The Dog has a follow-up for FAMH as follows:
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Undervalued Dog, Volume 3, No. 16, May 2, 1998
Notice: This investment newsletter (Undervalued Dog) was intended for a specific audience. If you received this private e-mail in error or would like to be removed from our list, please reply with "remove" in the subject line. We sincerely apologize any inconvenience that may
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Who we are: We are a group of equity analysts. We specialize in discovering undervalued small- and micro-cap stocks in terms of their book value, growth potential, revenue, income, turnaround situation, acquisition, or reverse merger. We are using certain criteria to screen stocks in a database that contains all public companies and then we have an in-depth analysis by using sophisticated professional procedures. We provide unbiased commentary on stocks that we recommend. We evaluate the stock using the fundamental approach; the technical approach including bar charts, point and figure charts, volume studies and others; the psychological approach including the Theory of Contrary Opinion, Odd-Lot Studies, Sentiment Studies and others.
Mission Statement: Discover a massive new trend at the start of stock climb... Find a Gung-Ho public company...Invest early... Then make the killing of a lifetime...
Disclaimer: The information that the Undervalued Dog provides is not a solicitation to buy or sell securities. We are not stock promoters. We do not accept payment of any kind from the companies we introduce or their public relationship firms. Investing in securities is speculative and may carry a high degree of risk. As a reader of the Undervalued Dog you will be responsible for your own trading and investment decisions. You have to set your own goals whether you want to invest for short or long term. The Undervalued Dog is not responsible for your investment decision. We give you ideas, stock picks, and buy alert to work with. We advise you do a little research yourself to make a proper investment decision depending on your own risk objectives. The information set forth herein is obtained from sources believed reliable, but the Undervalued Dog does not guarantee its accuracy or completeness. Investors are urged to obtain information directly from the company to further add to their investment decision. The Undervalued Dog is not liable for any investment decision made. We are an investment analyst group only. We may have positions on stocks that we recommend.
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Part I: Important Notice
We would like to answer some questions that have been asked frequently by our readers.
Q: Since the Undervalued Dog releases picks after the market is closed, I can't take advantage of your picks any more as a daytrader. What should I do?
A: We will publish another newsletter entitled "Trader's Paradise" on May 12, 1998, twice a week. This newsletter will exclusively serve daytraders. We have seen some groups of daytraders. They just don't have any clues how to pick. As a result, few people in these groups make a profit, the rest of people get sacked. The sad thing is that some people even pay for getting "slaughter". It's not only unethical, but also inhuman.
We will mix procedures used by professional and institutional daytraders to create a new procedure for screening picks. First, daytrading any stocks must be supported by momentum-inducing factors which include, but not limited to, major news release, merger, acquisition, major contract, rumor, or other important events. Second, a daytrading stock must have sound fundamentals, if not solid, because the stock will be carefully scrutinized by professional and institutional daytraders. Third, stock liquidity should be good. Fourth, only stocks in NASDAQ will be picked, as this is where professional and institutional daytraders focus on. Fifth, some stocks should be held for days, even weeks for maximum gain, as momentum can last weeks, if not months in some cases. Sixth, trade and investment must be well mixed. Sometimes investment of a stock can turn out to be trade of a stock. In other cases, trade of a stock can turn out to be investment of a stock. With these six principles in mind, we will have attentions for our picks from the Street with our unique trading style. As a result, everybody will be a winner overall, if not in trading a particular pick. We'll send specific instructions before we start.
If you want to subscribe "Trader's Paradise", please send an e-mail to traders@the-stock-market.com with "subscribe" in the subject line. Even you are a recipient of this newsletter (Undervalued Dog), you do not automatically receive "Trader's Paradise". You must send an e-mail for subscription of "Trader's Paradise" in order to receive the newsletter. The subscription is free.
Q: To me, MDCE still sounds too good to be true. Do you know when MDCE will release its audited 97' 10-K?
A: We don't know the exact date. The delay is attributable primarily to the acquisition of Pasadena that will be included in this annual report (10-K). Also, the management needs to add some analysis and discussion for its 10-K. We believe it will be released any time from now on. Just keep to check MDCE news at quote.yahoo.com
Q: Do the newsletters have a website?
A: No, we don't have one. The Better Life Foundation, a non-profit organization, is planning to create a website for us with numerous investment and other resources. It will be free for all!
Q: I don't understand what the meaning of technical support of a stock is. Can you explain it a little bit?
A: For example, MDCE has a technical support in the area of $0.15/share. It was concluded from its trading pattern in the past. Basically, It means many investors including market makers are willing to buy the stock at this level. It's also a downside potential for a stock. This is one of our criteria to analyze a stock. For example, MDCE is $0.20x0.21 now. If you buy MDCE at $0.21, you may lose $0.06-0.07/share. According to its on-going revenues, earnings, and assets, we estimate MDCE has a upside potential of $2-3 by the end of this year. The ratio of gain and loss will be $2-3/$0.07 = 28.6 to 42.9. You see the chance to lose money in this stock is minimal, though the price may be up and down. An increase in the price of technical support means uprising tendency of a stock price. For example, FAMH stock has moved its price of technical support from the area of $0.30 to the area of $0.45 in the past two month. That means more investors including market makers are willing to buy the stock at a more expensive price now. Eventually, the stock will move up, as investors and market makers are unwilling to sell the shares at a cheaper price
Q: Why does the newsletter often find some incredible stocks with low PE and high ratio of price/book? However, people on the Street are willing to invest some companies that do not have any earnings, and even some do not have any assets in some cases, just because these companies have a website or claim that they will develop one?
A: We know that. We know fund managers toss our analysts' reports up in the air and tease they geek's' reports as soon as we leave their offices. Why do they have to care when they fool around with other people's money (e.g., pension, trust, mutual fund, and institutional retirement fund). When they win big, they get a promotion. When they win small, they get a luxuriant bonus. When they lose small, they have millions of excuses. When they lose big, they land another job and continue to fool around with other people's money. Sounds like your broker? You bet. The party will be going on for ever? We don't think so. When the market settles down where it comes from, these people will learn the lesson and look into a company's fundamentals as stated by Investment 101. It's just a matter of time. It's no need for a rocket scientist or brain surgeon to figure out how foolish people can become when they use other people's money!
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Part II: A Follow-up for FAMH
Firamada Inc. (OTC BB, FAMH)
Recent Price: $0.47-0.485/share
Daily Average Volume: 520 K
97 EPS: $0.11/share
97 PE: 4.4
Industry Average PE: 59.07 (Thomson Tipsheet)
Estimated 1998 EPS:$0.36/share
Forward PE: 1.3
Book value: $0.95/share (estimated)*
Price/Book: 0.51
Industry Average of Price/Book: 6.89
Div/Shr: None
Yield: None
52-week Range: $0.09-1.25/share
Outstanding shares: 50 M
Floating Shares: 20 M
Market Cap: $24.2 M
Profit Margin: 10-15%
1997 revenues: $8.5 M
Estimated 1998 revenues: $120-140 M
SEC filing: Yes
* Book value may vary due to the recent acquisitions.
We recommended FAMH on March 2, 1998 at $0.29 to 0.31/share. Since then, the stock price has been as high as $0.70/share and pull back at $0.485 now. We believe the dip has created the best opportunity to buy if you have missed it last time, as the company has entered a new era with dramatic improvement in business operation and completion of several acquisitions. Though the company has been expanding and performing businesses well, two major factors may directly contribute to the price tip. They are the delay of the release of 97' 10-K and the failure of an attempt to merger with ATRIX. We want to emphasize that FAMH fundamentals become better and better in the past two months. FAMH shares have a great chance to reach its upside potential of $2.50 by the end of this year and upside potential of $10.00 by the year of 2000, though fluctuation in the price is expected. Next is an in-depth follow-up for FAMH.
On April 17, 1998, FAMH closed the acquisition of Myriad Employment Services, a $90 Million staffing and employee leasing company based in Long Beach, California. Per terms of the Acquisition Agreement, Firamada is scheduled to make an initial $1 Million payment to the Internal Revenue Service's San Diego office next week. This payment will be followed by sixty monthly installments of approximately $59,500. The aggregate of these payments will total $4.5 Million. The final Agreement does not include the issuance of any Firamada shares and will be a cash transaction only. Also per the Agreement, Ted Colo and Steve Fox will continue in a non-principal management capacity with the company under a negotiated 3-year contract. On April 28, 1998, FAMH acquired Financial Recruiting and Consulting, a niche market staffing and consulting firm located in Wilmington, Delaware. Financial Recruiting and Consulting specializes in placing credit, collection, customer service and systems personnel in the Wilmington area. Financial Recruiting and Consulting currently generates annual revenues of $1+ Million. The President of Financial Recruiting and Consulting, Mr. Francis DiMichele, brings 18 years of experience in the banking and staffing fields and is a mainstay in the Delaware marketplace.
Terms of the purchase of Financial Recruiting and Consulting included cash and an on-going employment agreement to retain the services of Mr. DiMichele. FAMH will close another acquisition of a $1.5M staffing company in Connecticut next week. The management told us that the strategy of acquisition is to improve overall profit margin and to bring people with special expertise in staffing industry to FAMH. The management also wants to diversify its income sources in case the economy has a down turn in the future. This is a major reason to sponsor the Morton Downey, Jr. Television Talk Show.
The Morton Downey, Jr. Television Talk Show, co-produced by FAMH and scheduled to appear in 105 markets, is slated to begin production in June. Exact dates and location will be announced at a later date. FAMH will receive a significant percentage of the Morton Downey Show sponsorship revenues ($200,000 to $500,000/month). Firamada's new Internet web site, firamadainc.com, will be fully activated on, or about, May 4th. The Company's web site will initially include job listings, employment office locations, upcoming events and other pertinent Company information (Well, FAMH has a website. FAMH may turn out to be another Internet play as well. Who knows??? You never know how some people on the Street are getting foolish, particularly when foreign money flows into the US market). The web site will eventually also include a detailed investor package that can be downloaded for print-out. Firamada will launch a 10-city speaking tour next month featuring Company President Ira Monas. Mr. Monas will begin his speaking tour with an engagement in Las Vegas, NV May 13-15. This tour should greatly expose FAMH in investor community. The revenues from recent acquisitions with current FAMH on-going businesses will generate $120-140M revenues for 1998. The management is planning to continue expansion beyond 1998 and to become a $250 M company by the year of 2000.
Besides these right moves in business by the management, listing FAMH on NASDAQ is another priority of the management. The company has filed its 97' 10-K with the SEC, becoming a fully reporting company. We don't know what the exact plan is, but we do believe FAMH won't have any trouble to get listing on NASDAQ with current expansion and solid business plan. It's just a matter of time. Maybe 3 to 6 months. FAMH has a strong cash flow and businesses are booming. It's just another matter of time when investors realize how the company has been well managed! When investors have unrealistic anxiety to make 100% return in their investment within weeks or months, it's hard to appreciate the fact that the management has turned a $8.5M company into a $120-140M company within several months. By any standard, it's a miracle, if not a magic, in this increasingly competitive industry.
Contact:
Firamada, Inc.
40 Wall Street, 32nd Floor
New York, NY 10005
TEL: 212-425-2168 or 888-831-2442
CEO: Arif Adam and President: Ira A Monas
Company's website: firamadainc.com
PR FIRM: Preferred Financial Marketing 310-789-1132
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STATEMENT OF DISCLAIMER: The information presented in the Undervalued Dog is not an offer to buy or sell securities referred to herein. By no means is the above company information complete. One should obtain financial statements and a full due diligence package, including chronological news releases, from this company prior to reaching any investment decision. One should also use the full battery of available technical analysis, including stock charts, moving averages, etc. and consult a licensed financial advisor for an independent opinion. The Undervalued Dog is not in the financial advisory business. The Undervalued Dog is not responsible for the outcome of anyone's investment decision.
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