Bravo David, nice touch of reality and level headed summation.
Many times we do get this image of tinted glass front buildings with marble floored lobbies, yet most of the time you're lucky if they have a dedicated receptionist.
I'll never forget about 8 or 9 yrs. ago I invested in a company called National Tech Team out of Dearborn MI. One day I happened to be up in that neck of the woods on a business trip and decided to stop by. Lord I think I almost went "white in the face" when I saw the building where they working out of. It looked like some schoolhouse that had fallen into dis-repair. I couldn't believe it. Actually got out of my car and went inside to verify that this was the address of the company that I had invested in. As I entered, things got worse. Sparse was an understatement, my home office had more office equipment. There were about 8 employees total.
Had I had a cellualar phone at the time, I would have called my broker from my car, with one word, SELL.
To this day I don't know what made me hold on to the stock, maybe it was because I shared their enthusiasm and vision for the explosive need that existed for their service, tech support. It was fundamental, personal computers were exploding in the corporate workplace, they were complicated and needed tech support. Simple, and National Tech Team was going to provide corporate America that service. Elementary.
Well, there was a little more to the story than that. Actually I was in fear of losing my investment and decided I should call the company before unloading. I owned 10k shares at .375 at the time, and although it wasn't a fortune, it was still a tidy sum to risk. I called and spoke to the CEO. What came out of that conversation was conclusion that this man knew what he was doing and where he was going. He had a tremendous grasp on the direction of pc industry, the companies that made up that industry, and the glaring hole in the support programs that were needed. He was focused and you could sense his tenacity.
I got off the phone and bought another 10k, for a total of $7500 invested.
Soon thereafter they landed a contract with Ford Motor Company. Then Chyrsler, then the Michigan Bar Association, then Blue Cross Blue Shield. Yet the stock languished in the .37 to .62 cent range. What was wrong? They were growing, they had a viable service, they were landing new accounts, I didn't get it. Well actuall I did, I doubled up. Now I was armed with 40,000 shares and no longer a small investment, I had a total of about $20k invested and that to me was a lot at the time.
I remember actually getting excited when the quarterly report would come out and it would show that losses were cut from -.04 to minus -.01 EPS. The day that they reported break even I celebrated by adding 10k more of stock, now at a whooping .87 cents.
Wow! A company that had one decent contract of size, and a hand full of smaller contracts.
It was 1991 now, two years after initially buying my first share and it was still in the infancy stages of Prodigy. The online forum was just getting started and that was my foray into discussing stocks on an open forum. There were naysayers back then also. They were bitching because TEAM's eggs were all in the Ford basket, eighty percent of revenues. But I believed in their corporate focus, computer support services. All it took was one phone call to any software or hardware company, being put on hold, or for that fact, even getting to speak to a real person on the same day that you were having a problem was a miracle. That in itself was enough to tell me that TEAM had the right idea, at the right time, and most importantly had a CEO that was hell bent on getting the job done.
Then Wordperfect signed a deal, and at about the same time they turned the road to profitability, a whole penny in profit. Revenues were growing, I think they had a whole $4 million in total annual revenues, but damn they were growing. So I added another 5k of stock, but it was all I could afford, because now the stock was trading at $1.38.
The company continued to languish, reinvesting their earnings in infrastructure, laying the foundation for growth. Earnings tettered back and forth, changing ink from red to black, back to red, but the revenues were exploding and more companies were coming on board.
They had gone from an idea to a viable service. Building, writing software, hiring, adding new services, constantly adding equipment, and even added a new facility to accomodate growth, present and future.
Then one day about three years after my first investment they signed up Hewlett Packard, and the catepillar opened to reveal a butterfly that quickly spread it's wings.
The stock soared litterally overnight to $3.50, then $5, then back to $3.50, then straight to $9. And the amazing part was that in a small period of time, between $3.50 to $5.00, they got NASDAQ listing, regional investment houses came on board, but the key factor was that the number of employees exploded from 10-15 to about 75.
Today, less then a decade later they now have 1500 employees and are international. The stock has since traded as high as the $30 level, but yet it all started in a dump.
An honest and dedicated man, focused on a vision. A burgeoning and promising industry, that was the magic combination for success. Nothing complicated about that.
After that I found Comverse Technology at .50. A Long Island high tech company with roots in Israel. Lead by an incredibly bright CEO named Alexander Kobi. He was shrewd, cunning, and focused. Could negotiate a
bear out it's winter coat of fur. Extremely organized and frugal. No waste, nothing fancy. Again, a talented CEO and management team, a cutting edge product, a specialized niche, and a promising upstart sector within the telecommunications industry, digital technologies that addressed the soon to be accepted GSM platform. From .50 cents to $45.00 in about five to six years.
Both companies shared common traits. Humble beginnings, focused CEO's, and niche technologies to address a promising new industry, having the earmarks of exploding into becoming the standards in everyday life, tomorrow.
Whether it's the coming of PC's, digital comunications, or satellites it doesn't assure success, it only allows for a more level playing field that isn't dominated by the big boys. It allows for a small company with a humble background, a fighting chance to become a leader in their own small corner of that explosive sector. For success it takes great leadership, and the ability to finance the start up and ensuing growth. Most companies don't get past first base because they lose focus and/or can't capitalize on their potential because they didn't plan for growth. Without the right management team, facitlities, or the cash flow, a company may have the best mouse trap ever, but it isn't going anywhere if it doesn't have the basic fundatmentals of a good business plan and the ability to faciltate that plan. One other missing ingredient goes back to Thoreau, when he stated that "No man is island unto himself." It takes partnering, contacts and support from outside the inner walls of a company. Without it, your dogmeat on Wall Street. It took Hewlett Packard's contract with TEAM after they had NASDAQ listing to bring the street to their front door. Then the street looked, and they saw a company that had other contracts with Ford, Chrysler, Wordperfect, Corel, Shiva, and host of others. But until that time, the street didn't know they existed. All it took was that one contract, and the investment analysts that followed Hewlett Packard discovered TEAM. Merrill Lynch, Salomon Bros., R.W.Baird, NatCity, they all piled on, and litterally overnight "A star was born." It happens that fast.
Consider the above success stories. Then apply those to Franklin. That is why I am so gung-ho over Franklin. And when you evaluate the alliances, the CEO, the technologies, and the promise that the communications industry affords, it is clear to see that Franklin is a standout candidate for any speculative portfolio.
Does that guarantee success. NO!
The above were success stories, there are several more success stories that I could add to that list. And there are several miserable failures, some even were downright scams.
The difference was that in the beginning (as above w/TEAM) they all have a story, and at the onset it's just that, a story, a begining. They are all cheap for a reason. How much should you invest in a story? In a penny stock? The right answer is, very little.
An initial stake, if it falters, bail, if it develops you should re-evaluate and consider further financial involvement.
Some stories are better then others, some stories are based on good substaniated facts, some on nothing but dreams, some on lies. Some end up with good endings, others turn into horror stories. But there is one common trait that all the success stories have in common, a solid person at the top, one that is honest, usually experienced, focused and dedicated to seeing his vision realized. The success stories also have one other trait in common, they all have a trail of progression, news releases, alliances, contracts, and list of accomplishments that back up their story. Soon it goes from being a novel to a chonicle, a historical biography of a company based on a conceptual vision playing out in front of you.
As the story develops, and starts to give way to confirmation that it is turning into a list of acheivements, it's no different than playing a poker hand. You may start off with an ante, (every hand starts off with an ante), and in the course of play, you may ante many times with nothing developing, nothing to build on. But a winning hand only comes along maybe one in ten. As the hand develops, you back up your ante with further conviction in the form of more chips invested. The stronger the hand, the more conviction. But never lose sight that you are gambling, after all, unless you're dealt a royal straight flush, you should be easing into the hand as it develops, and basing your odds on what is going on around you. That could easily be compared to looking at the industry in which your playing and comparing your investments technology to others in that same industry. Sometimes you get lucky, and as you look around the table you only see others working on a pair or a possible two pair, as you sit with three of kind and working on a full house or four of a kind. The same thing applies to investing in unproven upstart companies.
Franklin isn't the only player at the table, but they are developing into a promising hand to invest more then a mere ante, in my opinion. The hand they represent is based not on face cards or suits, but products and services that judged by price and performance.
As technology leapfrogs, the realm of who holds the power hand may shift. But for right now, Franklin looks to have a solid chance of bringing home the chips. Just remember that there are still a few more cards that have to be dealt and anything can happen. After all you never know what the other players are holding and what might still be dealt that could turn the odds against you.
Let me finish by saying that the last announcement added something that most don't realize. It is the one announcement that will serve as the fulcrum point from which Franklin just went from red ink to providing a postitive cash flow that should translate into black ink. It's like going from holding a high pair, to matching up three of kind, and holding a fourth card that isn't showing up in anyone elses hand. To most, that's enough to raise the stakes. After all the rest don't know what we're holding yet. If you want a peak into the hand to verify that it represents three of kind, then I highly suggest you call Franklin at 1.800.372.6556 and verify that the last announcement was monumental in providing a healthy positive cash flow to the bottom line. And to think there has only been dealt four cards with 3 more coming. What they will be, I have no idea. But I'm betting that the hand can only improve from here.
In closing all I can say is this, Franklin isn't a proven viable entity within the investment community, but with the last announcement they are showing me that they now have the cash flow to go forward. Considering that the last announcement doesn't even take into account that it comes on the heels of another potential revenue stream in the form of the Cyclone debut, it even adds to my comfort level. Back those two significant announcements with alliances, ventures and other products and services in the making, and I feel Franklin has the makings of a thoroughbred the likes of TEAM or CMVT.
The stakes are getting higher and the commitment is more intense, I don't know if I'm take the whole pot but I like my chances. All I or anyone else can do now is monitor closely the unfolding of events and participate as is warranted. But just as in a poker hand, I'm far to commited to drop out now when it looks like I have the winning hand.
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