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

Resverlogix - Up over 25% in 6 days (RVX.TO)

RVX which I last wrote about on September 10th has been on a tear over the past 6 trading sessions.  

On September 7th the PPS closed at $1.20 on the Canadian TSX, and after 6 consecutive positive days it closed Thursday Sept. 15th at $1.54 for a gain over over 25% over that short span.  On the US side where Resverlogix trades OTC Foreign with the symbol RVXCF the shares have gone from $0.94 at the close on Sept. 7th to a close of $1.17 currently for a jump of almost 20%.

And the volumes have picked up considerably....on the Canadian side volumes for Sept 15th hit 113,368 with 55,100 reported trading on the U.S. side.  That compares to 3 month daily average volume of around 25,000 and 3,000 respectively.

Big gains over a short period of time on what is still thin trading, but still substantially higher volume than normal  So what gives?

Obviously its impossible to say for sure, buyers don't put out PRs saying:  "We're buying RVX today because...".  But I think there's a good chance that their presentation at the Rodman & Renshaw Global Investment Conference in NYC on September 13th may have something to do with it.

During their presentation the company said they will be announcing a second licensing/partnership development deal.  The first such deal was announced last April involving Chinese based Shenzhen Hepalink Pharmaceutical.  In the weeks and months leading up to that announcement shares of RVX went on an absolute tear, climbing from less than $0.60 CDN to over $3.00.  

If similar gains are in store, then RVX is starting its run from $1.20 CDN instead of 50 odd Canadian pennies.

For those who want to listen to the presentation its available on line here:

• http://wsw.com/webcast/rrshq26/RVX/index.aspx

That presentation requires registration.  For those who just want to see the PDF presentation it can be accessed here:  

• http://www.resverlogix.com/upload/media_element/240/01/rodman-renshaw.pdf

Now please note, RVX has traded higher for six consecutive sessions and obviously at some point there will have to be at least a pause, if not a pull back.  After the close Nasdaq listed Novavax Inc. announced a trial failure causing its share price to absolutely crater by around 80% in after hours trading.  NVAX trades over 5 million shares on average per day, so obviously it has a very large following.  On StockTwits NVAX has over 8,000 "watchers", RVX by contrast only has 63 currently.  

I consider it possible that NVAX could have a domino effect on other speculative biotechs.  We shall see.  Regardless, if Resverlogix succeeds with their currently running Phase III BETonMACE trial I think a valuation in the billions is very possible given all the potential indications Apabetalone could impact.

Comments are welcome, do note I am a shareholder so my opinions should be considered extremely biased.  

My rationale for playing the short side on Vuzix

Its Sunday, and at church today our Pastor was talking about the newly Sainted Mother Theresa...and how she lived her life "in the trenches".  In his view she was already a Saint with no need for Rome's approbation.  The rest of his sermon was about not rushing to judgement, how one never knows the circumstances that lead others to make the choices they make. 

With that in mind I thought I'd explain the back story to my decision to play VUZI short.  Others will undoubtedly disagree with my opinions, and that's the way it should be.  I'll explain my rationale and if others want to explain their's the comment section is always open, so long as there's no profanity or personal attacks.

I guess the best place to start is the beginning, with how VUZI popped up on my radar.  I saw it being hyped all over sites like StockTwits and Twitter with posters expressing the view that an investment in this speculative stock was pretty much a sure fire winner....great fundamental prospects for massive growth and all that other stuff.  

So I checked it out.  The chart showed a big climb in a short period of time on heavier than normal trading.  As recently as May of this year the PPS was down around $4.50 and volumes were typically in the range of one or two hundred thousand, and a few days with not even 100K trading. Then in late June volume started picking up, and by July days of 1 million+ were becoming common, in fact there were 3 days late in July with over 2 million trading.

By my reckoning the volumes had increased about 1,000% and the PPS had made big gains as well. Those $4.50 shares being bought and sold when things were quiet...they were long gone as VUZI had traded as high as $9.30 on July 25th.  That's a gain of about 100% off that $4.50 area in May, not a bad return for a couple of months, just a tad better (sic) than what the banks are paying in a savings account.

So here we have a stock, VUZI, which had basically doubled in price over a couple of months on a big 1,000% jump in average volumes.  Check.  The question now for me becomes....Why?  Did the company sign a major contract or  sign a Joint Venture Deal that would ensure big revenues and big profits?  

Time to do some more digging....what caused the increase in volumes and share price?

The company is sponsoring a Drone racing team...okay, but that's going to cost money, it means some exposure I guess.  I'll check local listings for the next big Drone race, maybe its a big thing...I didn't even know there was such a thing as Drone Racing.

More digging......then I found something.

Microcapresearch.com, one of those email blasting promoters put out one of those bullish stories about Vuzix on May 17th which was right when the stock started climbing off that $4.50 low.  The toutsheet's headline for Vuzix called the augmented reality/virtual reality space an $80 billion marketplace.  Uhm, not so fast...that's based on a report by Goldman Sachs that says the space "could" be "potentially" worth that figure....maybe, maybe not.....and certainly not right now.

Here's the link:  http://microcapresearch.com/vuzi-next-big-thing/

At this point the game is pretty clear in my opinion, and I've seen the same script used many times before.  The days of the tech bubble were full of multi billion dollar projections for things like ordering groceries over the internet....I'm sure a lot of people remember that.  Or how about the Internet Refridgerator?  I recall the Virtual Keyboard (or VKB for short)....everyone was going to be using one by now...that was over 10 years ago.  

And of course there were all kinds of penny stocks out there touting themselves as becoming a dominant player with countless new technologies.  The word paradigm became so overused it almost became meaningless.

But wait....Vuzix isn't a penny stock, its trading for $9+ per share.  More research needed.

Okay....it was an OTC penny stock, but then did a 1:75 reverse split and uplisted to the Nasdaq exchange.  I saw that with SBOT, another heavily promoted stock that did a 1:10 reverse to get off the OTC and onto the Nasdaq.  Of course it gave that stock a nice lift to over $20....but since that pop SBOT has imploded and is now only worth $2 and change....happens all the time.  That's pre-split 20 cents or so adjusting for the share consolidation.

Alrightee....all my regular readers, both of them, they know what I try to avoid when going long, what I consider the unholy trinity:  Promotion, News and Hype.

• Promotion gets the sheep to put a stock on a watch list.
• News that is forward looking and safe harbor protected gets buyers to move in and pushes the PPS higher.
• Hype takes over on social media sites and stock message boards.  Anyone who dares to express a bearish opinion is attacked and accused of trying to talk the stock down so they can accumulate.

Now in fairness I do think there are people out there who will trash the stocks they want to accumulate.  But in my opinion that is more likely to happen with stocks that have been beaten down, that are trading at or near their lows, not one that has been pumped up to historic highs on forward looking promise.

I'll close this off with some commentary on social media posting.  When one of the stocks I'm holding gets bashed and trashed, and it happens often enough....LAC, XBKS, RVX and plenty of others...I take a deep breath and relax.  After all, stocks are risky....especially when its the stock of a company that is losing money and relying on selling shares to pay salaries and to keep the lights on.

If someone is truly bullish and buying, then they should welcome and be happy when social media types are posting messages expressing Fear Uncertainty and Doubt.  On the other hand if someone is hoping to dump a stock that's made big gains, then there is logic to attacking anyone who expresses sentiments that engender feelings of FUD.  Its hard to dump high priced shares unless there are bullish excited buyers that think they're getting a bargain.

Peace Out for now.

Resverlogix (RVX.TO RVXCF) Trying to assign a price target

I am an active participant on the site StockTwits with the user name growacet.  

Its basically Twitter for stocks, but instead of # hashtags stocks are discussed using the ticker symbol with a $ dollar sign in front.  I have about 175 followers, and likely a similar number of ignores.  I'm sure a lot of $ZIOP bulls blocked me because they didn't appreciate my bearish opinions when that stock was trading at $13+ and I wasn't buying into the bullish predictions of $20+.

I was recently asked on that site for a one year price target on $RVX.CA

1. 

   Sep. 9 at 6:20 PM

   growacet

   $RVX.CA Nice to see RVX holding up on an overall brutal day, and while volume is still light it was about 33% above normal. Bullish
2. 

   Sep. 10 at 12:56 AM

   S210

   @growacet what price target do you see this in a year from now?

   via StockTwits for iOS
3. In reply to

   • EMBED

   

   Sep. 10 at 9:07 AM

   growacet
   

   Howie

   @S210 If they pass futility analysis at halfway point of phase III trial then a MC of $1 bill USD to me seems fair and maybe conservative

Now, full disclosure right up front.  I am currently a shareholder in Resverlogix and have written about the company here before at AvoidTheBag.  As such my views and opinions should be considered as being extremely biased.  If you're considering an investment in Resverlogix I strongly recommend consulting with a qualified investment adviser to ensure you have the requisite risk tolerance and to ensure it represents a suitable investment for your profile.  

Personally I find trying to assign a future price target on a speculative stock to be something of a mug's game, but I did offer up the opinion that I could see RVX attaining a market capitlization of $1 billion USD if the company's phase III BETonMACE trial passes the halfway point futility analysis. To give that some context the current MC is just under $100 million USD.

Why do I consider assigning a target price to be a mug's game?  

With speculative stocks there are so many variables, and with development stage biotech, ultimately the biggest variable is success or failure.  At least in Resverlogix's case the finish line is within sight given that they've reached a phase III trial for their lead compound Apalbetalone also known as RVX-208.  But still, setting a price target is fraught with uncertainties and unknowns.  

But targets are put out all the time, and I assume the reason is because that's what investors want.  If a stock is trading for $1, $5, $10 or whatever....investors want an "expert" to offer up an opinion on whether that price is low or high.  Why buy an $8 stock if the target price is also $8?  Better to buy a stock that's trading for $8 but that is projected to go $20...maybe.

Resverlogix also has analysts offering opinions and price targets:

• Stonegate Capital Partners put out a report in November of 2015 with a target range of $3.54 to $9.34  
• Van Leeuwenhoeck Research provided their last update in May of 2016 with a new NPV of $8.50 CAD up from their previous $5.85 opinion:  
• Zacks put out the most recent report with a $5.00 CAD valuation target:  

1. http://www.stonegateinc.com/reports/RVX_NOV_2015.pdf
2. http://nebula.wsimg.com/2e68712bb20de1e4d82f91da58ab0b9f?AccessKeyId=F1B3D293B900048B2E3E&disposition=0&alloworigin=1
3. http://s1.q4cdn.com/460208960/files/News/2016/July-29-2016_T.RVX_Vandermosten.pdf

My own opinion is predicated on Resverlogix succeeding with its phase III trial, the goal of which is to prove that Apalbetalone can provide Relative Risk Reduction (RRR) for the incidence of Major Adverse Cardiac Events (or MACE defined as heart attack, stroke or death) in patients with Diabetes Mellitus.  

The phase III trial is called BETonMACE and it has been running for almost a full year now, however there isn't a specific end date because its an "events based" trial.  The results will be evaluated after 250 MAC events with a futility analysis to come after 125 events.  A futility analysis is used to determine whether or not a clinical trial should continue or not.  

If MAC events are occurring equally in both the Placebo and Apalbetalone arms of the study, then the trial will likely be determined to be futile and stopped.  If the treatment is outperforming the placebo, then the trial should reasonably be expected to continue.

The company is blinded to the safety and efficacy results, however a recent PR put out by the company announced that the independent Data Safety Monitoring Board had given a positive recommendation for continuing the trial with no modifications after a completed safety review.

https://finance.yahoo.com/news/resverlogix-announces-positive-recommendation-data-110000475.html

Of course the most obvious question, and one that is perfectly legitimate is this;  

If Resverlogix has so much awesome potential, then why is it trading at such a depressed level with a market capitlization of less than $100 million USD?

The answer in my opinion is as obvious as the question, its because of profile, or rather a lack of it. RVX is not a stock on a lot of radar screens.  And this pathetic and miserable little blog will do very little to change that.  Yes there are some analyst outfits covering the company, but they're small boutique shops that companies pay for exposure.  Nobody is ever going to confuse Zacks with BMO or JP Morgan.  

Daily volume for RVX.TO trading in Canada is only about 20,000 over the past three months and on the US side where it trades OTC with the symbol RVXCF the trading is even lighter with only about 3,000 shares changing hands on average.

The big boys like the aforementioned JP Morgans and BMO, I highly doubt they have brokers talking up an investment in Resverlogix, and looking at things logically....Why would they?  There are plenty of development stage companies engaging investment bankers all the time to underwrite initial and secondary offerings.  The major outfits underwriting those offerings and ponying up hundreds of millions, perhaps billions of dollars....those are the stocks that are going to get the buzz, the ones that will be put "in play".  

But if the phase III BETonMACE trial succeeds, then I don't think that will matter.  In my opinion the market potential for Apalbetalone would be explosive with indications in major diseases like Diabetes, Kidney Disease, Cardio Vascular and Alzheimers.  All those conditions are impacted by bad cholesterol which Apalbetalone may alleviate.  

It is my view that a successful futility analysis with the company being given the green light to continue through to completion of the trial, that this would be the catalyst that could vault Resverlogix to a market capitlization of at least $1 billion USD, and even that is extremely conservative in my view.

Ultimately though, if the trial succeeds, I don't see Resverlogix taking Apalbetalone to market, I would expect them to be bought out by Big Pharma, as happened recently with Relypsa which sent it from around $14 as recently as May to $32 on the Nasdaq where it traded under the symbol RLYP.  

Recent Developments

Resverlogix recently cancelled their Annual General Meeting (AGM) which was scheduled for October 5th, notifying the market via a SEDAR filing.  No reason was given for the cancellation so I emailed the company's Investor Relations VP to ask why.  A reply came back saying that the meeting date had in fact been "changed", but that no reason could be given because that information is not in the public domain.  Here's the text of the email I received:

• Unfortunately, we can not advise to the reason for the change in meeting date as this would be information not in the public domain. When the business to be addressed at the annual meeting has been finalized a Notice of Meeting will be filed with the regulators (www.sedar.com) and ultimately the company will issue a press release regarding the details of the meeting closer to the event date

So obviously something is going on that warranted cancelling the AGM and I am hoping its something positive like another regional deal or a buyout by Big Pharma, but ultimately its all speculation at this point.  And even if there is a big deal being worked on that doesn't mean it will be finalized, lots of deals die in the negotiation stage.

But getting back to a stock's valuation, ultimately its about supply and demand.  I made lots of Ziopharm shareholders mad last year when I offered up the opinion that the $1 billion + valuation the company had was merely the result of retail investors being herded into the stock by a lot of fluffy news, cheeseball promotion and social media hype.

Its that old line about selling the sizzle not the steak.  And there is nothing wrong with frying up a juicy T-Bone and enticing diners with the sound of the meat sizzling.  But if they come and sit down and instead of a T-Bone they find a minute steak or hamburger, well they're not gonna stick around too long.

At the end of the day it all comes out in the wash and if a company succeeds then the market will recognize it at some point.  If a company doesn't succeed, or if they over promise and under deliver....well the market recognizes that as well which is why you see a lot of high flying heavily pumped stocks get pummelled downward.

If BETonMACE succeeds, in my view the sky is the limit given the diseases being targeted and the potential market.  But before that happens they will have to have a successful futility analysis, and with a positive report on that I can see Resverlogix attaining a market cap of $1 billion USD at least while waiting for the full trial completion.

Sizzle is nice, it can get the mouth watering.  But you can't eat sizzle.  

Vuzix - Time machine back to the tech bubble? Why I'm playing the short side

Its been more than 15 years since the days of the tech bubble when stocks soared on hope, promise and dreams.  Companies were popping up almost daily with innovative technological ideas and investors stormed in, sending valuations to insane levels.  Seeing companies with market capitlizations of $100+ million became the norm, even when profits were non-existent and dilution was the order of the day.

But with public companies, whether back in the days of the tech bubble or now....its always about the future. Back in the nineties investors saw firms burning through billions of dollars on tech solutions and e-commerce ideas that promised a new paradigm.  But ultimately it was the old paradigm of simple economics that did them in. Eventually a company has to bring in more revenue than it spends...that's reality.

So what's the dream with Vuzix?  

Smart glasses for business and entertainment providing things like 3-D virtual reality.  Its an exciting concept certainly, and I can certainly see it being a viable space.  The question is will Vuzix as a company be able to make a go of it.  

Back in the dotcom era lots of companies were going to be huge successes in delivering E-Commerce solutions, and some did, Amazon springs immediately to mind.  But for every Amazon there were hundreds of other companies that imploded, Pets.com, Etoys, Digiscents, Go.com and on and on and on.

Some of these companies had big players buying into their ideas, companies like P&G and Disney, big name athletes like Michael Jordan and Wayne Gretzky were backers.  But business is business, and eventually revenues have to be sufficient to sustain operations.  Even the sheep get tired of throwing money at an idea, at some point investors want to see solid bottom line performance.

Vuzix is far from a new company, they've been around since 1997 which will soon put them into their third decade of existence.  They started out as VR Acquisition Corp, then became Kaotech, then Interactive Imaging Systems, then Vicuity, then Icuiti.  In 2007 the company adopted its current name of Vuzix. 

According to the company's SEC filings they have incurred net losses since their inception, with a reported $13,4 million net loss for the year ended December 31 2015 and an accumulated deficit of $57.6 million as of that same date.  A loss of $10+ million per year means they're going to have to sell an awful lot of glasses at a decent profit margin to achieve positive cash flow.  

Revenue is great, but business doesn't operate in a virtual reality world.  In the real world revenues need to eventually surpass expenses. 

And then of course there is competition from companies like Google and Sony.  Maybe Vuzix will be the David that slays the Goliath players in the market.  My Christian faith notwithstanding, when it comes to the business world I find its usually Goliath who wins.

Bulls, promoters touts and shills will no doubt point to the small float with WSJ reporting just over 17 million shares outstanding and a float just shy of 13.5 million.  But they will likely fail to mention the share consolidation that took place in February of 2013 when VUZI enacted a 1 for 75 reverse stock split.

Bulls will also undoubtedly take issue with all the old information I've just provided and will point out, quite correctly, that investing is about the future not the past. That is true, just because a player has a career batting average of .220 over ten seasons, that doesn't mean he can't turn it around in season 11 and challenge for the batting title.  But if I'm betting on the outcome, I won't risk money on a .220 hitter winning a batting crown.

Ultimately though the reason I placed my bet on the short side on Friday September 2nd just after the opening bell....Its because in my opinion the sheep have been herded into VUZI with a lot of promotion, news and hype.  Here's a small sampling of some bullish write ups that took place over the summer.

http://sylvacap.com/vuzix-smart-glasses-will-key-component-dhl-global-augmented-reality-program

https://www.thestreet.com/story/13686807/4/these-5-stocks-are-breaking-out.html

http://ceolive.tv/vuzi-virtual-reality-wearables-leader-vuzix-announces-collaboration-agreement/

http://saadvisory.com/update/archive/July-11-2016.htm

As probably should be expected after all that activity, VUZI volumes exploded.  After hardly ever trading 1 million shares in a day during all of 2015, in July that 1 million level was topped on numerous occasions.  And the PPS surged as well, going from in and around $4.50 to up in and around $9 in just a few months.

Maybe this time the herd will be right, but I am one who ascribes to that time tested old bromide that ''the herd is almost always wrong''.  Lots of promotion, news and hype is not unusual when companies are diluting, its hard to sell secondary offerings without something to get the bleacher crowd excited and a rising share price.  

Since the PPS started climbing at the end of June the volumes trading have been huge when compared to more recent norms,  Maybe the level of interest can be sustained, but I don't think so.

We'll see how VUZI performs going forward.  

Canada poised to open up a $10 billion industry this spring

Shhhh, this blog posting is about something that's currently illegal in my home and native land, Marijuana, Mary Jane, Wacky Tabacky, Pot, Weed, Cannabis.

A lot of Marijuana stocks have been roller coaster rides for the past two to three years as American states like Colorado legalized weed.  Then last year Canadians elected a Liberal government headed by Prime Minister Justin Trudeau with the legalization of marijuana being a key platform plank.  That sent MJ stocks on another wild ride.

Prime Minister Selfie (as Conservative critics have dubbed him) admitted smoking up while visiting with friends when he was sitting in opposition to the then governing Harper Conservatives. That revelation led to a funny little exchange on Canada's 'This Hour has 22 Minutes' comedy show.

No matter your opinions on JT's politics, ya gotta admit the guy is pretty cool...but enough preamble.

What's going on with Marijuana as a potential investment vehicle?

As noted in the subject line, marijuana is projected to generate $10 billion  a year in Canada, and likely even more.  And if Canada's Liberal government makes good on its pledge to bring in legislation by the spring of 2017 the overall sector will probably explode again.

That's good and bad.

The good is that there will be companies capitalizing and delivering solid fundamental results.  The bad part is that once again there will be all kinds of penny stock scams out there touting the $10 billion figure while dumping shares into the excitement.  They'll take the cash but never deliver one thin dime in long term shareholder value.

I want to be clear on something here.  If you're just looking to flip in and out quickly....then often times it doesn't matter whether the company you've invested in is solid for the long term or not.  I've written a lot about Lithium here, and that's exactly what happened with a lot of junior miners. Companies put the word Lithium in their name and, BAM, they popped.  Sometimes by 100% in just one day.

But if you're looking for a long term investment...then caution is warranted.

Peter Lynch of Fidelity fame once famously quipped: "Buy what you know".  The thinking behind that axiom is that if you're familiar with a particular industry, that you'll be more adept at making wise investment decisions.  But a lot of times investors storm into penny stocks because they know something about a particular industry, and lots of people know at least a bit about marijuana.

Many people have smoked weed, and like it.  Some probably think of themselves as a having a "PHD in THC" because they've committed dialogue from Cheech & Chong movies to memory....they think that qualifies them as experts.  Sad but true.  And the companies that show up on people's radar are all too often hyped up penny stocks.

There's one Canadian company in my view which pretty much epitomizes this mentality, with investors buying into a stock based on forward looking promise, hype and promotion.

Puf Ventures has the perfect ticker symbol for a marijuana stock, PUF on the Canadian Securities Exchange or CSE.  Canada has three exchanges, and if you do some research you'll find that the CSE has easiest reporting standards which in my view makes it the riskiest.  I would equate it to the American Pink Sheets sometimes called the "Gray Market".

PUF has been promoted by an outfit called Prosperity Stock Report which discloses having participated in a Private Placement priced at 5 cents, and with the stock trading currently around 9 cents, they've done well if they've been selling.  Interestingly PUF recently announced they bought into some mineral claims which may contain Lithium.  Here's a link to that news:

http://thenewswire.ca/archives?tnwcatalyst2=release_id%3D19667

Here's what it says in part:

"...in order to capitalize on the recent surging demand for Lithium, it has acquired a 100% interest in certain mineral claims (the “Claims”) located in Quebec, Canada, known as the Lac Saint Simon Lithium...." 

Regardless the company says it is committed to its strategy to become a licensed producer of marijuana.  

I'm going to end this blog posting here....but I will add this link to a site that lists the companies that comprise something called the Marijuana Index, and the Canadian companies that comprise it.

http://marijuanaindex.com/stock-quotes/marijuana-index-canada/

I would advise caution with all these companies obviously, but in particular those listed on the CSE and Venture Exchanges.  Here's another link to an excellent Globe & Mail article that also urges caution:  

http://www.theglobeandmail.com/report-on-business/rob-commentary/investors-should-take-a-deep-breath-before-they-try-cannabis/article27059802/

Good luck