market.

Sunday, 23 July 2017

Isodiol: 10x Undervalued Cannabis Stock Inks Deals With Canopy

Before we get into our next pick, we need to briefly speak about Applied Optoelectronics (AAOI). On May 6th we initiated a strong buy call on AAOI with our article "AAOI: Eight Reasons To Expect This Tech Unicorn To Double By The End Of 2017" and the stock has been on fire, up over 60% to $90 since then. It hit as high as $95 last week before dropping after another short attack from BWS Financial.



BWS has already done this song and dance once before as our article on June 20th "AAOI: Strong Buy Price Target $250; Short Squeeze Imminent" will show. BWS called for a $25 price target while we called for a $250 price target. Since then AAOI has risen from the low $60's to $90 so that goes to show you how much of an expert Hamed Khorsand, head analyst at BWS, really is. Khorsand's rating on TipRanks has deteriorated in the month since the first time he pulled this scheme, with his success rate down to 45%:



How this analyst continues to get mainstream coverage while we have a much better track record is a mystery. We are up to 266 followers and we don't think that is by accident. If you like our picks make sure to follow our blog by clicking the follow button on the top of the left hand panel.

Now onto our next pick. The marijuana industry has been lightning hot upon expectations of favorable government rulings for recreational use and increased open-mindedness over cannabis-based medicinal uses. The issue with a lightning hot industry is that the major players in that industry tend to trade at quite aggressive valuations. There may be one exception to that.

Laguna Blends (LAGBF) has recently gone on an acquisition spree. It has changed its name to Isodiol International to reflect its largest acquisition. This stock is listed on the OTC and we rarely pick OTC stocks. But you really don't have much of a choice when it comes to weed companies. Isodiol trades frequently on the Canadian Stock Exchange under the symbol ISOL. So it's not quite like the typical OTC stock. LAGBF closed at 18.74 US cents on July 21 and ISOL at 23 CAD cents. With 173 million shares outstanding, Isodiol has a US market cap of $32 million and $40 million Canadian.

What makes ISOL/LAGBF stand out as an OTC company other than the fact that it is dual-listed is that it can claim that is is EBITDA positive:

While these numbers are unaudited, $12 million in revenue and $1.6 million in Adjusted EBITDA makes it sound like ISOL is a steal compared to its peers with a trailing revenue multiple of 2.7x.

Furthermore, the consolidated company "recorded sales of $1,843,173 CAD for the thirty-day period ended June 30, 2017. Total quarterly sales were $4,919,693 CAD for the period April 1st to June 30th, 2017" according to a press release on July 11. If sales are $5 million CAD per quarter, ISOL is trading at a 2x revenue multiple.

Contrast this to Canopy Growth Corporation (TWMJF) (WEED.to) which has a market cap of $1.37 CAD billion. Revenue was $14.7 million in its last reported quarter and $40 million for the year. Canopy's trailing revenue multiple is 34x while Q4 equates to a $60 million annualized run-rate or a revenue multiple of over 22x. Canopy is growing very quickly, but so ISOL so it's difficult to imagine that ISOL is over ten times undervalued compared to Canopy. Especially in light that the two companies have recently announced a distribution deal:

"VANCOUVER, BC / ACCESSWIRE / July 20, 2017 / Isodiol International Inc. (CNSX: ISOL) (OTC PINK: LAGBF) (FSE: LB6A) (the "Company" or "Isodiol") a global cannabis innovator specializing in the development of pharmaceutical and consumer products is pleased to announce it has signed a licensing agreement with Canopy Growth Corporation ("Canopy") (WEED) (https://www.canopygrowth.com).

Canopy Growth is the world's premier cannabis company that operates a collection of diverse brands and curated strain varieties, supported by over half a million square feet of indoor and greenhouse production capacity. Under this licensing agreement, Canopy Growth will have the right to manufacture and distribute the Company's "Pot-O-Coffee" and "Pot-O-Tea" branded marijuana infused single serve K-Cup products in Canada and certain other markets internationally as federal regulations allow. Licensed products include caffeinated and de-caffinated product lines as well as Isodiol's single serve "Pot-O-Coco". In addition to the Canadian rights, Canopy Growth shall have the right of first refusal to sell the "Pot-O" brand products in any territory outside of the US, Mexico and Puerto Rico.

"This distribution agreement has us positioned to increase our global footprint with the largest cannabis company in the world. We will continue to develop our Pot-O-Coffee product lines with ready to drink and cold brew products while working with Canopy Growth for international distribution channels. The Pot-O-Coffee brand is well recognized, and adding additional products to this line will continue to strengthen its market presence," stated Isodiol's CEO Marcos Agramont.

The availability of the various licensed products in Canada and elsewhere will differ depending on applicable laws and regulation. While Canadian law does not yet permit the manufacture and sale of marijuana infused products, the Company anticipates that such products will be permitted in the near future. Furthermore, currently proposed regulations which would permit the sale of infused products, would not allow such products to contain both marijuana and caffeine. As such, the specific product offerings in Canada and elsewhere may be limited. The Company will provide additional updates as regulations are adopted and as product roll-out plans are developed."



ISOL's stock has been diluted over the past several months as the company has gone on its acquisition spree. Any investor can see that this is money well spent but it has also led to a buying opportunity as some may fear that the 12 cent shares will flood the market in a couple of months when the lock-up period expires. With a revenue multiple of 2x on an EBITDA positive business in a lightning-hot industry, a strong growth profile of cannabis-infused products and pure, natural CBD and a distribution deal with Canopy, ISOL looks like a slam dunk 10-bagger as long as the cannabis industry continues to get positive regulatory events. We think that ISOL can hit $2.00 in due time to properly reflect its value, but for now $1.00 should be a reasonable target before 2017 is up.

Disclosure: We are long ISOL on the Canadian Stock Exchange

If you're interested in making money investing or trading the stock market, here are some good resources to assist you. This includes technical analysis, investing in the weed sector, dividend stock investing, gold and commodities, sector rotation, options trading and microcap trading strategies.

Marijuana stocks were lightning hot last year, the cream of the performance crop in the microcap sector. Microcap Millionaires can show traders how to make big gains in this sector as well as many others in the microcap and penny stock world.

Click Here for Microcap Millionaires Free Video: How To Score Up To 1,400% Gains With "Weed Stocks" in 2017

Learn How to Maximize the Dividend Return of Your Portfolio With Access to a List of the Top 100 Dividend Stocks

If you are interested in improving your investment returns through dividends then dividendstocksonline.com might be a useful resource for you. Their simple stock filter ranks each company's dividend by return and sector but the key to investing in dividend stocks is sustainability. The site provides additional information in order to help you make that determination such as 5-year dividend growth rate, 3-year income growth rate, payout ratio, 1-year return and DSO rating,

Additional benefits include:

  • The ability to get the top dividend ratings for stocks going ex-dividend each month so you know when to buy and sell them to collect as many dividends as possible.
  • Split your portfolio between safe dividends, growth dividends and high-yield DRIPs so you can better refine your risk vs return profile.
  • Finally, get REIT and international stocks' dividend ratings in order to diversify your portfolio. 

Click here for the dividend stock report from dividendstocksonline.com


Seven Proven Dividend Investing Principles, One Website

Dividend Stocks Rock follows seven principles in order to maximize the returns on dividends:

  • High Dividend Yield Doesn’t Equal High Returns
  • Focus on Dividend Growth
  • Find Sustainable Dividend Growth Stocks
  • The Business Model Ensure Future Growth
  • Buy When You Have Money in Hand – At The Right Valuation
  • The Rationale Used to Buy is Also Used to Sell
  • Think Core, Think Growth

You can find out more about these seven principles by visiting their website


Top-Rated Signals for Binary Options

If you're interested in trading options, both calls and puts on certain large cap stocks, binaryoptionsprosignals.com sends real-time trading signals on a select group of stocks, forex pairs and commodities. The site claims over 70% accuracy thanks to a combination of trading algorithms and technological advances which allow it to produce signals through predictive software.

The report currently sends out alerts on Apple, Google, IBM, JP Morgan Chase, Coca-Cola, ExxonMobil, Facebook, Alibaba, Dow Jones, and S&P 500. Click here for access to the top rated signals for binary options



The Top 15 Gold Mining Companies


There are a ton of gold stocks out there so it may be overwhelming for a novice or casual investor to figure out which stock is the best. This 250+ page investment report showcases the top 15 gold companies to invest in right now from an author who lives in South Africa, a top 5 country in the world when it comes to mining gold along with other minerals. His first hand experience being "on the ground" and "in the mining field" gives him special insight into the industry that regular investors may not have. Click here for the Goldmasterinvesting.com Ocean Of Gold Report





WallStreetWindow: Your Game Plan For Trading Gold

For anyone interested in trading gold and silver, WallStreetWindow's Gold Trading Program is a must-read.


TraderReview: Professional Daily Market Strategy Newsletter

Learn to trade stocks, options, commodities and forex profitably with Trader Review's  secret charting methodology with instant portfolio access to their picks.

Z Code System: For something a little different

Try the Z Code System if you're looking for other ways to make money systematically outside of the stock market.

Thursday, 13 July 2017

How To Make Money Investing In The Stock Market

If you're interested in making money investing or trading the stock market, here are some good resources to assist you. This includes technical analysis, investing in the weed sector, dividend stock investing, gold and commodities, sector rotation, options trading and microcap trading strategies.

Marijuana stocks were lightning hot last year, the cream of the performance crop in the microcap sector. Microcap Millionaires can show traders how to make big gains in this sector as well as many others in the microcap and penny stock world.

Click Here for Microcap Millionaires Free Video: How To Score Up To 1,400% Gains With "Weed Stocks" in 2017



Learn How to Maximize the Dividend Return of Your Portfolio With Access to a List of the Top 100 Dividend Stocks

If you are interested in improving your investment returns through dividends then dividendstocksonline.com might be a useful resource for you. Their simple stock filter ranks each company's dividend by return and sector but the key to investing in dividend stocks is sustainability. The site provides additional information in order to help you make that determination such as 5-year dividend growth rate, 3-year income growth rate, payout ratio, 1-year return and DSO rating,

Additional benefits include:

  • The ability to get the top dividend ratings for stocks going ex-dividend each month so you know when to buy and sell them to collect as many dividends as possible.
  • Split your portfolio between safe dividends, growth dividends and high-yield DRIPs so you can better refine your risk vs return profile.
  • Finally, get REIT and international stocks' dividend ratings in order to diversify your portfolio. 

Click here for the dividend stock report from dividendstocksonline.com


Seven Proven Dividend Investing Principles, One Website

Dividend Stocks Rock follows seven principles in order to maximize the returns on dividends:

  • High Dividend Yield Doesn’t Equal High Returns
  • Focus on Dividend Growth
  • Find Sustainable Dividend Growth Stocks
  • The Business Model Ensure Future Growth
  • Buy When You Have Money in Hand – At The Right Valuation
  • The Rationale Used to Buy is Also Used to Sell
  • Think Core, Think Growth

You can find out more about these seven principles by visiting their website


Top-Rated Signals for Binary Options

If you're interested in trading options, both calls and puts on certain large cap stocks, binaryoptionsprosignals.com sends real-time trading signals on a select group of stocks, forex pairs and commodities. The site claims over 70% accuracy thanks to a combination of trading algorithms and technological advances which allow it to produce signals through predictive software.

The report currently sends out alerts on Apple, Google, IBM, JP Morgan Chase, Coca-Cola, ExxonMobil, Facebook, Alibaba, Dow Jones, and S&P 500. Click here for access to the top rated signals for binary options



The Top 15 Gold Mining Companies


There are a ton of gold stocks out there so it may be overwhelming for a novice or casual investor to figure out which stock is the best. This 250+ page investment report showcases the top 15 gold companies to invest in right now from an author who lives in South Africa, a top 5 country in the world when it comes to mining gold along with other minerals. His first hand experience being "on the ground" and "in the mining field" gives him special insight into the industry that regular investors may not have. Click here for the Goldmasterinvesting.com Ocean Of Gold Report





WallStreetWindow: Your Game Plan For Trading Gold

For anyone interested in trading gold and silver, WallStreetWindow's Gold Trading Program is a must-read.


TraderReview: Professional Daily Market Strategy Newsletter

Learn to trade stocks, options, commodities and forex profitably with Trader Review's  secret charting methodology with instant portfolio access to their picks.

Z Code System: For something a little different

Try the Z Code System if you're looking for other ways to make money systematically outside of the stock market.

Tuesday, 11 July 2017

Citigroup And Leerink Create Fake News On Arena Pharmaceuticals To Pump Up Its Share Price For A Secondary

EDIT 7/13: We have closed off our short around $24. The pricing of the offering was at $24.

Arena Pharmaceuticals, Inc. (ARNA) rose 41% from $18.39 to $26.00 on 15 million volume on Tuesday, after the company announced "positive Phase 2 results for ralinepag, an investigational, long-acting, orally administered prostacyclin receptor agonist under development for the treatment of pulmonary arterial hypertension". This is obviously a very positive development for the company. But given that this is a Phase 2, ralinepag is still years away from a New Drug Application being accepted by the FDA, assuming all goes well with Phase 3, and it will cost a lot to navigate through the FDA approval process. ARNA added $240 million in market cap on Tuesday, a fairly high amount for Phase 2 results.

Immediately after the market closed, ARNA got to work on trying to secure the cash resources needed to develop ralinepag by announcing a $150 million offering of common shares. The release states that: "Citigroup, Leerink Partners, Cantor Fitzgerald & Co. and UBS Investment Bank are acting as joint book-running managers for the offering.  JMP Securities is acting as a co-manager for the offering." The terms, including the price of the shares in the offering, were not announced.



Minutes after ARNA announced the offering, two of the bookrunners released updated price targets on ARNA in an attempt to stop the bleeding afterhours. Citi increased its target on ARNA from $23 to $37 and Leerink increased its target on ARNA from $47 to $53.

While ARNA has done what an early-stage pharma company is supposed to do, we smell a rat from the supposedly unbiased firms that happen to have gotten the bookrunning business and are so quick to upgrade the targets. Are these targets not supposed to be based on reasoned, thorough and complete analysis? How can these firms come up with a price target based on reasoned, thorough and complete analysis when the denominator (number of shares) in their valuation isn't even defined thanks to the unknown price of the offering? They are just throwing out made up targets to try to inflate the stock price as much as possible before the secondary. Either to help fill it or to get suckers to buy shares high so that the hedge funds participating in the offering can short the stock at a higher price and cover from the offering.

At what price will the offering be filled? We think $22.50. The underwriters have an option to purchase up to an additional $22.5 million of shares of its common stock at the public offering price, This $22.50 number fits extremely well with that. In the meantime we hold a short position on ARNA and will continue to hold it until we see the pricing of the secondary.

If you like our picks make sure to follow our blog by clicking the follow button on the top of the left hand panel. We are up to 259 followers for a reason.


Disclosure:We are short ARNA

If you're interested in winning sports betting picks, try the Z Code System

If you are interested in penny stock picks, check out Microcap Millionaires.

If you're interested in trading options, both, calls and puts on some large cap stocks, check out binaryoptionsprosignals.com.

Learn to trade stocks, options, commodities and forex with Trader Review.

If you are interested in dividend stocks and return analysis, Then dividendstocksonline.com or Dividend Stocks Rock are for you.

If you're interested in gold, this WSW special report or the Goldmasterinvesting.com Ocean Of Gold Report are for you.

Sunday, 9 July 2017

AAOI Ran On Friday As Expected; DPW Should Run Next

On Wednesday July 5th we suggested that readers pick up shares or call options on Applied Optoelectronics (AAOI) with our article "Unlocking The Secret To Trading AAOI: Buy Before The Friday Short Covering":

"Here's our recommendation for Thursday, July 6th based on AAOI's close of $60.62 on Wednesday. Buy anything under $59 on Thursday, and if it never goes that low, buy it near the end of the day. If you're looking for just a quick couple of dollars profit, sell on the rip on Friday." 

We have noticed a pattern that AAOI performs very well after a Thursday morning dip as shorts cover on Thursday afternoon and Friday. AAOI hit a low of $59.15 on Thursday, just missing our bids in the morning, but we bought up call options on Thursday afternoon. Let's just say that worked out very well as the stock raced over $68 and ended the day up nearly 10% on Friday. If you like our picks make sure to follow our blog by clicking the follow button on the top of the left hand panel. We are up to 251 followers for a reason.

AAOI is still a long term hold with a core position but we took those massive short term profits and we loaded up more on Digital Power Corporation (DPW). We introduced readers to DPW last week with our article "DPW: An Undervalued NYSE-Listed Microcap Poised For A Run Based On Fundamentals". DPW had dropped down to as low as the mid $0.50's last week after flirting with the $1.00 a couple of times. We took that opportunity to load up even more and by the close on Friday, DPW was up 7% to $0.62.

DPW has been swinging around wildly like many other microcap and low float stocks, including Marathon Patent Group, Inc. (MARA), Delcath Systems, Inc. (DCTH), Spherix Incorporated (SPEX), Cerulean Pharma Inc. (CERU), ImmunoCellular Therapeutics, Ltd. (IMUC), Cerecor Inc. (CERC), Monster Digital, Inc. (MSDI), Moleculin Biotech, Inc. (MBRX), Opexa Therapeutics, Inc. (OPXA), MYOS RENS Technology Inc. (MYOS), Threshold Pharmaceuticals, Inc. (THLD), Avinger, Inc. (AVGR), CHF Solutions, Inc. (CHFS), CytRx Corporation (CYTR), Dextera Surgical Inc. (DXTR) and DryShips Inc. (DRYS). A lot of those stocks have moved on news that is hard to quantify and others have moved on no news at all. That's why they are moving so violently up and down, because nobody really knows a true fair value. DPW on the other hand has recently released a business update that makes the stock unambiguously fundamentally undervalued at $0.62. It may have gotten caught up with the other high-volume big-swingers over the last few weeks but we strongly believe it is the best of the bunch.




DPW closed up 50% to $0.72 on over 10 million volume on Friday, June 30th after releasing the following quarter-end investor update:

FREMONT, Calif., June 30, 2017 (GLOBE NEWSWIRE) -- Digital Power Corporation (NYSE MKT:DPW) ("Digital Power" or the "Company"), a growth company seeking to increase revenues through acquisitions and organic growth, today announced that is customer order backlog has increased to over $65M, an increase of $8M from the prior update issued by the Company on May 17, 2017. The increase was attributed to organic growth from new and current customers of DPW and the consolidation of financial reporting which now includes Microphase Corporation.

Amos Kohn, the Company’s President and Chief Executive Officer, stated, “We continue to see strength in our custom power supply business as our order book grows. With the purchase of Microphase Corporation, we will also see strong cost savings which will increase our gross and net margins. We are very excited about our continuing prospects to reduce costs while expanding production across the enterprise.”

The Company reported that it has received from its customer, MTIX, Ltd., order instructions with production schedules and specifications which have launched the formal production process for the machines that utilize MTIX’s proprietary technology. On March 15, 2017, the Company announced it had been awarded a 3-year, $50 million purchase order by MTIX Ltd., headquartered in Huddersfield, West Yorkshire, U.K., to manufacture, install and service textile treatment systems that utilize MTIX’s proprietary Multiplexed Laser Surface Enhancement (MLSE™) system. The Company confirmed that though production planning and scheduling had been underway, these tasks are now being driven to completion. The Company is fully engaged to incorporate the customer’s final specifications and schedules into the production cycle and implement, execute and manage all aspects of this new revenue stream. The Company disclosed that invoicing for the initial deposits necessary to launch production total $1.5MM and anticipate additional invoicing to support the escalation of production over the coming weeks. The Company stated that revenue from the production of the MLSE machines will be recognized in fiscal 2017 and should measurably impact both the gross and net profitability for the Company.

Regarding the progress made in production with MTIX, Ltd., Mr. Kohn said, “The execution of the general contract with MTIX, Ltd. has resulted in a positive material change to the future prospects of the Company. The added value to shareholders is yet to be understood. Over the coming years, this contract and relationship we believe will provide massive value to our shareholders.”




DPW has 11,789,546 shares outstanding after a small offering of 289,092 shares were made to certain creditors for the cancellation of $159,000 worth of debt earlier in the week. This could explain why the stock has pulled back from over $1.00 on the day of this great news as creditors would take their easy profits with no regard to the company's bright future. Last week was a holiday-shortened week and there are some preferred shares with a conversion price of $0.60 on the books (negotiated at a time when the stock price was lower so this is NOT toxic convertibles) which may have also played a role in the pullback

Those who were able to see past this minimal dilution have been able to take advantage of a very undervalued company. Even with the recent offering, DPW has only a $7.3 million market cap based on Friday's close of $0.62. This is extremely low for a company with over $65 million in backlog. Backlog is also growing quite quickly - an increase of 14% in the six weeks between mid-May and the end of Q2.

Look at DPW's Q1 income statement:

























Revenue was $1,628,000 for Q1 and gross margin was $708,000 or 43.5% and a net loss of $1 million. We know that the three year $50 million contract is being deployed right now and will materially impact numbers in 2017.



Let's say the split over the next three years is $10 million in revenue for 2017 and $20 million each in 2018 and 2019. If gross margin is 40%, that means $4 million will be added to the bottom line, taking the company from a million dollar a quarter burn rate to $300,000-$400,000 in net income for the remaining three quarters assuming costs remain static. 2017 would end approximately breakeven under this scenario. This does not take into consideration the remaining $15 million in backlog which could also have a material impact in 2017 though some of that may be baked into the existing $1.6 million per quarter revenue run rate.

2018 would be a very lucrative year. If $20 million in revenue leads to $8 million in gross profits, a $1 million burn rate per quarter would turn into $1 million in net income per quarter. That is an 8.5 cent EPS per quarter or $0.34 EPS for 2018. A P/E ratio of just 10 would imply a $3.40 stock price. We think a target of $2.00 fairly accounts for any risk this deal may have until it materializes. Now that DPW has garnered the attention of many traders, expect it to start trading at a much more fair price to reflect the value of its backlog.

Disclosure: We are long DPW

If you're interested in winning sports betting picks, try the Z Code System

If you are interested in penny stock picks, check out Microcap Millionaires.

If you're interested in trading options, both, calls and puts on some large cap stocks, check out binaryoptionsprosignals.com.

Learn to trade stocks, options, commodities and forex with Trader Review.

If you are interested in dividend stocks and return analysis, Then dividendstocksonline.com or Dividend Stocks Rock are for you.

If you're interested in gold, this WSW special report or the Goldmasterinvesting.com Ocean Of Gold Report are for you.

Wednesday, 5 July 2017

Unlocking The Secret To Trading AAOI: Buy Before The Friday Short Covering

We have been a big fan of Applied Optoelectronics (AAOI) since early May with our report "AAOI: Eight Reasons To Expect This Tech Unicorn To Double By The End Of 2017" along with several follow up reports since then. While we think the stock could reach as high as $250, we believe that we have unlocked a secret to winning short term trades on the stock as well. We have paid close attention to the price movement of the stock over the past two months and noticed a very consistent pattern.




This trick is particularly useful for weekly options players. Always buy before the Friday short covering. Have a look at the price history since the start of May with relevant numbers highlighted in green and red. If you like our picks make sure to follow our blog by clicking the follow button on the top of the left hand panel.


DateOpenHighLowCloseAdj Close*Volume
Jul 05, 2017
Jul 03, 201762.4163.7561.0461.3961.39970,600
Jun 30, 201761.7463.6260.4361.7961.792,414,000
Jun 29, 201760.1660.8558.7760.0060.001,365,100
Jun 28, 201759.6261.1958.0061.0061.001,986,100
Jun 27, 201761.3062.2358.2758.4458.442,748,300
Jun 26, 201765.0165.0160.7661.5961.594,653,100
Jun 23, 201763.6067.1863.3565.8765.872,987,900
Jun 22, 201763.0663.9461.9263.5863.581,315,700
Jun 21, 201761.1064.3061.0963.1063.101,830,400
Jun 20, 201763.2363.7560.8961.0861.082,002,100
Jun 19, 201763.3065.2362.2963.2063.202,596,600
Jun 16, 201762.2363.1560.1062.8862.882,978,300
Jun 15, 201758.2562.9957.5562.2362.234,006,600
Jun 14, 201764.0064.9059.6160.9560.953,749,400
Jun 13, 201766.7167.8563.2563.8563.853,186,000
Jun 12, 201763.5266.8960.0264.6164.614,931,200
Jun 09, 201773.8974.0062.0464.7164.715,292,300
Jun 08, 201771.7373.1770.7173.1473.142,045,000
Jun 07, 201773.3073.8770.0371.4871.482,756,500
Jun 06, 201771.3575.5970.5073.4173.412,964,600
Jun 05, 201774.9675.0071.8072.4472.442,754,700
Jun 02, 201772.0574.7371.7674.6874.683,986,800
Jun 01, 201770.0571.3669.4470.0170.011,857,300
May 31, 201771.0771.6568.7269.8269.822,395,600
May 30, 201771.2071.8169.1170.4870.482,283,700
May 26, 201767.3772.9567.1271.5171.513,885,000
May 25, 201768.8069.8966.3067.8867.882,555,900
May 24, 201768.2570.2367.8668.6368.632,010,100
May 23, 201771.6071.7067.0669.1569.153,771,600
May 22, 201766.0071.3465.8071.2471.246,771,200
May 19, 201764.7465.9363.5063.5463.542,271,300
May 18, 201760.0665.3058.9663.9863.983,947,300
May 17, 201763.0464.0060.1061.3861.383,507,000
May 16, 201764.1165.2462.5364.9764.972,528,000
May 15, 201765.8066.4063.2564.0164.013,112,500
May 12, 201764.2467.0163.2265.4565.453,004,300
May 11, 201764.0565.3362.0864.2364.233,543,900
May 10, 201761.8165.0061.3664.9764.973,932,300
May 09, 201757.7562.6456.0162.1162.115,046,800
May 08, 201757.1560.0056.5557.3957.395,314,600
May 05, 201751.5356.3048.5055.9655.9610,854,900
May 04, 201747.3048.7546.3446.8146.812,998,200
May 03, 201745.9946.9245.0146.4746.472,121,300
May 02, 201749.9850.3046.2747.3047.302,694,000
May 01, 201750.2552.1049.3350.1350.133,243,700

On Friday, May 5th, the jump from $46.81 to $55.96 was justified because of strong Q1 earnings.

On Thursday, May 11th, AAOI opened at $64.05 but dipped $2 to $62.08 before recovering by the end of the day to $64.23. May 12th was another winning Friday with the stock hitting as high as $67.01 before settling at $65.45. Buying the Thursday dip and selling on the Friday rip, or even setting up a stop loss could have resulted in nearly a $5 win with perfect timing and luck. But more realistically even a win of $2 to $3 could have been had.

On Thursday, May 18th, the stock opened at $60.06 and dipped to $58.96 before ending the day strong at $63.98. The next day the stock actually ended down at $63.54 but did hit as high as $65.93. Another opportunity to make as much as $7 with perfect timing but more realistically at least $3 or $4.

On Thursday, May 25th, the stock opened at $68.80. Unlike the prior two Thursdays, it had a weak close at $67.88 but the next day it closed up to $71.51 and nearly hit $73 so no matter what price you paid for it on Thursday, you still made money on Friday.




The trading pattern on June 1st and June 2nd was very similar to the prior week. You wouldn't have made much money searching for a dip on the Thursday, but as long as you got in around $70 by the end of the day, you made good money on the Friday as it closed at $74.68.

For June 8th and June 9th the numbers are red because this is the one week where this trading strategy blew up. The stock dropped from $73.14 on Thursday's close to $64.71 on Friday. Still, had you bought on the dip on Thursday as low as $70.71 but at least under $72, you would have had a chance to sell at $74 or at least take a stop loss and break even in the low $70's before it really cratered.

On Thursday, June 15th, AAOI's dip occurred right away with the stock opening down over $2 from Wednesday's close and providing people an opportunity to buy in under $58 before ripping to a $62.23 close. Friday was relatively uneventful with a close of $62.88 but you still already made the money the previous day. Even if you had a stop loss taken out at Friday's day low of $60.10 for fear of the stock repeating the prior week's performance, you still made a couple of bucks

On Thursday, June 22th, AAOI opened at $63.06, dropped as low as $61.92 and closed at $63.58. If you missed out buying near the lows as that was not much of a dip, even buying over $63 was profitable as AAOI closed at $65.87 the next day and traded over $67.

June 29th and 30th had a very similar trading pattern as the previous week. Not much of a dip on the Thursday but even if you bought in at $60 by day's end, you had a chance to make $2 to $3 with a high of $63.62 and a close of $61.79 on Friday.




What we believe is happening is that shorts are controlling the stock price earlier on in the week, but as the weekend nears they don't want to hold over the weekend for fear of a positive news event like a buyout and will cover before Friday's close, sending the stock price up.

Here's our recommendation for Thursday, July 6th based on AAOI's close of $60.62 on Wednesday. Buy anything under $59 on Thursday, and if it never goes that low, buy it near the end of the day. If you're looking for just a quick couple of dollars profit, sell on the rip on Friday.

Disclosure: We are long AAOI

If you're interested in winning sports betting picks, try the Z Code System

If you are interested in penny stock picks, check out Microcap Millionaires.

If you're interested in trading options, both, calls and puts on some large cap stocks, check out binaryoptionsprosignals.com.

Learn to trade stocks, options, commodities and forex with Trader Review.

If you are interested in dividend stocks and return analysis, Then dividendstocksonline.com or Dividend Stocks Rock are for you.

If you're interested in gold, this WSW special report or the Goldmasterinvesting.com Ocean Of Gold Report are for you.

Sunday, 2 July 2017

DPW: An Undervalued NYSE-Listed Microcap Poised For A Run Based On Fundamentals

On Tuesday morning we introduced our readers to Applied DNA Sciences, Inc. (APDN) when it was trading at $1.40. We suggested that it will hit $2.00 shortly and so far it has come close, hitting as high as $1.94 and closing at $1.76 on Friday. If you like our picks make sure to follow our blog by clicking the follow button on the top of the left hand panel. We are up to 241 followers despite the relatively few articles that we publish. We think this good growth in followers is indicative of people liking our picks and research.

NASDAQ-listed penny stocks have been on a tear over the last couple of weeks, particularly those that have broken out from a long-term downtrend like ReWalk Robotics Ltd. (RWLK), AVEO Pharmaceuticals, Inc. (AVEO), Marathon Patent Group, Inc. (MARA), Delcath Systems, Inc. (DCTH), Spherix Incorporated (SPEX) and CHF Solutions, Inc. (CHFS). Some of them moved on news, others have simply moved from their oversold condition. But there was one active stock on Friday which really stands out as being highly undervalued based on fundamentals trading on the NYSE, Digital Power Corporation (DPW).



DPW closed up 50% to $0.72 on over 10 million volume on Friday after releasing the following quarter-end investor update:

FREMONT, Calif., June 30, 2017 (GLOBE NEWSWIRE) -- Digital Power Corporation (NYSE MKT:DPW) ("Digital Power" or the "Company"), a growth company seeking to increase revenues through acquisitions and organic growth, today announced that is customer order backlog has increased to over $65M, an increase of $8M from the prior update issued by the Company on May 17, 2017. The increase was attributed to organic growth from new and current customers of DPW and the consolidation of financial reporting which now includes Microphase Corporation.

Amos Kohn, the Company’s President and Chief Executive Officer, stated, “We continue to see strength in our custom power supply business as our order book grows. With the purchase of Microphase Corporation, we will also see strong cost savings which will increase our gross and net margins. We are very excited about our continuing prospects to reduce costs while expanding production across the enterprise.”

The Company reported that it has received from its customer, MTIX, Ltd., order instructions with production schedules and specifications which have launched the formal production process for the machines that utilize MTIX’s proprietary technology. On March 15, 2017, the Company announced it had been awarded a 3-year, $50 million purchase order by MTIX Ltd., headquartered in Huddersfield, West Yorkshire, U.K., to manufacture, install and service textile treatment systems that utilize MTIX’s proprietary Multiplexed Laser Surface Enhancement (MLSE™) system. The Company confirmed that though production planning and scheduling had been underway, these tasks are now being driven to completion. The Company is fully engaged to incorporate the customer’s final specifications and schedules into the production cycle and implement, execute and manage all aspects of this new revenue stream. The Company disclosed that invoicing for the initial deposits necessary to launch production total $1.5MM and anticipate additional invoicing to support the escalation of production over the coming weeks. The Company stated that revenue from the production of the MLSE machines will be recognized in fiscal 2017 and should measurably impact both the gross and net profitability for the Company.


Regarding the progress made in production with MTIX, Ltd., Mr. Kohn said, “The execution of the general contract with MTIX, Ltd. has resulted in a positive material change to the future prospects of the Company. The added value to shareholders is yet to be understood. Over the coming years, this contract and relationship we believe will provide massive value to our shareholders.”



DPW has 11,789,546 shares outstanding after a small offering of 289,092 shares were made to certain creditors for the cancellation of $159,000 worth of debt earlier in the week. This could explain why the stock pulled back from over $1.00 late in the day as creditors would take their easy profits with no regard to the company's bright future. Those who were able to see past this minimal dilution have been able to take advantage of a very undervalued company based on this update. Even with the recent offering, DPW has only an $8.5 million market cap based on Friday's close of $0.72. This is extremely low for a company with over $65 million in backlog. Backlog is also growing quite quickly - an increase of 14% in the six weeks between mid-May and the end of Q2.

Look at DPW's Q1 income statement:

























Revenue was $1,628,000 for Q1 and gross margin was $708,000 or 43.5% and a net loss of $1 million. We know that the three year $50 million contract is being deployed right now and will materially impact numbers in 2017.



Let's say the split over the next three years is $10 million in revenue for 2017 and $20 million each in 2018 and 2019. If gross margin is 40%, that means $4 million will be added to the bottom line, taking the company from a million dollar a quarter burn rate to $300,000-$400,000 in net income for the remaining three quarters assuming costs remain static. 2017 would end approximately breakeven under this scenario. This does not take into consideration the remaining $15 million in backlog which could also have a material impact in 2017 though some of that may be baked into the existing $1.6 million per quarter revenue run rate.

2018 would be a very lucrative year. If $20 million in revenue leads to $8 million in gross profits, a $1 million burn rate per quarter would turn into $1 million in net income per quarter. That is an 8.5 cent EPS per quarter or $0.34 EPS for 2018. A P/E ratio of just 10 would imply a $3.40 stock price. We think a target of $2.00 fairly accounts for any risk this deal may have until it materializes. Now that DPW has garnered the attention of many traders, expect it to start trading at a much more fair price to reflect the value of its backlog.

Disclosure: We are long DPW

If you're interested in winning sports betting picks, try the Z Code System

If you are interested in penny stock picks, check out Microcap Millionaires.

If you're interested in trading options, both, calls and puts on some large cap stocks, check out binaryoptionsprosignals.com.

Learn to trade stocks, options, commodities and forex with Trader Review.

If you are interested in dividend stocks and return analysis, Then dividendstocksonline.com or Dividend Stocks Rock are for you.

If you're interested in gold, this WSW special report or the Goldmasterinvesting.com Ocean Of Gold Report are for you.