CANADIAN OVERSEAS EXPLORATIONS (CVC). Why?
1) PREDICTABILITY
- History repeats itself with great regularity on the VSE. Stocks like CVC have annual upswings because that is the only way the insiders can make money. There are no salaries worth speaking of and few directors have the skill and energy to create a `real' company.
- Here are CVC's spring breakouts for the last 5 years:
March 26,1992 7c to 92c (June 26)
March 29,1993 21c to 52c (June 10)
March 28,1994 32c to 65c (May 25)
March 29,1995 4c to 18c (June 15)
March 29,1996 5c to 13c (June 13)
2) RETURN OF DECENT MANAGEMENT.
- Michael Raftery is not a new face to the company. He is an old face returning after a two year absence. In 1992, he paid off CVC's debts in exchange for shares and the price skyrocketed from 5c to 92c. With him as a director, CVC was also able to hit highs of 67c in '93 and 65c in '94. After he left, the stock was only able to reach 18c in '95 and 13c in '96.
* Some other Career Highlights *
In 1990, his American Pacific had annual earnings of $17 million before being acquired by Breakwater. In 1992, he helped launch Rome Resources and during his two year time, the stock went from 43c to $1.80. Last year his KFG went from 30c to 85c. Also in '96, he bought a private placement of Strand Resources at $1.60 in July and 6 weeks later the stock hit $4.00.
3) SECURITY
- It may seem crazy to label a 5 cent stock as safe but there are justifiable reasons for making this claim with CVC. First, there is nothing unusual about this situation because CVC has been at this low price a dozen times before. Second, it has only been suspended for one day in its long 16 year history. And on that day the VSE publicly apologized for making a mistake. Third, the liabilities of $87,957 mentioned in the news release are ridiculously small and can be easily overcome.
4) SOLID UPSIDE AND MINIMAL DOWNSIDE.
-The worst thing an investor can do is get swept away in a lot of hype. There is certainly no danger of that with CVC because they have not done a speck of promotion. There is no web site and there has not been an encouraging word released to the public. In fact, the opposite of hype occurred when an anonymous director sent out a self serving news release that labeled their predecessors as incompetents. They also put an overly bleak spin on the current condition of the company so they could be hailed as saviors when conditions improved.
5) ACTIVE SHAREHOLDERS THAT KEEP MANAGEMENT ON THEIR TOES.
-If management wants to make significant money they will have to drive CVC above 15 cents. This is the minimum price the B.C. Securities Commission will allow companies to issue private placements and stock incentives. Last fall, they tried the easy way out by proposing a 1 for 5 stock consolidation (thereby making the price 25 cents) but the shareholders wisely voted the initiative down. The clear message sent to management was: "you will only be rewarded if there is an increase in the stock price." For the sixth year in a row, this is what is likely to happen.
6) GOOD FALLBACK POSITION.
- If management does not promote, thereby stalling CVC at its current price, it will be one of the easiest stocks to take over. At 5c a share, our group needs to only spend an additional $251,250 to achieve 25% control. At that point, we would be in a position to block any share consolidation and/or stock incentives unless one of our members was given the position of director. Once that had been accomplished, the group would split any performance shares awarded our director (determined by number of shares owned) and they would be ensured of a prompt and effective promotion.
* Point #6 refers to a stock group that I manage. If this sounds interesting, email me at rookleya@idirect.com and I will fill you in on the details. *
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