Though the overall stock market has remained a little bit shaky for most of November, a few small cap and micro cap stocks have started to emerge as leaders. That’s not to say any of them are official Micro Cap Press picks, but on the other hand, their charts got and kept our attention. A little more due diligence may be merited for these bulletin board stocks.

Modavox (MDVX)

What happened on November 7th that turned things around for this sinking ship? Nothing - it just happened. Even more encouraging is that MDVX was sent back down from a high of $1.89 on the 10th to a low of $1.30 by the 18th, and the stock rebounded - sharply - despite the setback. Perhaps this attempt is going to be sustainable, unlike the rest. Just watch out for resistance between $1.95 to $2.05. The stock has topped there a couple of different times this year, as well as over the prior couple of years. Getting past that level, however, could be explosively bullish. 

Clearly Canadian (CCBEF)

Clearly Canadian’s chart just looked painful in September and October, but maybe some excessive selling in those two months set up what’s been a great November… and perhaps what could be an even longer-term recovery. The current short-term trend is pointed that way anyway. The $1.20 level seems to be a ceiling, so while any ride from 45 cents to there would be nice, don’t get giddy or sloppy (i.e. don’t forget to take any profits).

BioTime Inc. (BTIM)

Two steps forward and one step back seems to work just fine for BioTime - it’s been trending higher that way since March. The pullbacks are a healthy relief from overbought pressures, but have yet to be serious threats to the overall uptrend. BioTime - though diverse - is essentially an advanced medical technology company. They do a lot with blood and tissue, and recently launched products that could have practical applications in the area of stem cell/regenerative medicine. Revenues are minimal right now, and there are no profits, so it’s difficult to call BTIM an ‘investment’. Based on the chart though, it could make for an interesting ‘trade’. 

Intelligroup (ITIG)

The last few days have been much better for Intelligroup than the last few months have been. The stock has moved back above its key short-term average lines, and appears ready to at least stay there … if not keep moving higher. Though not enormous, the growth in bullish volume has at least been consistent. The recent surge, however, may be related to their Q3 earnings… they actually produced a net income, which is a lot more than many other bulletin board companies can say. In fact, Intelligroup has consistently produced income, which makes it surprising that the market isn’t jumping all over the stock. The twelve-month P/E is only 7.97, so perhaps investors just haven’t found this stock yet. Too bad.

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The real estate market’s contraction - having finally made its way into commercial real estate prices - has been nothing but a good thing for eager Spicy Pickle (SPKL) franchisees. Early in November a couple of new leases were signed, and another one was just signed this week for a new location in San Antonio … the Texas town’s first.

At a point in the real estate crisis’ timeline it seems like nobody wants anything to do with real estate, Spicy Pickle’s people realize this is an opportunity to find new locations at very reasonable prices. Rent and lease terms weren’t as tenant-friendly as they were a year ago, and they’ll probably not be as tenant-friendly a year from now. For those who are willing and able, getting prime real estate now is going to be highly-advantageous in the long run. So, Spicy Pickle is basically making lemonade out of the economy’s lemons.

The San Antonio store will be located near the University Square shopping center on DeZevala Road, and should be opening in early 2009. That’s not the only new thing we heard from Spicy Pickle though…

Canada’s Bread Garden Urban Cafes - a wholly-owned group of restaurants located in and around Vancouver - is moving their Cloverdale store to a location with a drive-thru. It will be the first drive through for any Bread Garden or Spicy Pickle. But, if it works out well, the company may entertain the idea of adding more of them in the future. CEO Marc Geman thinks the company may be able to compete with other quick-service restaurants not just with speed, but also with menu choices (and quality) not available at other drive-thrus.

Note that Spicy Pickle’s initial growth plan from late last year, which was on hold for a while, appears to be getting back on track.

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There’s no question things have been tough lately, psychologically at least as much as financially. Bad companies are seeing their stocks destroyed, and even good companies’ stocks are getting punished. For those of you in need of a glimmer of hope, we’ve got one for you today … water utility stocks don’t stink right now. They’re actually up for the week, the last two weeks, the last four weeks, and the last six months. It may not be sexy or cutting-edge, but it’s better than losses.

The chart below is the Dow Jones Water Index. The recent recovery effort has certainly been more volatile than the move lower was, but beggars can’t be choosers.

Just so you know, the Dow Jones niche indices (and water is one of them) include almost all listed stocks in the industry according to SIC codes. However, it still may be worth breaking the group down into small and mid cap segments. Sooo…

The next chart is of the S&P Mid Cap Water Index, and then the S&P Small Cap Water Index. Clearly it’s the mid and large caps doing the heavy work here, as the small caps in the group have actually moved mostly lower.

Some of the more prominent large cap and mid cap water utility names are American States Water (AWR), California Water Group (CWT), SJW Corp. (SJW), Aqua America (WTR), and American Water Works (AWK).

Based on the charts above, one would think the all the big shining stars in the industry would be lending a helping hand. However, only California Water and Aqua America are actually making any progress. The other three stocks are drags. That’s a little unusual, but not unheard of. Needless to say, that makes those two stocks at least a little more attractive than others in this group.

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The newsletter/op-ed piece we published earlier this week (”Obama Versus Buffett in Detroit“) generated tons of feedback. Most of it was positive; some of it was not. We’re fine either way, as our whole point was to spur thought and discussion. Some of the feedback is below. We’ve also included our response to the individuals who sent the responses in.

The first reader wrote it…

“Quite to the contrary, if Obama doesn’t choose “dissenting” views for his advisors and listen (hear and understand) to them, he is doomed to failure. (I am not an Obama supporter, but I want to support the President of the USA)”

Good point.

“For all those many years gm made a profit and the govt collected  AND has paid so many (they used to say how goes gm  how goes the country)—now that no one dependant on finance can make a profit in this most horrible economic environment idiot politicians and reporters want  to take this former cash cow for so many and for  so long and shoot  it because the cow  is  sick and  temporarily unable to give milk in dire need of help to survive– if we  want to prevent  a depression we must  do the right thing and help the GM cow get on its feet again–not only for their sake but for our sake also as it is the only RIGHT  thing a great country  would do.”

Agreed. We took a lot of heat based on this basic assumption, but just to be clear….we don’t want GM to fail. We just want it to be fixed right. (There’s a whole lot more below on the same topic.)

I am deeply offended by this editorial, which is not accurate. 
 
Why emphasize what Buffet is saying.  He is not right and you are both wrong on your “facts”  The auto industry is not as “simple” to understand as you think.  Learn a little bit about foreign trade and the role the auto industry plays in it, and the survival of foreign companies because of American involvement, and because of trading agreements, and you will change your mind (I would hope!).
 
The truth is: CIO union manages the health care benefits for hourly workers, and the retired employees are managing and will private-pay their own health care as of 1/1/09.
 
(Previously, GM and other auto companies contributed to part of the cost, which allowed a more reasonable premium rate for employees from some of the largest insurance companies, such as Aetna, Prudential, and Blue-Cross Blue-Shield.) This was part of the employee benefits package negotiated by the union.
 
No, of course you wouldn’t suggest that GM pensioners be thrown under the bus, but that is exactly what could happen if GM and other automakers go into bankruptcy.  The pension wasn’t a gift - because employees contributed, too!  This would be horrible!
 
Obviously, YOU DON”T CARE!…..AND YOU THINK THEY SHOULD FAIL!

Hundreds of thousands of people would be forced to go into the welfare system, since Social security benefits would not even begin to cover the basic costs of living, 

We’re sorry if you were offended by any of our ideas. We won’t apologize for them, since our job is to present them - good or bad. However, we certainly don’t wish to upset a reader.

That said, it’s clear you’re passionate about the topic. We respect that. However, your passion may have led you to a conclusion we weren’t making.

We’re not advocating GM’s bankruptcy - we’re advocating GM’s self-sufficiency. However that can happen is what we support. But, we can’t advocate throwing $25 to $50 billion at Detroit’s big three without a specific plan.

The Treasury drummed up $700 billion a couple of weeks ago to stave of a meltdown in the financial sector, but only recently have we figured out they (the government) still don’t really have a plan to fix the problem…. they’re flying by the seat of their pants. That’s how things get misappropriated, and that’s where fiscal irresponsibility is bred. To see it possibly happening now with the auto industry is worrisome. That’s all.

So, our issue isn’t the money or the industry - our issue is sending money without a plan, or conditions. If the company can’t support itself in the long run (not the short run, but the long run), then something needs to change so that they can.

Maybe GM can be self-sufficient in the long run. We hope so. Letting retirees shoulder some of the health care costs rather than being paid by the company is a good start, though not quite enough.

To be clear though, the employees (current and former) are our primary concern. Like you said, they’ve contributed as much or more than anybody. We agree, which is why we specifically said in the newsletter “In our opinion, the pension and health coverage should be protected by the government”.

In response to your belief, no, we DO care, and we DON’T want them to fail. We just want them to be autonomous, which is better for everyone ultimately. Mentioning the Deutsche Bank target of $0 was mostly a commentary on the stock, not the people in the company.

G M and engineering crew has no imagination.
 
They set on their fat cat butts and let every country that makes a car build them with people in mind, while they continued with huge, heavy monstrous gas guzzlers with 300 to 600 horse power engines.
 
Now needing a complete building of their plants to produce an economical car and still too ignorant to understand where they went wrong.
 
Even now when they build a hybrid its a 6000 pound monster, that will only  get 20 to 25 miles to the gallon of gas and cost 35 to 40 thousand dollars.
 
They proved over and over again, they are simply in the wrong business.
 
Ignorance is bliss, but it wont sell autos or trucks.
 
They biggest line for their truck is, it gets 20 miles to the gallon.

Thanks for the e-mail. We can’t verify the stats and specs cited above, but we definitely get the idea.

good article…well balanced…

Thanks

I think you are right on target.
 
Thank you

Clearly it’s a topic people are passionate about, one way or another. If you’ve got two cents (or more) to add, feel free to do so below.

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Perhaps you came across the news yesterday regarding Japan’s carbon emissions and greenhouse gas production last year? In a nutshell, carbon emissions were up 2.3%…a clear step in the wrong direction of reducing their output of carbon dioxide (CO2). All told, Japan produced 1.37 billion tons worth of CO2, or its equivalent, last year…a record they aren’t exactly proud of.

Japan voluntarily entered the Kyoto pact, which essentially limits the amount of pollution each pact participant is allowed to generate. And, the country’s government thought they could come in under their quota when the pact was first signed. In fact, they were fully expecting a decrease in carbon emissions, which they had managed to do the year before. However, an earthquake led to the shutdown of a key nuclear power plant (TEPCO), so the country fired up their coal power plants. Their CO2 output increased accordingly.

There’s still no word on when or if the nuclear plant will be operational again, so the reprised problem is also an indefinite one.

It’s worth mentioning that - in an effort to abide by the Kyoto pact - Japan is looking to push their carbon output levels to less than 1990’s levels by the end of 2012. That will require almost a 10% reduction of CO2 output every year until then though. So, it’s not unreasonable to think the goal is out of reach, considering the latest batch of data.

What’s this got to do with China Energy Recovery (CGYV)? Nothing, directly. Indirectly it has everything to do with China Energy Recovery.

Considering China Energy Recovery’s (or CER’s) specialty is making coal power cleaner and more efficient, Japan’s solution is a no-brainer… buy some of CER’s caps and boilers. The cost is a pittance compared to the benefit.

One discouraging announcement itself (like this one) doesn’t put money in CER’s pocket. And, just because the solution to the problem is clear doesn’t mean Japan is going to place an order for the equipment that clearly could solve the problem. However, the fact that the problem is so well defined - coupled with the fact that the pressure is on - certainly speaks to the kind of demand CER should enjoy over the next 3 to 5 years. See, Japan is hardly alone here….China’s got a similar challenge, as do many countries including the U.S. (which does not participate in the Kyoto pact).

Carbon emission restrictions are not going away, nor is coal power. One way or another, the world’s got to find a way to make them work together….which is precisely what CER does.

We’re generally not into this kind of ‘concept’ investing, since it doesn’t define a specific valuation. However, CER has provided a clear valuation along with a brilliant product/service concept. That’s why we remain so encouraged.

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