I was waiting to post this until I got part 2 of the Chris Bunka report but since nobody seems to have a subscription that wants to send me the blocked November 26 article I decided to post this without seeing part two. What really promoted me to post this was Keith Minler's comments that …."Of course I read it and so did the market and the stock is up 3 cents on the week".
I was shocked on Monday when we sold off on the news since it was better than even the biggest bull on the thread could have hoped for. I was even more shocked when we sold off sharply on Tuesday. For the record I was a large buyer of the stock on Monday and Tuesday.
I have talked with numerous people over the last week trying to find out why the stock sold off on Monday and then again on Tuesday. I know the old catch phrase, “buy on the Mystery, sell on the history” very well. However when the history is even better than the mystery it doesn't make any sense that the stock would sell off. After lots of digging I blame this lack of a large price appreciation on this one event and this one event only......the news releases being split up. What I have found out is that numerous people that use different U.S news services only received the first news release and not the second one, which discusses the alliances. Shareholders that were waiting patiently for a technology or Internet deal to be announced and/or a new business plan were confronted with the Enviromation deal and the Enviromation deal only. I am not sure why only one news release was received by numerous individuals and am not here to lay blame...it happened. I received and read the Enviromation news release before seeing the second release and to tell you the truth I was sick to my stomach. The first thing I said to myself is “we are going to drop like a stone”. That news release gave few details about the deal and had no price tag and also lacked the words technology/internet or new business strategy that everyone was waiting for. However about 10 minutes later I received the second new release. As I read the second release I was swept over by a wave of exhilaration and if I remember correctly I yelled out “YES”. We have already discussed why this news was great so I will not go into it.
As proof that this is why we sold off I am offering up the Chris Bunka newsletter. For those not familiar with Chris Bunka he writes a pay newsletter ($200-$1500/year depending on the subscription service) that covers both U.S and Canadian stocks. It turns out that good old Mr. Bunka only saw the first news release on Monday and without looking for other news or calling the company to ask for further details wrote up JDX for his clients. He released the write up to his clients on the morning of November 23 (Tuesday). Well after seeing the Enviromation deal, and only the Enviromation deal, Mr. Bunka assumed that the company was becoming just a water company and told his clients that this didn't justify the current price and told his subscribers to sell. That is right…. he told his subscribers to sell without even a clue that JDX had set up these alliances and was continuing to review and negotiate investment opportunities in the technology, Internet and telecommunications industries. You see in mid-1998 Chris Bunka told his subscribers to buy JDX because of the cash and management and hadn't mentioned a thing on them until this point. I will not bother going on and on about how irresponsible this type of journalism is, especially for a pay service, because that is fairly obvious. However when a newsletter writer tell their clients to sell and probably sell themselves and other people only see the Enviromation deal it sure explains the lack of price appreciation this week. I think after reading this it becomes clear why JDX re-issued their news release on Friday.
Since Monday Mr. Bunka realized that JDX came out with other news. On Friday afternoon he wrote up JDX again. This release is blocked to subscribers only and since I am not a subscriber I haven't seen the release yet. I am not sure how Mr. Bunka plans on saving face on this one since this was a royal screw up on his part. I will wait to see the write up before I pass judgement.
Here is the Nov 23/99 write up by Mr. Bunka.
Tuesday, November 23, 1999
JDX-T JORDEX RESOURCES INC
#9944: JORDEX ACQUISITION.
Am I missing something? Jordex stock has soared recently, doubling to over $1.40, on expectations of a high-tech acqusition. On Nov19/99 we learned that the company has signed a letter of intent to acquire 100% of Enviromation, Inc, a private company that designs, manufactures and installs control systems for water treatment facilities.
Guess what? This sounds to me an awful lot like the business that I covered for two years: Unitec International Controls. Yes, Jordex is talking about their intention to open marketing channels over the Internet and to use the Internet's communications capabilities to broaden its lines.
Enviromation is expected to have revenue of about US$3.3 million this year, making it roughly twice as large as Unitec measured by sales. I have always liked this industry but I've been unable to pick a company that shows clear leadership. Will Jordex manage to do it? Maybe. But I'm also nervous that we don't fall into the same trap that we did with UIC: namely, falling in love with a neat industry that is nevertheless not a growth or profit center.
Maybe Jordex has additional acquisitions and plans that we don't know about. That would be great because this acqusition, in my eye, does not justify the hype surrounding the stock.
Our initial review of JDX was at $0.48. At the current price of $1.29 you are sitting on a 169% profit. I'd say, at the very least, that you take some money off the table with this one. The stock price is higher than current events justify. I may well be proven wrong and the stock shoot higher, but I simply don't see anything wrong with making this kind of profit.
We are taught in school that the market is efficient and that all news is factor into the price of the stock immediately. However in this case many people only say one side of the news and sold while many other, such as myself, that saw all the news were large buyers. In my opinion as this story gets out and deals are announced we will see the price appreciation that Monday's news justified. JDX has just started their promotion on their stock and deals still need to be announced and so does a name change. I remain long!
Best Regards
KEITH |
