MYDX and NBEV - Admitting bad calls....

I haven't been shy about patting myself on the back here when I've written a bullish opinion on a stock that then goes on to make substantial gains.  I've had a number of successes.

The Bullish Calls

I first wrote about LAC.TO at $0.75 CDN and it is now trading for $1.06....I long ago took profits on that stock at lower prices than where its trading now, and when that happens I simply cry into the money I made.

http://www.avoidthebag.com/2016/04/lithium-americas-cup-and-handle-forming.html

EGT.V is one I wrote about at 14 Canadian pennies.  I bailed on it after doubling my money but its still trading up around 25 cents.

http://www.avoidthebag.com/2016/05/the-lure-of-clean-energy-eguana.html

HMPR, which is now trading as XBKS after a merger is one I'm particularly happy about, and while I have taken profits by selling some shares its one I continue to like and have maintained a position in.
It was trading at a split adjusted price of $18.10 when I first wrote about it here, now its at $26.50 after pulling back from as high as $30.

http://www.avoidthebag.com/2016/05/hampton-roads-bankshares-hmpr-great.html

RVX.TO is a stock I first wrote about here when it was trading around $1.30 CDN, its currently at $1.75 after getting up around $2.50 in October and is one I still continue to both like and hold, however fully ackowledging that it is extremely high risk in my view.

http://www.avoidthebag.com/2016/06/resverlogix-phase-iii-clinical-trial.html

ACU.V written about at .16 cents now at .185 is one I doubled down on when it fell to 10 cents.  I took some profits when I climbed up over 20 cents, but I still am maintaining a position and still think there's much more upside potential.

http://www.avoidthebag.com/2016/07/the-lure-of-green-energy-aurora-solar.html

In October I expressed a bullish opinion on RMHB when it was trading around .036 cents American. Now it has climbed to .092....it is another one where I'll have to cry into the money I made, bailing on it after a 50% profit.

http://www.avoidthebag.com/2016/10/hemp-infused-beverages-intriguing-idea.html

KUB.V has been a monster, I wrote about it in October as well when it was 2 cents...and now its settled in around 6 cents after trading as high as 7.5 pennies CDN.  Its one I continue to hold, in fact I just added to the position I started at 2.5 cents by buying more at 6 cents.

http://www.avoidthebag.com/2016/10/an-intriguing-penny-play-kubv-ukranian.html

Not too bad at all, and I'm leaving out more recent gainers like Emblem Corp.

Of course not all my calls were long plays.  I did express bearish views at times when I thought some stocks were bubbling up on nothing more than Promotion, News and Hype.

The Bearish Calls
I wrote a few bearish opinions on ZIOP starting last May when that stock was trading in and around $7 to $8 per share, now its sitting around $5.50

http://www.avoidthebag.com/2016/05/ziopharm-wall-street-sting.html

I did a couple posts on KTOV also in May when that stock was trading up around $6.60 per, now its fallen all the way to around $3.

http://www.avoidthebag.com/2016/05/ktov-what-just-happened.html

And then there's VUZI when it was up at $8.81 on its way to almost $10.  Now its fallen all the way back to $6.40

http://www.avoidthebag.com/2016/09/vuzix-time-machine-back-to-tech-bubble.html

And finally my very recent bearish thoughts on NF.CN from November when it was up around 25 Canadian pennies and on its way to being promoted to over 30 cents.  Its now trading for 11 or 12 cents and in my opinion on its way back to .02 cents eventually.

http://www.avoidthebag.com/2016/11/message-board-fun-and-games-with.html

But enough of the successful calls, I didn't get them all right last year and I am sure I will get some wrong in the future.  Two opinions I expressed were particularily bad, one long idea and one short.

MYDX is a company I wrote about this past November and one I took a position out in.  When I wrote about the PPS was trading for 2.2 cents, and I bought into at .0144 as revealed in the comments. Its most recent closing price was .0021 for a drop of over 80%.  Ouch!!!  Thankfully it was a small position, and I followed my own advice in that post and only risked money I could afford to lose.

http://www.avoidthebag.com/2016/11/mydx-another-way-to-play-marijuana-space.html

I will continue to hold MYDX (the symbol and company name are one and the same).  The company is forecasting profitability in the near future, I'm not going to hold my breath however.  A good recipe for going broke in my opinion is to believe the forward looking bullish outlooks on penny stocks. I've already booked some solid capital gains in 2017 and losses can come in handy at tax time, even if the dollar amount is small.

The bearish short opinion was expressed on NBEV, back when it was trading under the symbol ABRW.  I wrote about that stock in June of last year when it was trading up around $1.75 cents after already made a huge jump from as low as .20 cents in February and March.  Today its trading up around $4.20 and has been as high as $5.50

http://www.avoidthebag.com/2016/06/abrw-great-example-of-stock-promotion.html

My opinion on NBEV hasn't changed for the long term, but I have to admit I was wrong.  The ultimate arbiter in the market is price, and I thought NBEV had been pumped up near its limits in June, so I was incredibly wrong on that one as well.

When I get it right I'm not shy about sharing my success, but that means I have to take ownership of those views and opinions I get wrong too.  Some social media posters talk with extreme confidence when pumping and bashing stocks because they know sheep will follow strength, and admitting to past failures or the possibility that a call could be wrong, well that doesn't inspire confidence, and pumpers and bashers in my opinion (one that is often not humble) is that most are industry hacks.

Professional market players infest social media sites where stocks are discussed, that's opinion but for me its not up for debate.  The way I see things they are manipulators and bullies, trying to dominate the herd so as to shepherd the sheep into the stocks they're dumping, or out of the ones they want to accumulate.

I'll end this post here and wish everyone luck.  I will also once again cite those two maxims that I think are of critical importance to retail investors.  Firstly that nobody has ever gone broke from taking profits, and secondly that if you sell a stock and then see it continue climbing even higher, before buying back in cry into the money you made and think again about that first maxim.

Cheers.

Emblem Corp - Short players double down, borrowing and dumping nearly 500,000 more shares (EMC.V - EMMBF)

Short interest for EMC.V was just updated, current to January 15th 2016 and that number climbed an additional 496,900 shares to a new total of 952,900...

Again that's only current to January 15th and does not include any activity over the past three days of trading.  That means it is conceivable that the number could be even higher now.

Why would short players increase the size of their bet, more than doubling the previously reported number of shares borrowed and dumped back into the market from the January 15th update of 456,000?  I think the answer is fairly obvious, nobody likes to lose.

Retail investors are notorious for being price sensitive, viewing a rising share price as strength and a falling price as weakness.  Up is good and down is bad.  Its the inverse of what happens when people go shopping for things like groceries.  

My local store puts instant coffee on special every so often, selling it for a discounted price of $2 per jar as opposed to the regular price of $6 or so.  When I see the price drop to $2 do you think I take the jar in my cupboard that I paid $6 for and rush out and try to sell it?  Of course not. Instead I buy 10 jars at the lower price, confident in the knowledge that in another week's time the cost will be back at $6. 

The key word there is "confident".  I know with almost 100% certainty that the price of my coffee is going to return to $6.  When it comes to stocks however, retail investors typically lack that degree of confidence.  And players on the short side can impact what confidence long investors have by borrowing a significant quantity of shares and dumping them back into the market to depress the share price.  Their hope is that shareholders will get scared:  "The price is falling, things must be bad".

Should Emblem Investors be confident?  I think so, but as a shareholder my views are biased and should be viewed in that light.  

Obviously everyone is forecasting the Canadian Marijuana space to be an absolute monster in the years to come with overall revenues forecast to be in excess of $20 billion according to a recent study conducted by Deloitte.  (TorStar Article). 

Emblem specifically has an incredibly talented executive team leading it, arguably the strongest in the entire sector, with luminaries such as John Stewart formerly of Purdue Pharma heading up the pharmaceutical side of the business.  I don't think there's another player in this space with experience running a billion dollar company.

But that doesn't mean there aren't risks.  

The market is going to be highly competitive, with more and more licensed companies fighting over market share.  And there's always the chance that the Justin Trudeau government could back off on their pledge to bring forward their plan for legalized recreational weed, expected this April.  Given the poor state of Ottawa's balance sheet I don't consider that to be likely, however I have to acknowledge that it is a possibility.

Suffice to say there are risks, and risk can lead to uncertainty which causes fear and doubt.  And short players can exploit that fear by borrowing significant quantities of shares and reselling them into the market in order to lower the price of the stock.  

I won't belabour the point further, obviously those players on the short side have shown that they're willing to step up and increase the size of their overall position.  And I have no delusions that this miserable and pathetic little blog will rally retail longs to defend the PPS by holding and possibly even buying more.  

Taking out a sizeable short position takes a big bankroll because of margin and maintenance requirements.  What's that old expression:  "In for a penny, in for a pound".  In the weeks and even months ahead I will not be surprised if short side players up their bets even higher.  Only time will tell if it works.

If you watch social media expect to see the number of posters confidently proclaiming Emblem to be overvalued to increase.  With almost 1 million shares borrowed and sold bears will need investors convinced they overpaid and that selling would be a prudent move.

If you missed my first post on the short situation with Emblem you can read it here: 

Emblem Corp - Short Interest hits almost 500,000

I will leave you with an old video I've shared on here a number of times before.  Its Jim Cramer of Mad Money fame talking about the strategies he would use when he was "position short" to influence the sentiment of "moron longs" who fixate on price price price.

Its a dirty little game in the public markets, and knowing the ploys of the bigger players can help retailers make better decisions in my view.  Good luck, comments are welcomed as always but no profanity please.

Eagle Energy Inc. 8% annual yield (EGL.TO - EGRGF)

I don't write much about dividend stocks on this blog, tending to focus more on highly speculative companies.  But I think with Eagle Energy that an argument can be made that, in spite of the dividend, EGL.TO ( EGRGF OTC) is still extremely speculative in spite of its monthly distributions.

I have had this stock on my radar for a number of weeks and just initiated a position on Monday Jan. 16th 2017.  As such the views I am about to express should be considered as biased.  I'm not going to do any brainless pumping however, regular readers already know that's not my style.  I don't gloss over the risks, rather I prefer to stress them.

Calculating the annual yield of a dividend paying stock is pretty simple for those unfamiliar.  Take the dividend and calculate what it comes to over 12 months.  EGL pays its dividends monthly and are currently .005 cents, so over 12 months that comes to 6 pennies.  Then divide the annual dividend by the share price and you have the annual yield.  

An annual dividend of .06 cents divided by $0.76 cents per share CDN, (the closing price on Monday January 16th 2017)  gives Eagle Energy an annual yield of 7.8%,  At 75 cents the yield is a nice round 8%. That's probably just a tiny bit (sic) better than anything the banks are paying. 

Comparing Eagle's distribution to other oil and gas companies is interesting.  Major players like Chevron and Exxon pay less than 4%, even Royal Dutch Shell is less than 7%:

http://www.dividend.com/dividend-stocks/basic-materials/major-integrated-oil-and-gas/

So what are the risks here then?  Where do I begin?  

A good start would probably be with the dividend itself.  Many investors like dividend stocks because you are paid to own them with regular distributions.  However dividends can be reduced or eliminated altogether, and when that happens the effect on the share price can be devastating.  It already happened with EGL back in June.

On June 6th 2016 the company announced it was cutting its dividend in half, from .01 cent to .005 and the impact can be seen in the PPS.  After trading up near $0.90 CDN in May of 2016 the share price collapsed in the wake of the dividend cut, bottoming out around 62.5 cents in early August. That's a drop of around 30%.  Here's the chart:

So someone who bought 10,000 shares at 90 cents (to keep the math simple) for a $9,000 outlay saw the value of those 10,000 shares drop to a little above $6,000 within just a couple months.  It will take a long time for someone to recover those losses even if EGL continues paying an 8% annual dividend at the current share price.  And if Eagle were to eliminate their dividend altogether at some point in the future I think the effect on the PPS would  be even worse than a 30% drop.  

In the near to medium term I consider this to be the biggest risk.  

The other major risk factor I will highlight is the fact that the company is not currently profitable, the only reason they are able to pay dividends at all is because of their credit facility.  Anyone considering an investment in Eagle, I would strongly advise reading over their financial statements on SEDAR.

So why, given those obvious risks.....why did I decide to put money at risk with an investment in EGL?  Firstly I consider the fundamental realities to be old information that is already baked into the current valuation.  What matters more is what is coming in the months ahead, not so much what happened in the recent and more distant past.  

The chart above shows that the PPS recovered nicely after dropping close to 60 cents by August in the wake of the dividend cut and is now trading over both the 50 and 200 day moving averages. There is also the bullish cross of the 50 DMA over the 200, however it should be noted that some followers of Technical Analysis consider that cross to only be bullish when both the 50 and 200 lines are ascending.  

Crude oil prices have recovered to over $50 USD per barrel as we embark on the year 2017,after starting 2016 around $30.  This represents both a risk and a potential reward of course,  Should oil prices start falling again, or even if they remain close to current levels and don't continue climbing then I expect small companies like Eagle to struggle and even possibly fail

Some other aspects I look at are also positive, the share count sits at just under 42.5 million, same as where its been since January of 2016 so the company hasn't flooding the market with shares.  Short interest is practically non-existent at just 200 shares current up to December 31st of 2016.  

And finally I don't see any Promotion, no email blasting chop shops or newsletter services calling the herd to the trough.   In terms of news there's very little, beyond monthly dividend announcements and notifications of required flings.  And given the minimal news and lack of promotion it goes without saying there's no hype.

Some might suggest that's what I'm trying to do.....that I'm trying to hype EGL.  That's not unreasonable, this is a blog about investments after all.  But given how pathetic and miserable my little corner of cyberspace is, I consider this post to be little more than a fart in a hurricane.  

Good luck and as always comments are welcome however they are moderated so no profanity please. Fart is not profane in my opinion.

KUB.V has its highest close in over 2 years

I first wrote about Cub Energy (KUB.V or TPNEF) back on October 31st 2016 when the price was sitting at a whopping 2 cents.

An intriguing penny play - KUB.V - Ukranian Oil and Gas

I had established a position in KUB.V at 2.5 cents (I almost never get the bottom) so I'm obviously very happy.  If I were to sell for the current closing price of 7.5 cents that would represent a tripling of my investment which isn't bad for just over three months.  

I know I post continually how nobody ever goes broke by taking profits, however I'm planning on holding because I genuinely believe there is potential for significantly higher prices in the weeks and months to come.  If you've followed my posts on RMHB here you'll see that I wasn't shy about taking a 50% profit on that play, but I believe KUB.V is different.  (RMHB LINK - check the comments)

Here is a 3 month chart that shows how KUB.V has performed since I first wrote about it back at the end of October:

Taking that chart in isolation, selling now might seem like a wise course of action.  But taking a longer view I see potential for substantially higher prices.  Of course please take note that as a current shareholder, my thoughts and opinions are also INCREDIBLY skewed....there is something called "confirmation bias" and I can be as prone to it as anyone.  

One quick note on the 3 month chart and taking note of stochastics (the indicator at the very top), they show KUB being in an overbought position, so a near term pullback would not shock me.

Its when looking at the 4 year chart, that's where I see the potential for much higher prices....at least in the area of 20 to 25 cents....roughly three times where they are now and about 10 times higher from where I initiated my position.

You have to go back to 2013 and early 2014 to find KUB trading up around that 20 to 25 cent area. So what makes me think it can get back there?

Often with penny stocks you will see the PPS fall in tandem with massive dilution, I've seen penny stocks with 1+ billion shares issued.  KUB.V on the other hand had 311.7 million shares issued at the end of 2013, and now about four years later there are 312 million shares listed as issued as per stockwatch.  

You can verify those numbers by checking the company's filings on SEDAR and I encourage anyone considering an investment in KUB to do so.  

So obviously the drop in value from 20+ cents to about 2 pennies isn't attributable to the company printing shares and dumping them into the market.  What was it?  Those who don't keep up on world politics might have missed the situation which cropped up in 2014 between Russia and Ukraine over a little parcel of land called the Crimean Peninsula.  

Here's a Wikipedia article on it:  Russian military intervention in Ukraine (2014 - present)

Looking at the above 4 year chart its hard not to draw a cause and effect relationship between this conflict and KUB.V 's plummeting share price.

Of course all that is in the past, and KUB has already climbed well off those 2 cent lows.  So why do I think it can keep climbing back to the valuation it had before the Russian intervention.

Back in November the company released its third quarter financial and operational results, Included in those numbers was the fact that the company's working capital and cash position were the best they had been in over two years.  Also noted was the reduction in royalty rates for natural gas in Ukraine from 55% to 29%. 

Here's a link to the PR or check the filings on SEDAR:  

http://finance.yahoo.com/news/cub-energy-inc-announces-q3-210507800.html

Frequent readers of this miserable and pathetic little blog know that I like to keep an eye out for what I consider to be the unholy trinity of the market game.  In order those three things are Promotion, News and Hype.  With Cub Energy I have found zero promotion going on, if anyone knows of any please leave a comment because I have come up completely dry.

In terms of News there isn't much either.  Aside from the required quarterly and annual results or other material information news is pretty scant.  Cub Energy doesn't look like one of those companies that goes to investor roadshows, issuing PRs every other day about any little tidbit they think might drive interest to the stock.   

Their most recent PR was on Dec. 28th of 2016 announcing a 20 year production license and increased acreage: 

http://finance.yahoo.com/news/cub-energy-inc-announces-20-141500227.html

Back when I first wrote about KUB in October of last year I offered up the opinion that my take on the chart was that it showed signs of accumulation.  The reason I thought, and the reason I still think, KUB was undergoing accumulation is because I believe I'm not the only one who sees the PPS returning to the levels it was at back in 2013, and possibly even higher.

Please note, while I am very bullish there are still risks.  The political situation could deteriorate again, if it does I would expect KUB.V to drop in value.  Penny stocks are incredibly risky and not suitable for everyone.  I would never suggest investing a single dime in KUB or any other penny stock unless you can afford to lose some, and possibly even all of your investment.  

Comments are always welcomed, but they are moderated and will not be published if they contain profanity.  And no spam allowed either, if you want to promote your pills to increase the size of the male organ, then do it somewhere else.  At my age and with three kids that's not a concern, you'd have to go back to the 1970s to get me interested in anything like penis enlargement.  

Emblem Corp - Over or undervalued? (EMC.V - EMMBF)

That's the central question for any stock isn't it?  Is it under or overvalued.  It doesn't matter whether its an OTC stock trading for a single penny, or a NYSE listed company trading for $100 or more.  

If you get it right you can make money, get it wrong and you lose.  And you can make money both ways.  If you think a stock is under priced you can go long, or if you think the price is too high you can borrow shares and dump them back into the market going short.  

I've written many times on this blog that trying to assign a value to a speculative stock is pretty much a mug's game.  There are stocks out there right now that have been around 20 years or more that have histories of nothing but failure, but their market caps are in the hundreds of millions, sometimes billions. How can that be?  Simple, there are more people buying than there are selling.

Stocks don't trade on fundamentals, they trade on sentiment.  

Emblem is now trading around $4.20 CDN or $3.20 USD.  That is the result of the levels of buy side interest and sell side supply to date.  Determining whether or not the PPS will rise or fall going forward will depend on how many buyers and sellers there are in the days, weeks and months ahead.

I very much like the chances for Emblem to increase in value from current levels, however as a shareholder in the company my opinions should be considered as extremely biased.  Of course I will explain my reasons for being bullish.

Emblem stormed onto the market with trading starting on December 12th 2016.  Activity that first day was robust to say the least, with over 7.3 million shares trading hands on the TSX venture exchange. While market commentators had anticipated an opening PPS of around $1.50 to $2.00 CDN the stock opened at $2.99, double the low end projection.  The PPS closed at $3.30 that first day, and traded as high as $3.98.  There was no trading on the US side as the OTC listing didn't come until later.

Why was there so much interest in Emblem?

It goes almost without saying that Cannabis stocks have been on fire.  But beyond the overall spotlight in the wider marijuana sector, Emblem had already attracted a lot of attention even before being a public company.  There were write ups in Canada's national newspaper The Globe and Mail, Huffington Post did a piece, even the BBC had an article about Emblem.  

If you missed it here's a sampling of some of those early articles.

http://www.theglobeandmail.com/news/national/leadership-behind-canadian-medical-marijuana-company-has-an-oxycontin-past/article33200287/

http://www.cantechletter.com/2016/12/emblem-cannabis-corp-will-soon-one-canadas-leading-producers-says-pi/

http://www.wealthdaily.com/articles/emblem-cannabis-to-be-biggest-cannabis-ipo-of-2016/8445

http://www.huffingtonpost.ca/madaline-zanni/licensed-cannabis-producer-canada_b_12365080.html

http://www.bbc.com/news/world-us-canada-38083737

That's a lot of attention before even one share had traded hands in the public markets.  I myself was alerted to Emblem's IPO by a newsletter service from a promotional outfit called Microcapresearch.  

No wonder demand and volume were so high on day one.  I had set aside funds specifically for EMC, but seeing it open around double the price I was expecting I decided to only invest one third of the money I'd earmarked.  I saw the potential for it to go either way, up or down.  I wanted a position if it kept climbing, but I also wanted some money available if the price moved lower.

As it turned out the PPS moved markedly lower.  Over the first four days of trading on the Venture Exchange short sellers borrowed almost half a million shares and dumped them back into the market. That kind of activity is bound to have a negative impact on the price, and it did.  By the 19th of December the PPS got as low as $2.52 and I was able to add to my position at $2.80 and lower my cost average substantially.

So now the PPS sits over $4 Canadian and the trading has cooled off significantly.  After that first day with over 7.3 million trading the volumes have only topped one million three times.  The last time volume crested the million mark on the Canadian side was on the first day of trading in 2017, January 3rd when a little over 1.1 million shares were bought and sold.  On the U.S. OTC side volumes are even lighter, there hasn't even been a day of 100K trading in calendar 2017 for EMMBF.

Short sellers took their foot off the gas pedal it seems.  After borrowing and dumping 483,200 shares in the first four days of trading up to December 15th 2016, the number actually dropped to 456,000 up to December 31st 2016.  During the first four days of trading the PPS never once dipped below $3 so I think its reasonable to expect that there are some angry bears out there right now.

Short sellers are not stupid, but that doesn't mean they're always right either.  Seeing short selling cool off is a positive sign in my opinion.  If bears had continued raiding the stock and dumping shares it obviously would have impacted the price by making more shares available for sale.  I strongly suspect that there are a lot of eyes on Emblem right now, with many thinking (or hoping) that the PPS will give back some and allow them to buy in cheaper.

Going forward I see the potential for Emblem to attract even more attention.  I haven't seen any promotional outfits hyping the company since that first email I received from Microcapresearch.  But with so much free publicity I don't think the company needs to be doing much to attract attention.

Reddit users may already be aware of a Cannabis Conference coming up at the end of January in British Columbia.  Here's a link to the post on that site:

https://www.reddit.com/r/weedstocks/comments/5m3u59/canaccord_genuity_cannabis_conference_jan_26/?st=ixq972n4&sh=cf90487f

EMC has been able to sustain a price of $4+ CDN on much lighter volume than was experienced when trading first started.  With the above noted conference, in which Emblem's Stewart is named as a keynote speaker, and with Canada due to outline the path forward to the legalization of recreational weed in April I see the potential for this level of demand to at least be sustained with a distinct possibility of it even increasing.

The one caveat I will toss out there is the possibility of a bear raid.  Short sellers could attack Emblem, borrowing more shares and dumping them into the market as they did during the first four days.  It is this possibility that has kept me from investing the final 3rd of the money I'd set aside for Emblem.  If I sense a bear attack aimed at taking the price down I fully intend to take advantage the same way I did with my second buy.

Good luck all....please read the disclaimer at the very bottom of this site and feel free to comment, just no profanity please.