Bottom Fishing- Follow Those in the Know
Are small and microcap stocks oversold and poised to bounce, [Image]
or are stocks simply trading where they belong? A look at a
startling emerging trend helps provide the answer.
Mergers and acquisitions in the micro cap world are booming. Many
companies trading at 1% of their former valuations are exploding off
the charts in sudden moves after months of inactivity and listless
trading.
These moves are not fueled by renewed entusiasm for the stock market.
Instead, larger companies within their industries see value, and are
buying companies at bargain basement prices.
For example, last week, shares of digital-rights management company
InterTrust Technologies (NASDAQ: ITRU) traded up to $4.20 after
spending most of 2002 in the $1 range. This stock traded to a high of
$80 in early 2000. InterTrust received an all cash tender offer from
Sony and Royal Philips for $453 million.
Another example is Gish Biomedical (NASDAQ: GISH), which traded for
$.25 cents a share just two months ago. The current level of $1.76
represents a 600% return for investors who were willing to buy when no
one else wanted the stock. CardioTech International (AMEX: CTE), a
maker of synthetic blood vessels, will purchase Gish for $7.6 million
in stock. CardioTech inherets Gish's FDA approval as a registered
medical device maker.
[Image] Microcap Optaa Food Ingredients (Nasdaq: OPTS) received a $28
million all-cash takeover offer from Stake Technology in
October. Opta's stock was stuck in the $1 range for most of the first
quarter, and is currently in the $2.50 range.
This extraordinary increase in mergers and acquistions in the microcap
world is being fueled by larger companies within the respective
industry, not market investors recognizing value and bidding up
shares.
If this trend continues, fund managers and investors everywhere will
begin hunting for the next acquisition target. These smaller oversold
issues will start to drift higher, and this will act as a catalyst to
get individual investors and fund managers back into the micro cap
world.
If you want to know if many are of these small issues are undervalued,
look at what their big brothers are doing within their own industries.
They are buying, and it's time for you to start buying also.
We are looking at several opportunities that have the potential to
follow the patterns demonstrated above. Stand by for ideas.
[Image] The Case For A Significant Rebound In the Technology [Image]
Sector
The recession appears to be waning, and this belief is starting to be
reflected in stock prices. With numbers now in for third-quarter gross
domestic product, the U.S. economy has enjoyed a very anemic recovery
over the past year. It has grown at a 3 percent rate, with 3.6 percent
growth in the domestic economy since the recession began to wane one
year ago.
Buried within the GDP numbers are signs that technology spending is
finally coming back, and stock prices are beginning to reflect the
change.
In the new GDP report, business investment in equipment and software
increased at an annualized 6.5 percent in the third quarter - its best
performance in 2 1/2 years. Computer sales are up, rising at a 75
percent annual rate in the most recent quarter. Business spending on
durable goods increased 23 percent annually. Wireless is recovering,
with top-line sales and profits at Nextel, Verizon and AT&T coming in
surprisingly strong. Customer demands for cable and broadband are
returning as evidence in performance at Comcast. In short, the tech
sector is being reincarnated from the dead.
If the tech sector rebounds strongly, the market will once again
become the preferred place to put your money. If the NASDAQ can get
through 1430 convincingly, many technicians believe this will
represent a major trend reversal, and higher levels could be imminent
this year.
otcjournal.com |
