Fraudulent newsletter which hyped stocks like Great White Marine (JAWS) speaks out on shortsellers. Subj: Where's The Bottom? Date: 3/17/01 10:35:42 AM Eastern Standard Time From: bounce-otcjournal-1104672@lyris.otcjournal.com (OTCJournal ListServer) Sender: bounce-otcjournal-1104672@lyris.otcjournal.com Reply-to: info@otcjournal.com (OTCJournal Newsletter) To: xxxxxxxxxxxxxxxxxxxxx If you are reading this message in plaintext or if you have an AOL address you must click on this link: listserv.otcjournal.com and wait for a web page to automatically open up to properly read this newsletter. [Image] [Image] [Image]
[Image]March 17, 2001[Image] [Image]Volume IV, Issue 27[Image]
Email : info@otcjournal.com URL : otcjournal.com
To OTC Journal Members:
[Image] Where's The Bottom?
Technicians are simply guessing. Whether you've been investing for four months or forty years you have never seen a market this bad. Technicians have given up trying to predict the bottom. All areas of support are burning down like dry brush in high winds at a wild fire.
Early in the week we felt we made a good call on Oracle (NASDAQ: ORCL) and Art Group (NASDAQ: ARTG). We were looking smart until about midday on Thursday. Then the market collapsed, and both these stocks got clobbered.
If you participated in these Trading Alerts you could have taken a nice short term profit on either one. However, if you held for higher gains you should have been stopped out with no more than a one point loss. In this free fall market discipline is required. There is no telling how low stocks can go. We are in uncharted territory and this market is driven entirely by emotion.
Short Sellers continue to use the media power of CNBC to convince the public stocks can never go up again, and it's working. Prior to the open the "Trader Talk" is down, down, down. They are winning. They're mission is to create an atmosphere where everyone throws in the towel. They're close to a Super Bowl victory.
Momentum is the most powerful force in the universe. Short sellers have momentum and they are relentless in their pursuit of the demise of technology stocks.
This past year has been amazing. In a life time of investing you may never experience times like this again. Never have the markets seen such extremes in such a short period of time, and you can be telling your Grandchildren that you survived the nasty bear market at the turn of the century.
[Image]The Good News[Image]
Simple- the lower the market goes the better. Bears make convincing arguments that many growth stocks are still overvalued in the climate of a shrinking economy. The market is proving them right.
The lower the market goes the better bounce when we finally hit bottom. In our minds, the worst thing that could happen would be six months of sideways trading on very light volume. Apathy would hit an all time high.
As stocks continue dropping your opportunity to make substantial returns when stocks rebound increases dramatically. As stocks go lower entry points become less risky. If they continue down for much longer at this pace, stocks will become nearly risk free for anyone with a six month investment time horizon.
[Image] Take Apple Computer (NASDAQ: AAPL) for example. Apple has the most exciting product line for the new generation of computer users. Go in the store and look at their current designs. It's space age. Their computers are configured for all the latest applications- digital music, pictures, and video. They're new razor thin titanium note book looks exciting.
Apple lost $.27 per share last fiscal year (September Year End) as it invested a tremendous amount of resources in the new product line they have introduced.
The company is expected to return to profitability this quarter. Analysts are now talking about a break even or a small loss as a result of the slowing economy. Here's the good news- Apple is trading at about $19.50 having seen a low of $13.625. The company has nearly $12 per share in cash. Therefore, at this price you are paying about $7 for Apple's business in every share you own, and they should have positive cash flow even in the absence of EPS going forward. Many investors believe Apple's business and brand are worth considerably more than $7 a share.
We are not recommending you run out and buy Apple Computer when the market opens on Monday. The market could go a lot lower. We are just suggesting investors perceive the values being created by this market free fall.
[Image]Some Perspective[Image]
There is a very simple way to view this market. Think of the NASDAQ over the past twelve months like this:
* The drop from 5,000 to 3,000 eliminated the irrational exuberance. * The drop from 3,000 to 2,000 correctly reflects slowing economic conditions. * The drop below 2,000 is irrational pessimism about the future state of the economy and purely emotional.
Thinking along these lines, any continuation of the NASDAQ's drop below 2,000 represents a chance to make profits on the way back up. The further it falls, the more you will make.
If you have your entire wealth in the stock market right now with no chance of ever having cash to work with you will have a long wait, but it will come back. It might take several years for the NASDAQ to see 5,000 again, but it will get there.
[Image]OTC Journal Favorites[Image]
The three stocks in the micro cap arena we have focused on this year are Envoy Communications (NASDAQ: ECGI), Energy Power Systems Limited (OTC BB: EYPSF), and MedGrup (OTC BB: CODX). All three companies are profitable and all three are undervalued in our opinion.
Envoy Communications (NASDAQ: ECGI) got killed this week, closing at $2. This is a level we thought the stock would never see. The company is having an outstanding year, and the current market capitalization of $40 million is a joke for a company doing nearly $100 million in annual revenues and making substantial profits.
Unlike our other two favorites, Envoy has institutional participation in its stock, and fund managers were selling this past week with no regard for their cost basis or the company's fundamentals. This may turn out to be the all time bargain basement steal at $2.
Energy Power Systems (OTC BB: EYPSF) had a great week in the face of a horrible market. The stock actually appreciated 37% on the news of the company's new contract in Atlantic Canada. This company is at the front end of a steepening growth curve, and there is no institutional participation in the stock, which explains why it could go up in this market.
MedGrup (OTC BB: CODX)had a quiet week, closing down $.10 for the week on extremely light volume. The stock has a loyal shareholder base of individual investors, and no one is panicking in the face of the tough market. Next week we hope to have their year end financial results.
[Image]Conclusion[Image]
The OTC Journal will continue to publish Trading Alerts when we feel there is an opportunity for a short term trade. If we publish any short term trading ideas please use a Stop Loss until the market becomes more predictable. Preservation of capital to be put to work at the inevitable bounce is prudent. Remember- the lower we go, the better the bounce somewhere down the road.
In the meantime, we continue to like our three microcap stocks for long term investors, and they should be accumulated at these levels. When the market comes back these stocks have the potential to double and triple.
Our previously announced new profile on a software company developing XML applications will be put on hold for the time being. ----------------------------------------------------------------------
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