Howard-
Well put....I cannot blame those with a healthy dose of skepticism... this is truly an issue of faith. Either one is predisposed to trust the judgement of management or they must take their dollars and vote elsewhere. I suppose a third option is to vote against management and to short the company. This would be a perplexing decision, however, if one does not have any basis of judgement other than their ability to read a historical document (profit/loss&balance sheet)for these things change.
It isn't that I have never shorted a stock, during market declines I occasionally hedge long positions, but I try to keep a reasonable grip on risk. In this case, it is difficult to make a case for naked shorting. The float is relatively small, the number of existing shorts relatively high (20% of float)and shares are hard to come by.
Either the company has a legitimate product and Zicam can do what it purports, or it doesn't. If it does not then the company will have to fall back on its gum product mix which was projected to grow at a rate of nearly 400% by GunnAllen (perhaps the skeptics will question this growth but then why did GUMM increase their manufacturing capacity to twice this projected rate in the last few months). Then one must determine if the price of $12 is a stretch should this growth be attainable less Zicam...GunnAllen's analyst had concluded that a price level of $24 should be attainable this year without Zicam.
Of course, if Zicam is what the company claims it to be, the growth this year could be a nice multiple of the aforementioned. Few know the answer to that. A number have shared their opinion. Some, like you Howard, have lent their expertise.
I encourage skepticism, because I abhor the lack of integrity that we too often find in corporate America. I think that the discourse on this thread is healthy and welcome. Anyone who reads through this thread will have been afforded the opportunity to consider many varied opinions and from this may come to a decision which pairs their faith in management, with their belief in the business plan and from this make an investment decision that conforms to their personal investment style.
In the two years I have been invested in this company, I worked through various stages of exuberant "hyper" expectations, not the fault of current management nor of GunnAllen management but of a poorly informed but genuinely enthusiastic broker. My position was modest. The previous CEO conducted a teleconference which announced an agreement to jointly develop private label products with a large and very recognizable company, which would result in significant sales in a very short period of time. I wanted to believe him and added to my position, but felt that his mannerism and promises were terribly optimistic. As the stock price failed to reflect this optimism I began to question his promises. I found that questioning Mr Kern incurred his wrath and I was immediately cut off from further communication.
From the 10K I decided that Gary Kehoe and not Kern would be the logical individual to talk to about the co's prospects. I found Gary to be almost the diametric opposite of Kern. While trying to appear loyal to Kern, he patiently discussed his own frustration with Kern's overly optimistic timetable. As we discussed further the prospects of the company I realized that this man had a very well conceived concept how to develop products and markets, albeit on a much more deliberate time horizon than that promised by his boss. His marketing ideas for proprietary products differed significantly from those of Kern and made much more sense to me than did the approach the company had embarked upon. I realized after this conversation that not only would Kern not survive (for reasons which I had already reached and which were confirmed in our discussion) but that Gary Kehoe was the "key man" to this organization. Furthermore, I sensed a sincerity and conviction in every thing he said. He made no unreasonable claims and he truly impressed me with his directness. Rather than liquidating my position, I decided to add to my investment. Then, when Kern was ousted I decided it was time to consider becoming seriously invested. As a part of my due diligence, I realized that in order to make an even larger investment,it was important to fly to Phoenix, view the plant and eyeball the management team. I did this in the fall. I was afforded the opportunity to talk to the IR, the CFO and spent all afternoon with Gary. He gave an excellent presentation and then forthrightly answered a myriad of questions. His responses were given to understatement and so exuded integrity that I found this interview even more satisfying than the telephone discussion. I was particularly impressed that his decision-making always reflected the long term view not the short term!
In my subsequent dealings with GUMM the principals have always shown a sense of propriety and given to understatement. They have endeavored to give no unfair advantage and make no thinly veiled hints to encourage my exuberance. I had no clue that Zicam was being developed.
Given all this I find the prospects of a hoax to be extremely remote. I would, no, I have bet serious money on it. I encourage everyone to do their own due diligence. To view this company, not through the eyes of others but through their own independent study of the business and its personalities.
I welcome anyone who wishes to buy, sell, sell short or even pass on this investment. If one chooses to short this company, I caution you to keep a wary eye on the exit. Any time shares are difficult to come by, that is a red flag to the potential volatility(read that upside).
Regards to all,
Mike |
