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Monday's
Big Movers Worth a Look |
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The
last several days - and several weeks for that matter - have started
to unlock some previously-frozen penny stocks and micro cap stocks. While
we still anticipate challenges ahead (for equities of all sizes),
we also feel wading into the water of penny stocks doesn't have
to be a terrifying idea any longer.
Below are a
few ideas that penny stock traders may want to consider. Some are
more speculative than others, but we think all of them have at least a
decent
shot at doling out rewards of some size. Nimble trading on your end could
help enhance any returns.
Note these
penny stocks may or may not also be micro cap stocks.
In general,
penny stocks make for better trades, while micro caps may be better suited
as investments (and the overlap between the two is dealt with on a case-by-case
basis). We only mention this to set a trading tone rather than
an investing tone. We'll present some micro cap (i.e. investing)
ideas later on this week.
A lot of stocks
have been one-day wonders lately, but a few of those big hits have also
followed through for several more days. Here's a look at Monday's biggest
and brightest penny stock stars that may be hinting at even bigger
moves in the near future.
 Joe's
Jeans Inc. (JOEZ)
Since March
24th, shares of Joe's Jeans have rallied from 27 cents to the current price
of 55 cents, and had been as high as 60 cents on Monday. What causes
a stock to more than double in a month? In this case, perhaps it was
a small dose of what seems like bad news that may actually be positive
news in the grand scheme of things.
JOEZ, which
had been lethargic since mid-February, received a potential delisting notice
from the NASDAQ on the 19th of March. The company posted an 8K about the
notice along with a response/plan on - you guessed it - the 24th
of March.... the same day the stock got turned around. Perhaps the market
was just waiting for evidence that Joe's Jeans could indeed maintain their
NASDAQ listing (which wouldn't be difficult to do).
The 'plan' is
simply to refile some of the more recent 10Q's to better reflect an acquisition
made in 2007. The amended numbers will slightly worsen results, but considering
the company's P/E is only 5.4, there's room for an adjustment. In fact,
the adjustment may already be priced in thanks to thanks to an enormous
tumble in late 2008.
 CopyTele
Inc. (COPY)
CopyTele has
popped up on our radar a couple of times in the last several days. Previously
it showed up based on a significant increase in trade volume, but on Monday
it appeared based on the stock's 30% gain, apparently out of nowhere. No
news, no press release, and no SEC filing.
So what gives?
We can not validate or invalidate the possibility, but the rumor
is that COPY is a potential buyout candidate.
It would make
sense too. CopyTele's thin panel, phosphor-based display screens are a
brilliant idea, but the fiscal side of the company is still a mess despite
drastic improvements in last year's revenue. The best thing for all involved
may really be a buyout. As we said though, it's strictly a rumor at this
point, and we don't wish to spread or start any unfounded whispers - the
market's got enough as it is. We're just letting you know what the underground
buzz is.
Either way,
the stock popped big-time today... maybe enough to shake it out of its
rut.
 Xerium
Technologies Inc. (XRM)
Joe's Jeans
isn't the only sub-$1.00 stock at risk of being delisted. Xerium Technologies
Inc. was also warned at the end of last year that their NYSE listing was
in jeopardy. Not only was the stock's price too low, but the company's
market cap and shareholder equity were also under the NYSE's requirement.
In the meantime
though, Xerium submitted a plan the NYSE liked well enough to keep XRM
listed at least through the middle of this year, and if certain conditions
are met, the stock will remain listed at least through late 2010.
However, it's
a little tough to directly link that good news with today's and Friday's
higher-volume gains... the news came out in late March.
Delayed reaction?
Maybe,
but more likely it's just recognition that Xerium is still profitable,
and grossly undervalued even if the economic turmoil persists. (The twelve-month
P/E is 1.30 for cryin' out loud.) The paper manufacturing supplier has
certainly struggled along with most other paper manufacturers, but the
industry isn't dead. Xerium just needs enough of a boost to push the stock
above $1.00.
With that understood,
the perk up in volume and the stock's price over the last few days really
didn't
make a big dent - the chart is still in consolidation mode. A potential
breakout is present, but we've seen a lot of resistance around the all-important
$1.00 area.
 Celsius
Holdings Inc. (CSUH)
There was nothing
in particular that prompted Monday's 16.6% surge in shares of Celsius Holdings,
but the company has been more than a little busy on the publicity front
over the last several weeks. That may explain the move from January's
low of 2.7 cents to the current price of 14 cents.
Is more of
the same on the way for the stock? That's a tough call.
The beverage-maker
is pre-profit, which in itself isn't a major hurdle for the market - stocks
can make early gains well before a company posts its first profit. So,
don't let a lack of earnings right now deter you. As for an answer to our
question though...
What we like
and don't like about this stock is how it's largely being news driven.
As
long as the news flow continues, AND as long as the company can
hint at living up to the hype, then yes, CSUH shares really could keep
in truckin'. If the market gets tired of empty promises though, eventually
it will respond by dumping those shares. That's the biggest risk at this
point, and why we still see this as a stock you'd want to trade
rather than invest in.
Our bottom line
- we've observed how companies that are willing to help a stock trade by
supporting it with positive news tend to do so in perpetuity. So, we don't
see the publicity effort drying up anytime soon.
With that in
mind, the question becomes one of "when" rather than "if" for CSUH. News-supported
rallies also tend to be choppy, so if you want to jump in, you may want
to pick and choose an entry point in between news events, when the stock's
lulling.
Oh, Celsius
Holdings was trading above $3.00 in early 2007 when revenue was much, much
weaker... if that helps provide some perspective.
That's it
for this round of penny stocks. Remember, we're going to be reviewing some
micro cap picks (which may or may not be penny stocks) later this week.
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Updated: 8:15 pm PDT (03:15 GMT), November 2, 2010
