REAL GROUP A KAISER BOTTOM FISH
From: Canspec Research Station
> To: Cambridge House Intl Inc
> Subject: Kaiser Bottom-Fish Tracker 99-008 Cambridge
> Date: Tue, Apr 6, 1999, 1:17 AM
>
>
> Kaiser Bottom-Fish Tracker 99-008
> April 6, 1999
>
> Cambridge Minerals ltd (CBM-C: $0.36)
>
> Tel #: (604) 688-2321
> Web Site: www.cambridgeminerals.com
>
> Cambridge: from ADP dog to Internet hero
>
> Synopsis: What do you do when you've clung to the resource and energy
> sector
> despite the worst commodity bear market in decades, when the IMF has
> backed
> up a truckload of 100 million ounces of gold with the supposed intent
> to
> feed
> the poor, when you have correctly (I guarantee it!) declared that the
> Internet mania is a greater fool spiral whose foundation has an
> economic
> substance substantially less than the indicated total market
> capitalization
> of all Internet stocks, and the only junior stocks that go up are
> those
> which
> have some sort of relationship to the Internet beyond having a
> corporate web
> site? Join 'em when you can't beat 'em? Well, luckily for myself and
> other
> bottom-fishers who clung to the Alberta diamond play a little longer
> than
> the
> rest of the market, an old bottom-fish reject called Cambridge
> Minerals Ltd
> (CBM-C: $0.36) has joined us to an Internet story. We are in the
> Internet
> game by default! How about that for being rewarded for not selling
> losers?
> In
> my September-October 1998 issue of the Kaiser Bottom-Fishing Report I
> advised
> readers to avoid Cambridge because it had no money, it was going to
> lose its
> property options in the Alberta diamond play, the structure was messy,
> and
> management did not include any heavy hitters who might breathe fresh
> life
> into the company without inflicting a stiff rollback onto the stock.
> At the
> time Cambridge was trading at a nickel, and because I wasn't exactly
> in need
> of any tax losses in 1998, I hung onto my position. Judging from the
> low
> Cambridge volume during the last quarter of 1998 not many
> bottom-fishers
> bothered to sell either. During January the stock began to show some
> life
> and
> on February 9 Cambridge announced a deal to earn a 49% interest in an
> Internet travel site called Discover Canada that had been developed by
> Real
> Group Inc (RG-C: $0.30). Cambridge would contribute $100,000 and issue
> 500,000 shares to earn its 49% interest. Cambridge managed to close a
> private
> placement of 2,097,500 units at $0.10 to fund this new venture. I
> don't know
> much about Discovery Canada (www.discoverycanada.com), but do know
> that
> Internet travel sites relating to vacations, accommodation, and tours
> have
> been around for several years. In fact, my brother and his partner,
> who have
> designed over a hundred web sites including my Canspec Research
> Station, had
> something similar going several years ago. So I paid no attention to
> what I
> wrote off as Cambridge's involvement in a hopelessly competitive
> market that
> will not show any profit margins until it has been consolidated into a
> giant
> system. But then as the Dow broke 10,000 and Internet fever drove lead
> stocks
> like Amazon and Yahoo into deep space, as a momentum hungry market
> began to
> trade stocks whose closest connection to the Internet was a mistaken
> identity
> in the form of a similar symbol, and as even Canadian listed stocks
> like
> Cybersurf and Image Power lurched onto the radar screen of Internet
> speculators, Cambridge's involvement with the Internet suddenly looked
> infinitely more promising than the hottest gold project. Cambridge is
> alive
> and well because it has tapped into the biggest market mania since
> Dutch
> tulips. Cambridge is riding a parabola that will certainly take the
> stock
> higher than current levels.
>
> Don't get me wrong. Unlike tulips, which will never accomplish more
> than
> tickle our aesthetic fancy, the Internet is reorganizing reality in a
> profoundly significant manner. What the Internet is not going to do is
> produce profit windows that come anywhere close to justifying the
> valuations
> that today's frenzied market is willing to assign to Internet stocks.
> Just
> about anything available on the Internet can be duplicated without
> violating
> any copyrights. And it can be done with a potentially profitable twist
> that
> the precursors cannot easily replicate. Right now the Internet is
> viewed as
> a
> power play where the entities which consolidate the largest audience
> will be
> the winner. That model is wrong. The winner will be somebody small who
> develops a model which will be both effective and modestly profitable
> even
> while the bigshots blow their brains out commandeering the universe.
> What is
> really going on right now is a massive raid on the piggy banks of
> investors
> buying into the Internet craze. But this raid is a double-edged sword.
> When
> the Internet boom loses momentum, as it has to when the liquidity
> structure
> shifts to the point where insiders and venture capitalists are free to
> unload
> all their paper, bottom-line valuation techniques will reassert
> themselves.
> While the bigshots like Yahoo, Amazon and Ebay are drowning in their
> red
> ink,
> bogged down by an infrastructure that has painted itself into a
> corner,
> smaller upstarts which took the time to think through a profit based
> model,
> will emerge as the survivors. As an example in a somewhat different
> field,
> keep an eye on Linux, the dark horse operating system whose slingshot
> may
> yet
> plant a fatal stone on the forehead of the Microsoft goliath. Many
> readers
> may be wondering why investors are grabbing for Internet IPO's and
> other
> obscure stocks. The answer lies in the subversive nature of the
> Internet,
> which belies the supremacy drives of the top Internet stocks that
> would turn
> the Internet into the ultimate big brother system. The speculative
> boom in
> Internet stocks encompasses big and small because Internet speculators
> intuitively understand that there are no barriers to entry, and that
> bigness
> produces a vulnerability to extinction similar to that suffered by the
> past
> titans of the earth, the dinosaurs. When I say that the Internet boom
> has to
> crash, I am only referring to the winners, all of which are doomed to
> flame
> out. The Internet as a genre within which many Davids take on the
> Goliaths
> will persist for many years. It is this perception which gives life to
> market
> interest in obscure Internet stocks like Cambridge. The Internet is a
> celebration of a perpetual battle of small versus big.
>
> On March 30 Cambridge was still trading at $0.12 on token daily volume
> of
> 40,000 shares. But on March 31 the stock began to trade more actively,
> touching $0.17. Volume continued to pick up on April 1 with the stock
> closing
> at $0.23. On Monday, April 5, Cambridge popped up on 862,600 shares to
> close
> at $0.36, three times the price a week ago. During the past three
> trading
> days Cambridge has traded over 1.7 million shares for a threefold
> gain! The
> 14.4 million fully diluted shares of Cambridge now have a market cap
> of $5
> million based on a $100,000 investment in an Internet travel site. On
> April
> Fool's Day Cambridge announced that Discover Canada Online
> (www.discovercanada.com) had signed on Rocky Mountaineer Railtours to
> something called Discover Canada Travel Partners, which facilitates
> online
> booking. This facility is still under development, and will be owned
> 70% by
> another entity called Whister Destinations Inc. In other words,
> Cambridge
> gets 49% of the 30% owned by Discover Canada Online. Confused? Don't
> worry.
> The bottom-line economic logic is for now irrelevant in the world of
> Internet
> stocks. What counts is that Cambridge stock has started to trade,
> delivering
> to speculators the juicy combination of rising volume and price. Am I
> going
> to try to tell bottom-fishers how to play this one? All I can say is
> that
> the
> laws of momentum are the only relevant factor. Valuation logic does
> not
> apply
> because any such attempt runs into the orebody equivalent of "what if
> this
> obscure wannabe finds the next Pierina deposit?" Eventually a familiar
> form
> of valuation logic will prevail (ie how much money is the business
> making?),
> but for now Internet stocks enjoy a holiday from the sort of
> depressing
> realism that weighs heavily on resource and energy stocks. So with
> regard to
> Cambridge, all I can say is that be aware that this stock is now
> trading as
> an "Internet stock", and that anything can happen.
>
> Personally, I will be looking for an opportunity to sell my position
> unless
> Cambridge develops an Internet story distinct from that of Realm
> Group, an
> obscure ASE company that has been in business in the "creative
> communications" field for 19 years. The math says so (forgive me, I
> can't
> help myself). Realm is a real company controlled 63% by Glen Phillips,
> who
> has built this company from scratch. The last available financials
> show
> Realm
> grossing $190,709 for the quarter ending September 30, 1998.
> Fortunately,
> Realm is not making any money; it lost $117,982, a prerequisite for a
> "good"
> Internet stock. The company's traditional revenue base consists of
> preparing
> annual reports and brochures for public companies, generally of the
> more
> substantive variety such as Placer Dome and MacMillan Bloedel. During
> the
> past few years multimedia services have grown to about a third of
> Realm's
> revenue stream. But since 1998 Realm has wandered into the arena of
> online
> publishing, where it has developed a number of destination sites such
> as the
> Inquisitive Cook, Decorworld, and Discover Canada. Realm is even
> responsible
> for Canaccord's web site, which makes one wonder how long it will take
> before
> Peter Brown discovers this orphan and figures out a way to give it a
> new
> life
> worthy of its pedigree. What Realm's Glen Phillips has been especially
> good
> at is in maintaining a low public profile for Realm. Realm took over
> an ASE
> shell in late 1996, opened at $0.50, and by mid 1997 had tanked to
> $0.10
> where it stayed until recently when Cambridge optioned 49% of one of
> Realm's
> many Internet projects. Realm is so obscure it even slipped through
> the
> radar
> screen of my bottom-fishing filter when I compiled my 1999 list. Realm
> is
> the
> sort of stock I would have dismissed as a typical ASE mom & pop
> operation
> that would have been better off if it had stayed private. However, in
> the
> context of today's Internet mania, Realm Group is a screaming Internet
> stock
> buy. It is one thing for a shell like Cambridge to grab somebody's
> Internet
> business plan and talk about putting it into action. It is another
> thing
> when
> a company like Realm that is already immersed in the communications
> business
> and online publishing to trot out a new business plan for a hot
> Internet
> project. It is a matter of credibility. Realm Group is pregnant with
> Internet
> possibilities.
>
> I have accumulated a position in Realm Group in excess of 50,000
> shares
> because I feel that this "extreme" bottom-fish could come to life with
> a
> vengeance. Glen Phillips is the equivalent of the "toiling geologist",
> somebody who knows what he is doing but has precious little
> comprehension
> about the dynamics of a public company. Because his stock is either
> escrowed
> or part of a control position, there is a public float of only 5
> million
> shares out of the 17,640,000 shares issued. Fully diluted there are
> only
> 18,910,000 shares, which translates into a market cap of $5.7 million.
> That
> is peanuts for an Internet stock! Realm Group has the potential to be
> trading
> at 5-10 times the current price if management adopts an aggressive,
> high
> profile stance regarding the Internet, and the stock market discovers
> this
> over-looked "Internet stock". If I were to add any junior to my 1999
> bottom-fishing guide, Realm Group would be my top choice given its
> current
> trading levels. I do not feel comfortable mentioning Realm to my
> readers
> because I have been buying it myself as an extreme bottom-fish of the
> sort I
> don't want to even admit buying. But the recent action in Cambridge
> Minerals
> tells me that Realm is not such an extreme bottom-fish after all, and
> that
> my
> readers deserve a chance to take a shot at this play on their own
> terms.
> Realm has become a case of the tail wagging the dog. Buy the dog Realm
> and
> hold for the homerun, and trade the tail Cambridge that seems to be
> wagging
> the dog. Cambridge can be reached at (604) 688-2321, while Real can be
> reached at (604) 689-3383.
> *John Kaiser owns in excess of 50,000 shares of each of Cambridge and
> Realm,
> and intends to sell all or part of these stock positions without
> further
> notice if Internet mania takes these stocks substantially higher.
>
> {No statement or expression of opinion, or any other matter herein,
> directly
> or indirectly, is an offer to buy or sell the securities mentioned.
> While
> we
> believe the sources of information to be reliable, we in no way
> represent or
> guarantee the accuracy thereof, nor the statements contained herein.
> Kaiser
> Trackers are available through an annual subscription to the Kaiser
> Works by
> Email at US$199/year or by Fax at US $399/year. To order contact
> Canspec
> Research at PO Box 6456, Moraga, CA, 94570-6456. Tel: (925) 631-9748.
> Fax:
> (925) 631-9753. Email: canspec@value.net. Archived copies available at
> www.canspecresearch.com.}
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