Vuzix - Does history matter?

You'll often hear bulls advocating that a company's past performance has no relevance, citing the oft repeated line that "its all about the future".  And usually they'll be talking about a company that is in a hot sector, or one that is expected to be hot.  And typically the reason they recommend ignoring past performance is because the company they're bullish on has a bad history.  And this is doubly true when you're talking about OTC penny stocks.

But wait, Vuzix which trades under the symbol VUZI, it isn't an OTC penny stock, it trades on the Nasdaq and shares are currently trading for around $8 per.  This is true....but.

VUZI "was" an OTC penny stock until January of 2015 when it uplisted to the Nasdaq exchange. How does a penny stock get off the OTC market and onto the Nasdaq?  An investment by Intel helped the company meet the capitalization requirements of the exchange, and a 1:75 reverse split announced in February of 2013 helped them attain the minimum bid price requirement.  

VUZI ended 2012 trading around $0.05 cents per share.  On February 6th 2013, after the 1:75 share consolidation the PPS closed at $6.38 or about .08 adjusted for the consolidation.  

As of November 19th 2012 Vuzix had over 265 million shares issued and outstanding according to the company's SEC filings.  After the 1:75 share consolidation that number was reduced to a little over 3.5 million as reported in the firm's March 2013 10K.  

Was Vuzix's history of issuing shares about to come to an end?  

In October of 2013 they announced receiving funding from DARPA and the shipment of optical systems to the U.S. military.  

http://ir.vuzix.com/press-releases/detail/724/vuzix-develops-and-ships-next-generation-holographic

That's one thing that appears to be pretty much a constant with Vuzix, (that along with dilution of course), a seemingly unending supply of exciting and bullish sounding news that continues right to the present day.

Of course it seems the DARPA funding wasn't sufficient as the company revealed in its November 2013 10Q filing that outstanding shares had grown to over 9.5 million, more than doubling where they were after the recent reverse split.  

And so it continued.  By April 9th 2014 the number of shares had climbed to 10.2 million.  By November 2014 over 11.1 million, and over 15.8 million by March of 2015.  As of August 15 2016, as per the most recent 10Q filing the number was up to over 17.3 million.  We'll see if the dilution continues in the filings to come.

Since effecting the 1:75 reverse split, with every 75 shares of VUZI becoming 1 share post consolidation, VUZI has gone from about 3.5 million shares to over 17.3 million, almost a 500% increase.  Adjusting for the reverse split that equals roughly 1,035,000,000 pre consolidation shares....over 1 billion.

After almost 20 years, coming up on their 3rd decade of existence as a company....some seem to be expecting this leopard to change its spots.  Not me though, that's why I took out a position on the short side when VUZI was trading north of $9 at the start of September.

However I fully expect there to be promotional outfits touting an investment in Vuzix, and social media pumpers galore using any port in a storm to encourage buying and holding tight.  And I further expect them to all be saying that the past doesn't matter, but then its always thus with penny stocks...and while the 1:75 reverse split may have helped them get off the OTC I for one won't be shocked to see them back on the pink sheets in the future.  

(RVX.TO) Golden Cross - Will history repeat?

For those unfamiliar the term Golden Cross, (GC) refers to a technical event involving the 50 Day Moving Average, (DMA) crossing over the 200 DMA.  Here's what it says at Nasdaq.com:

"In the trading world, a Golden Cross occurs when the 50 day moving average rises above its 200 day average. This is typically a telltale sign of bullish sentiment for a stock...".

That is certainly what happened the last time RVX had a GC with the PPS exploding from less than $1 at the start of March 2015 to up around $1.80 by the middle of that same month.  Whether you're looking for short term momentum or long term appreciation, gains in excess of 80% are hard to ignore.  Here's a chart showing RVX's trading at that time.

Now of course RVX is not trading for less than $1 CDN.  The current Golden Cross happened with RVX trading at $2.05 CDN.  If it were to go on and make similar 80% gains in the coming weeks that would put the PPS up around $3.60 CDN.

Here's the current chart showing the Golden Cross which just occured:

Are there any anticipated catalysts that could reasonably be expected to lead to these type of gains? I believe there are.  Firstly the company is scheduled to do two investor presentations, one next week in NYC at the Yale Club and the second a week later in London.  There was a PR about it on Tuesday:

http://finance.yahoo.com/news/resverlogix-host-research-development-featuring-110000544.html

And beyond that the company's CEO has stated that the company will be announcing a second licensing/partnership deal "soon".  The first such deal was announced last year and was likely responsible at  least in part for the climbing share price in early 2015.  

American readers take note, Resverlogix trades on Canada's big board TSX and is fully reporting,  In the United States it trades on the OTCQX market.  Not all OTC stocks are created equal, the OTCQX includes many fully reporting companies that are listed on foreign exchanges.  

Full disclosure, I am a shareholder in RVX so my opinions should be considered as heavily biased, in fact I added to my position today (Tuesday Oct 3, 2016) and hold what I consider to be a substantial (for me) position.

Cheers and good luck

Price prediction for RVX.TO - $3.00+ by year's end...

Please understand that I am offering up an opinion here on a stock that I have, (what I consider to be) a significant position in.  I eat my own cooking in other words, but with that being said it is obvious that my opinions are extremely biased.  

I typically don't offer up predictions for a stock price, so much can happen.  I prefer referring to market capitalization because dilution can come into play, especially with speculative companies like Resverlogix.  The reason I'm putting a price target prediction out now on RVX.TO is because of the technical picture, and I actually think $3 by the end of 2016 may prove to be incredibly conservative, and I sincerely hope it is. 

RVX.TO is setting up for a golden cross.  Strictly speaking a golden cross happens whenever a faster moving average moves over a slower moving one.  The 200 DMA moves slower than the 100, the 100 moves slower than the 50 and the 50 moves slower than the 20.  So a golden cross can involve the 20 DMA moving over the 50, 100 or 200 DMAs.  

But the goldenest (if that's a word) of golden crosses occurs when the 50 DMA crosses over the 200, especially if the 200 DMA is also moving higher when the cross happens.  And that's what setting up for RVX.TO right now (and for RVXCF as well).  The 50 DMA for RVX.TO is currently at $1.32 and moving higher and the 200 is at $1.39 and has also started to climb slightly.

The last time RVX.TO saw a 50/200 Golden Cross was in March of 2015, and all you have to do is look at the chart to see how the PPS reacted just before and after than technical event.

The difference this time is in the starting point.  Back in early 2015 when that Golden Cross was setting up in late January and early February the PPS was less than a single dollar Canadian.  Now the PPS is around $1.70 after recently trading over $2.  Take note that back in 2015 when RVX ran from less than a dollar to up around $3 that it wasn't a straight line.  There were periods where the PPS retraced significantly before resuming the upward climb, just as RVX.TO has seen the past three trading sessions.

The golden cross in 2015 happened prior to the company announcing a licensing and equity agreement with China based Shenzhen Hepalink Pharmaceutical.  Resverlogix's CEO reaffirmed that the company will be announcing a second such deal on September 13th just passed.  It is my opinion that expectation surrounding this second deal, that it is driving the current move we've seen with RVX.TO climbing off the $1.20 - $1.30 trading range it had been in for the past several months.  

Last year's climb to $3 was followed by a slow steady decline.  Is there reason to expect, that if it does, once again, get back $3 and perhaps even higher, that it will be followed by another long period of decline?  While I think that is certainly possible, I also think things are much different as we head into the end of 2016 and the start of 2017.  The biggest difference is in terms of the phase III BETonMACE trial seeking to prove that Apabetalone will reduce the incidence of Major Adverse Cardiac Events (MACE) in patients suffering from Diabetes Mellitus.  

Back in March of 2015 the BETonMACE trial was still over 6 months from starting, now heading into October of 2016 that trial has been running almost one full year.  And the company just recently received a positive recommendation from the independent Data Safety Monitoring Board for the continuation of the trial.  

There are no potential rewards without the potential for big risks.  Biotechs are almost akin to firecrackers.  They can give off a spectacular bang, such as when a buyout is announced, or they can fizzle, such as when a trial is halted.  

The comment field as always is open, but it is moderated so please keep it polite. 

ATB's take on the U.S. Presidential Debate

If my legion of loyal fans (enough to fill all the seats around a table at a local coffee shop, with maybe one or two empty chairs) are curious as to my take on Donald versus Hillary...I won't make you wait.  I think Donald Trump won on points.

If you're curious about Joe Retail's politics, well here they are.  I'm a Canadian (as most already know) and I define myself as centre left (in Canada we spell center, centre).  I consider myself a fiscal conservative but socially progressive.  In my home and native land I have voted both left and right, I am not partisan nor am I dogmatic.

So why do I think Trump won?  

Simple, I think there are an awful lot of Americans (and the same is true up here in The North) who have watched their standard of living decline over the past few decades, and I believe Donald Trump spoke to that constituency better than Hillary Clinton.  Early on when Donald rattled off the names of swing states like Ohio, Indiana and Pennsylvania...blue collar and hard working, and spoke about the jobs they've seen heading to countries like Mexico and China, I think he scored big.

Hillary did land some nice blows on Donald however, especially on the issue of taxes and the fact that he pays very little or nothing. ''Because I'm smart'' was his retort.  But I do think a lot of Americans see crumbling infrastructure, underfunded schools and veterans not getting the support they need and other areas of under funding, and they have to wonder why a guy who is so rich isn't chipping in his fair share like hard working wage earners are.

But overall and in the final analysis I think Trump's message and branding of Hillary Clinton as a ''hack'', and the architect of so many of the United State's problems...I think it was effective.  It wasn't a knockout, that rarely happens in debates.  Those who supported Hillary before the debate, I doubt he brought many (or any) to his side.  But likewise I don't think those who supported Donald before the debate were swayed to switch camps either.

Now to bring this back to the markets....I do think Trump is right about the overall markets and interest rates.  I do think the Fed has to move very cautiously on rate increases because raising the cost of borrowing too much or too fast could have a disastrous impact on both the equity markets and the overall economy as a whole.

November is going to be interesting, but ultimately I expect Clinton to win.  Donald Trump is an outsider and just as the DNC rigged their nomination to ensure a Clinton candidacy I think the same will happen in November to ensure she is occupying the White House when Barack Obama leaves.  I forget who said it but the line goes something like this....its not who casts the votes that matters, but who counts them.

Peace out.

Sunday thoughts - Who exactly is 'smart money'?

Its Sunday, and unlike last week I made it to Church today.  The readings were from Timothy and Luke.  The first being the passage about the love of money being the root of all evil and the second was about Lazarus lying at the foot of a rich man's door with dogs licking his open sores...yes, there wasn't just one Lazarus in the Bible.  Lazarus goes to heaven and the rich man is sent to Hades, crying out to the God of Abraham but he gets no consolation, he had the good life when he was alive.

Hardly the backdrop for a blog about the stock market, where most (and probably all, myself included) invest and trade with the goal of getting rich, or richer as the case may be.  

Our Pastor's sermon was about doing good, its not money that is evil but the love of money.  The rich man who left poor Lazarus outside his door to feed off the crumbs of his table, he could have shown him some kindness, invited him in...and now that the rich man is dead its too late.  The message was ''do good'' don't wait, don't make an excuse.

Ahhh to be rich, to have the money at one's disposal for whatever one wishes.  The markets almost worship wealth, and some investors will choose to put money into a stock because they're following a billionaire.  If social media is any indication many ZIOP investors stormed into that equity based on the involvement of billionaire R.J. Kirk, I myself took a flyer on another biotech based on Mr. Kirk's involvement, TBIO.  

Sometimes following a billionaire doesn't work out.  Investors who based the decision to buy Sandridge Energy based on the activist position of Leon Cooperman know that all too well, myself included among them.  Resverlogix, a stock I've written about here several times has the backing of billionaire Kenneth Dart, as does another biotech PPHM.

It would seem that having a big player as a backer is no assurance of success, even billionaires get it wrong from time to time.  So should we perhaps not include deep pocketed players in our definition of  ''smart money''?  I will suggest that no....we should not.  ''Smart Money'' players don't have to be billionaires or even millionaires by my definition.

So what is my definition then of a ''Smart Money'' player?

I will offer up what I consider a prime example, and although it is fictitious and from a movie I do believe instances like this occur.  

Younger readers might not be familiar with the movie 'Trading Places' starting Eddie Murphy and Dan Ackroyd which was made in 1983.  I won't bore you with a plot summary, rather I will include a scene available on YouTube.  

In this scene two old gentlemen, the Duke brothers, believe they have in their possession an early copy of a report on the orange harvest.  Their report tells them that the orange crop has been severely damaged by a harsh winter.  Looking to capitalize on this information they instruct their trader to start buying right at the opening bell and to keep on buying.  ''Don't worry if the prices starts climbing, just keep buying''.

What the Dukes don't know is that their copy of the report is doctored, and that the harsh winter didn't damage the orange crop.  Billy Rae and Lewis (Murphy and Ackroyd) are the reason the Dukes have a doctored report and instead of the Dukes getting rich they are financially destroyed.

So what's the point?  The manner in which the Dukes act is the way I think ''smart money'' acts, with bold confidence.  And just like the two traders who see the Dukes open their window on the trading floor and watch them eyeing their trader in the OJC trading pit....I think it can be possible to discern this ''smart money'' buying activity.  Not from the trading floor, (which has now been replaced by automated trading) but rather from the chart.

Take note however, the Dukes didn't issue a PR announcing to the world they were going to boldly buy up OJC futures, that would not be smart.  In today's world, if you were 100% confident that you had the inside track would you announce it to the world, spreading messages all over the internet and sending out emails?  No....I don't think so either.  If you did everyone would be buying with hardly any selling and your chances at profits would disappear.

I know in the movie the crop report the Dukes have is wrong....but that's Hollywood.  The guy they paid for it had it stolen and was then dressed up as a gorilla.  As the Dukes are going bankrupt their spy is being sent to Africa to be introduced into the wild gorilla population.

I've belabored this point long enough.  The smart money (no matter whether they're uber wealthy or not) buys with extreme confidence, and that confidence shows up in price and volume movements in a chart.  But note that if those price volume movements come in tandem with lots of Promotion, News and Hype....well then its almost certainly not smart money players but the dumb herd moving in.

Now to tie this in with my Pastor's sermon today....If you make some money in the markets, pay it forward, do some good, we're only here for a short time.  Money is not the root of all evil, the love of money is.  Money can do a lot to ease pain and suffering that exist in our own back yards.

Disclosure, I have long positions in TBIO, RVX and PPHM.  With ZIOP I have placed my bet on the short side.

Good luck 

Resverlogix - A good problem to have (RVX.TO - RVXCF)

Life is full of choices and oftentimes there is no good choice.  Kind of like the Presidential election in the United States right now if you restrict your choices to Donald or Hillary, most U.S. voters are trying to decide between two types of poison in my opinion.  

But wait, this isn't a blog about politics.

Sometimes problems are good, like trying to decide whether or not to take profits on a stock that has made big gains in a short period of time.  That's a problem being presented to Resverlogix shareholders right now, and I'm not going to suggest anything.  I will however invoke my favourite little bromide which I repeat over and over here at Avoid The Bag.

Nobody has ever gone broke by taking profits.

But that doesn't mean taking profits is easy..it can be very hard, I just wrote about it this past Sunday: Sunday thoughts on when to sell.  The difficulty comes from fear over selling too soon. Nobody wants to sell something for $2 and then look back in a few days or weeks and see it at $5, $10 or $20. That might sound insane, but in the biotech space things can and do happen very quickly, both good and bad.

Pharma watchers probably already know about Tobira (TBRA) which shot up from less that $5 to around $40 on M&A news that came out September 20th.  On the flip side Novavax (NVAX) recently went from over $8 to less than $2 after reporting missed endpoints in a phase III trial.  Big risks and big rewards, if you're familiar with the biotech space then this is old news.

Resverlogix hasn't achieved anything like the gains experienced by TBRA, not yet anyway.  But still the chart is eye popping.  

From the $1.20 to $1.30 area when I first started writing about RVX here at ATB, to a close of $2.02 today (Wednesday Sept. 20th).  The question is...what is driving the sudden surge in volume and price?  And the simple answer is, I have no idea.  What I do know is that buyers have been storming in and that the price has exploded higher. 

Volume

Wednesday's Canadian volume of just over 400,000 might seem light, however it represents the largest single day of trading in the past 12 months.  On the US side under the symbol RVXCF there was less than 90,000 trading.  Again, not a lot...but exponentially higher than the average daily volume of the past three months which is just 5,084 shares.

Trading is still light, but exponentially higher than what we've been seeing of late.  In fact during this month of September RVX had two days at the start of the month with less than 5,000 shares trading hands.  Strange to think that 400,000 shares trading is huge, but compared to recent norms it is.  

News

The company has issued news twice so far in September.  The first was on September 12th announcing participation is some upcoming conferences, and the second came out September 14th notifying the firm's most recent quarterly filing.  Prior to those PRs the biggest news item was probably the one from August 11th when they announced a positive recommendation from the Data Safety Monitoring Board for the ongoing phase III BETonMACE trial.

Whatever is driving RVX's recent move, I don't believe its news.  Resverlogix is very active in participating in scientific conferences and investor presentation shows like Rodman & Renshaw, and there were no surprise announcements that came out recently as far as I'm aware.  The CEO did mention that a second licensing/partnership deal will be announced soon during his recent R&R presentation, but that "news" was already out there. 

Promotion

Zacks SCR put out an updated report on Resverlogix on September 19th, however it seems to be pretty much the same as the last one.  Zacks and other "analysts" shops of this type are what they are. Small cap companies like Resverlogix engage firms like this to provide shareholders and prospective investors with something to review when researching a company.  I don't like it but its part and parcel of the industry.

Bottom Line Opinion

Getting straight down to brass tacks, I have always seen the potential for Resverlogix to attain a valuation in the billions of dollars.  If Apabetalone is successful in treating all the indications the company is targeting I wouldn't even hazard a guess as I think even $10 billion could prove conservative.  Call that pumping if you wish, but it is a genuine opinion, and it is predicated entirely on Apabetalone succeeding in clinical trials like the on-going phase III BETonMACE trial for patients with Diabetes Mellitus.

The reason I think the valuation is as low as it has been, and still is currently is because I do not believe that I am alone in having this opinion.  Both of my regular readers know my views on Pump and Dumps.  Pumps happen all the time, you see share prices explode higher, volumes go insane...millions and millions of shares trading every day as the smart money players unload on excited retail investors.

I think the opposite has been happening here, I think there are smart money players who have been accumulating RVX for the past 2 to 3 years.  Yes there are over 100 million shares issued and outstanding but roughly half of those are already in the hands of major shareholders like billionaire Kenneth Dart via his investment arm Eastern Capital.  That only leaves 50 odd million left, and I'm certain that I am not the only bleacher bum retail player who has bought in here.

The reason I think RVX has been drifting for so long.....is because that's the game.  Retail investors are often loathe to part with their shares when a stock is climbing higher and higher.  There are tools available to the big operators and the biggest tool in their box is short selling.  If you're sufficiently intrigued by this line of reasoning I will invite you to read this Business Insider article on exactly what I'm talking about.  And I think that the bigger the potential rewards, the longer accumulation can take.

http://www.businessinsider.com/the-richard-wyckoff-stock-trading-method-2013-2

Bottom Bottom Line

The reason I think RVX's price has been moving as it has since about Sept 9th, I think its because something is close....very close.  In my opinion something is coming down soon and there's no more time to play games, the real players who move the market are getting ready to send RVX higher I believe, much higher.

What exactly?  I do not know...a nod from the FDA, a partnership or buyout, a blockbuster regional licensing deal?  Again, I don't know...but the trading of late suggest to me something is in the works.

Of course, again, its just an opinion and it could be wrong.  

Sunday thoughts on when to sell....

Its Sunday again, time to sit back and relax and consider those things in the market that daze and amaze, astound and confound.  The things that both thrill and send chills down the spines of retail investors.  Today I'm going to write about selling, not just any selling though....about selling after you've made profits.  

I've put forth some long ideas here at Avoid The Bag that have made some nice gains:

Lithium Americas at $0.75 cents CDN now trading over $0.90 with  gusts up north of a dollar.  

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

Eguana Tech when it was $0.15 CDN now trading around $0.30   

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

Xenith Bankshares (pre-merger when it was HMPR) at $1.81 now trading for $2.26.

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

Resverlogix at $1.25 CDN now trading at $1.53

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

I also wrote about Aurora Solar at $0.15 CDN and it is currently trading for 10 northern coppers: http://www.avoidthebag.com/2016/07/the-lure-of-green-energy-aurora-solar.html

Four out of those five stocks that I've written bullish opinions about are green, which means there is the potential for profits.  Not bad....gains are good, but until those gains are crystalized by selling, there is no profit.  

My legion of loyal fans (all three of them) have probably come across someone who's owned a stock that dropped in value and heard them say something like:  "Its not a loss until I sell".  And that is true, but it also works when a stock climbs.  There's no profit made until the shares are unloaded. Paper gains and paper losses are notional and only become real once a stock is sold.

But selling is hard, and I will suggest it can be even harder after big gains than after a stock has dropped.  Why?  Psychology, and the triumvirate of emotions that seasoned market players know oh so well: Fear, Uncertainty and Doubt....or FUD for short.

FUD doesn't just rear its head when a company's stocks falls, it also pops up after a stock has climbed.  You've bought my favorite hypothetical stock ABCD at $1.00 per share when things were quiet and volumes were light.  You've read all the filings, the PRs, all the industry stories related to ABCD, you even know the histories of the CEO and other board members.  

Then ABCD starts attracting attention, volumes pick up....it getting mentioned in social media. The PPS starts climbing, to $2 then $3....before you know it ABCD is trading at $5 per share and you're sitting on a 500% paper gain.  Its not a capital gain though because you haven't sold.

And here's where FUD kicks in.  Let's say you bought 5,000 shares for an initial investment of $5,0000....and now those same 5,000 shares are worth $25,000 for a paper gain of $20,000 if you sell. But things are obviously going well now, better than they were when you bought shares at $1. Maybe there's analyst coverage, or a newsletter has picked up ABCD and is touting it to its readers. Those storming into ABCD are all over social media with predictions of $10 and $20 valuations to come.

What if they're right?  What if ABCD does go to $10...or even $20.  Those 5,000 shares could be worth $50,000 or maybe even $100,000 for monster gains in other words.  A new car, a bigger and better house....that dream vacation.  Sure $20,000 profit is incredible, but damn!  Won't you be kicking yourself if you take $20,000 when you could have had $95,000 in profit?

Time to take a deep breath.  A lot of people start investing with the goal of making huge "life changing" returns.  The stock market is the epitome of the Dream Factory.  And people do fall in love with their stocks, digesting every tidbit of news and opinion that hits the internet.  Whether its something from a respected analyst, a Seeking Alpha or Motley Fool author, or some moron like me with a blog.

I will suggest that you consider, when a stock has made big gains, whether or not its a profitable company.  Of the five stocks I mentioned at the beginning, four of them are not....

Lithium Americas is a junior mining company developing a Lithium mine in Argentina, Eguana makes inverters for battery storage power systems, Resverlogix is trying to develop a drug that will reduce major adverse cardiac events and Aurora is in the solar panel space.  None of these four companies is profitable.  Only Xenith Bankshares has actually achieved positive earnings.  

Next I will suggest you look at recent volumes.  Has trading in the stock exploded or is the PPS climbing higher and higher on light volume?  I have a rule of thumb, if between 5 and 10% of the float trades in a day, I start thinking about looking for the exit.  And that is doubly true if higher than historic volume happens in tandem with lots of Promotion, News and Hype.  Especially when its a company with a history of using shares to fund operations, pay salaries and keep the lights on.

My ultimate goal with this blog is to help retail investors understand the forces at play.  And I will suggest that these forces are most active when a stock has made big gains.  The goal of the industry players, in my opinion, is to get retailers buying when stocks are high while the true professionals sell.  And if a retail player is lucky enough to have bought in early and is sitting on big gains, to keep that retailer holding tight.....to fall in love.

I'll end with my favorite piece of market wisdom:  Nobody ever went broke taking profits.  And if the stock you sold at a profit keeps climbing, and you miss out on even bigger gains?  Then cry into the money you made.  

Good luck