After 10 years as a broker and the last 3 as the manager of a growing hedge fund, I believe that I have developed a degree of "instinct" about stocks. Clearly, I am wrong more frequently than I like, and I was wrong by not taking profits on Fastcomm when the Alcatel deal was announced way back when. Yes, I bought into the story of a NYSE listed company former Chairman (Madsen @ Newridge Networks "NN" during some of their greatest growth years, and currently Pete still is on the board of directors at NN)building a tech company in a rapidly growing market (the FRAD industry). What I did not count on was the degree of difficulty that this small company would have penetrating the marketplace with its product. Frankly, I don't even think Mr. Madsen believed that it would take this long to begin gearing up revenues. So all of this is ancient history...Fast forward to the present and let's speculate on the future:
Currently, the valuation on this company is, in my humble opinion, a desk thumping, screaming buy. When a stock like this is given up for dead but the company is more alive and kicking then ever, then this is when big money can be made on small stocks. The marketplace will not catch on to the momentum building at this company until the stock is trading at about $7 with a bullet towards $10.
You know the story: Tax loss selling; people tired of waiting for revenues to pick up after about a year of disappointing numbers; analyst and money manager following jumps ship; stock gets sold hard; marginability disappears, along with a good amount of investors positions in the stock as liquidations and trepidations combine to chase alot of the old following out of the stock; media outlets, such as the Motley Fool delist the stock, etc., etc.
So, you then arrive at an oversold condition in the price of the stock. This is a very common occurrence on the Nasdaq, particularly in the volatile tech sector. But remember that volatility is a double-edged sword, that can cut both ways. The downward momentum in this stock has been gone since December and we have been basing in the current price range.
Now, with rumblings about the 3 Alcatel deals that have been published in "Hemispheres"(the Alcatel quarterly newsletter for employees and vendors), and 2 other Alcatel deals for a total of 5 last quarter, the Comstat deal with Apple Bank, the developing deals with GTE and ICI; plus, I think it a very telling coincidence that I was recently discussing a needed data-link with an employee of a broker-dealer that employs state of the art trading systems in their daily operations (their parent corp. literally develops systems for the military that enhances radar operators capabilities to zoom in on detected objects and then identify the objects)and this technical support expert referred me to Worldcomm "WCOM" to access a frame relay access device for my data link needs, and then he mentions to me that they use a Fastcomm frad! And he says, "Fastcomm frad" with an attitude of confidence about it like you might say, "We are having steak tonight, filet mignon steak."
I tell you, I got so excited that I think I startled the hell out of this tech support fella when I jumped in with, "A FASTCOMM frad!?, Did you say a FASTCOMM frad!!??"
My point is, Madsen left a high paying position with a NYSE firm to come to this company several years back because even then he believed that he had identified a strong engineering team with quality product. Then the growing pains came when sales did not immediately materialize from the Alcatel deal and the previous sales force could not get a substantial amount of product out the door, and yes, their were reportedly a few technical bugaboos to be ironed out. Now, it appears that the Alcatel deal is gaining momentum on a quarterly basis and that other outlets for their product are beginning to develop. As the Fastcomm name is currently being established in the marketplace by major companies like Alcatel, Worldcomm, GTE, ICI, then there will also be more direct sales made by Fastcomm.
All in all, my instincts tell me that this one is finally coming together, and at this price, the risk-reward ratio is undeniably attractive. You know, I STILL believe that an experienced management team that has had major league success at Newbridge Networks and has a quality product in a growth industry such as frame relay can make a successful go of it with a company named Fastcomm.
Finally, heard that a high ranking exec. at Comstat believes that this issue is "realistically a candidate to trade above $10 this year". Well, I think that I will place my bets in agreement with that forecast. Good luck to all. |
