Hi James,
I am writing this post as i think a lot of people need it at this time. I have adapted a previous post posted on another thread to suit
OZON and i really believe in the post. Here comes:
The financials of any turnaround/special situation stock I invest may or may not be important. Financial statements for a turnaround (having been in a few myself and consulted with more) are often largely meaningless. (A few key assets (maybe), with most value such as key player reputation/track record and ideas not showing up on
them.) Financial statements are historical documents, and a start-up has little financial history to report by definition. When I analyze a start-up, I tend to view things like a venture capitalist --
* Strengths and weaknesses of key company players, i.e. the management team. OZON's is good and they did a good job so far.
* Strength and weaknesses of the main concept behind the company. OZON technology is strong. Like James earlier mentioned that all who see the laundry product are impressed. Lets face it,we will do well in that area for sure.
* Them being able to differentiate among the other vendors. They were the first to enjoy the limelight in the area of O3 and more press coverage will be there in the future. Besides they have a diversified line of products like the Polymers, Laundry, disinfecting and now food. Hustle for business which has been demonstrated with CYCLOPSS jumping in to the arena. The management definitely has an eye for any opportunity that comes knocking and soon the shareholders will feel lucky and happy with their purchases.
* Opportunity within the target market. I do not have to say what the market is for food and you may want to parse through older mail and get an idea what markets are in store for Sterox, Polymer and laundry. The company was punished a lot on the street as they were going through expensive research and no income was generated through major contracts. Now they are trying to cash in on the years of research and what better a time to get in.
Then, like all good investors, I watch for indications of reasonable cash flow and actions related to gaining it. Sales are not the only source of cash flow. Debt is a worrisome thing for me, especially for turnaround situations reaching for the manufacturing and marketing stages. Debt or raising finance for expanded operations to penetrate markets converted to stock or private placements are not a negative for me, even at 18 cents or some other amount under the current stock price. (Do I perceive raised eyebrows?) This is the nature of such things, sort of a "risk premium" established through negotiation (or a discount representing the sharing of saved
expenses over a public offering, for example). While I prefer such shares to be restricted (time based or performance criteria), I realize that sometimes they won't because of circumstances the start-up must accept to move forward. On the other hand, Reg. S will kill most investment opportunities for me.
Why no worry about "reasonable" increases in outstanding stock? Because it is very difficult to get fund managers/institional investors interested in low float stocks. Some have rules about this; others just skitish. Of course, the crucial balancing act is to
protect against overly large float and its impact on stock price (that magical $5 ).
Other cash flow can come from, as some have indicated, from relationships like Schyler, Hillenbrand if they intend to get the biggest bang for the buck.
Another factor in my analysis is the acceptance that a lot of what a company does is legally not my business as a shareholder (or potential shareholder). A company has to operate as its managers see fit to move it forward and advance the perceived value.
That OZON communicates with us is a clear privilege they have no legal obligation to do. Is it in their interest? Sure. But, do they need to do so to succeed? No. We have limited impact on the stock price, although, at times, I suspect we do have an impact
on perceptions.
As part of ongoing due diligence, people should watch the quality and content of IR/PR communications. Not rely on a poster's statement of when something will or won't be communicated. Also people here should not get bent out of shape when some announcement does
not come out when they want it to and a second later feel that they have been "SET UP".
If you're still with me, let me summarize how I view a special situation/story stock. It is like a baby. First, it has to learn to focus its eyes, then control its muscles to hold its head up and move its arms and legs in coordination. Then it has to learn to crawl. Then as it learns to walk, it will grab on to things to help it learn fine control of its leg muscles and learn balance. It starts to walk, tentatively first,then eventually at a full out gallop. Sometimes it will bump into things, but always it keeps trying.
OZON will go a long ways. Go OZON.
Regards
Sri. |
