Short interest makes dividend paying retirement home company EXE.TO an intriguing play

This blog tends to focus mostly on speculative stocks, companies that often have little to nothing in revenue and certainly don't distribute dividends to investors.  But there is certainly a place in most portfolios for some solid performers, companies that pay investors to own them with regular dividend payments.  

And in my opinion you can do a lot worse than to look at retirement homes for one simple reason, the baby boom generation.  Those hippy dippy teens who were once skinny dipping at the Woodstock Music Festival, they're now moving into their golden years.  Gone are the days of stripping down with friends for a cool refreshing swim in a lake, now comes the age when they're looking for help getting in and out of the bath.  

The post war baby boom started in 1946, which means the front end of the boomer generation is now entering their 70's.  And that's just the front end, the boomers have been called 'the pig in the python' and those who study demographics have been sounding alarm bells for a while now about the impact this generation is going to have on society as they enter old age.  

One inescapable fact of human existence is that we all need somewhere to live, no matter what age we are.  People are living longer and healthier now than at any point in history, but there's no defeating father time, it gets us all eventually.  While some older people will be healthy enough to maintain their independence for a very long time, many will also have to look at moving into assisted living facilities and retirement homes. 

That's the business Extendicare is in.

My legion of regular readers, all three of them, know that I pay close attention to short interest and that I have a healthy respect for bears.  When I see a stock with short interest at 10% of the issued shares, or higher....that to me is a warning sign.  However the level of short interest in Extendicare is well below 10%, sitting at just 2.3% of the 88.8 million odd shares that are issued as per stockwatch.com, that's current up to May 15th 2017.  

Over the long term I don't see anything to worry about with an investment in EXE.TO.  That's not to say I don't expect pullbacks and periods of consolidation, that's par for the course with stocks.  But over the next 10 to 20 years I view retirement homes as being almost as sure a bet as running a Casino. And we all know that when running a Casino that the house always wins, unless its someone named Donald Trump at the helm,  Thankfully his name isn't on Extendicare's Board of Directors.

But back to Extendicare's short interest, 2.3% of the issued shares represents a little over 2 million. My suspicion is that bears would like to cover, but they're pinched.  You can't buy unless there are others willing to sell after all.  Back in 2014/2015 when they were divesting the U.S. side of the business there was some uncertainty, but that issue has long since been resolved.   

This isn't some tech company that's been around for 10+ years, surviving by selling its shares and engaging pumpers and promoters to drum up interest.  Extendicare has paid a monthly dividend for years of 4 cents per share, which at current prices represents a yield of just under 4% which is better than a GIC, with the share price growing steadily over the past 5 years.  

That 4 cent monthly dividend means that bears have to dig into their collective pockets every month for roughly $80,000 at current short levels, that's almost $1 million per year.  Extendicare doesn't have to cover the dividend payments for shares that have been sold short, that's up to the bears who sold them.  

Recently analysts covering the company poured a bit of cold water on things, but I've never been one to trust analysts, I don't think they have my best interests at heart.  And certainly with EXE some price targets have been brutally wrong, but in a very good way for longs.  

RBC just boosted their Price target from $9 per share to $9.75, which to me is like targeting 20 wins at this point in the season for the Blue Jays, even though they've already won 23.  But it is what it is, perhaps its just a matter of industry players helping out the bears who seem to be stuck.  You can read about it here:

https://sportsperspectives.com/2017/05/19/royal-bank-of-canada-boosts-extendicare-inc-exe-price-target-to-c9-75.html

I'll leave it there and, as always, strongly suggest further research.  Take note that I am a shareholder and as such my opinions should be viewed as heavily biased.  

Toronto housing bulls can relax - Buyers should take advantage of the lull

Emotion can have a big impact on a market in the short term, you see it with stocks all the time. Bad news will hit an otherwise profitable company with solid fundamentals, and the stock price will fall. Then sanity returns as the market realizes that nothing truly important happened and the PPS recovers.  

The same thing happens in reverse with highly speculative money losing companies.  Good news comes out and excitement takes over as buyers storm in and push the PPS up to often insane levels. And then reality sets back in and the PPS collapses as people wake up and look at the balance sheet and see nothing but red.  

With housing there are 3 fundamental metrics that drive the market.  The two most important are obviously supply and demand.  The third factor has a big impact on the first two, and that is affordability.  In housing affordability is largely driven by mortgage rates, most people would not be paying $1 million+ for a detached family dwelling in "The Six" if mortgage rates were in and around five or six percent.  

But with interest rates sitting under three percent and a lot of household incomes well into six digits, GTA families can afford to assume hundreds of thousands of dollars in mortgage debt.  

A note of caution though, interest rates are key.  If mortgage rates go up even one full percent, then the supply/demand dynamic will change dramatically.  Many current homeowners would no longer be able to afford to keep up with mortgage payments and would be forced to sell, and the number of buyers would drop as would the amount they could afford to spend.

But absent a sharp jump in lending rates, if mortgages continue to be handed out at less than 3%, then GTA housing bulls have little to fear in my view.  Why?  Let's face it, when it comes to Canada the greater Toronto area "IS DIFFERENT".  Immigration is a big factor, probably the biggest reason that GTA real estate has been a rocket ship performer over the past 10+ years.  

There are lots of people who go to work in UAE states like Dubai and Bahrain or in Saudi Arabia where they make big bucks and pay $0 in income taxes.  After ten years working in the Gulf States its not unusual for a couple to emigrate to Canada with $1+ million in the bank, often in U.S. funds. They can afford a $1 million dollar home in The Big Smoke because they can buy it free and clear, with $0 needed to finance a mortgage.  

There's a very popular blog called Greater Fool authored by shameless self promoter Garth Turner that has been predicting an imminent correction in the housing market for a while now.  Turner is so excited by the recent pull back that I understand he's cancelled the prescription for his boner pills. 

Take note however that Garth Turner has been the Chicken Little of the Canadian housing market for nearly ten years now, starting in 2008.  The Über Moron was telling homeowners to "sell now if you want out at the top" when a single detached dwelling selling for $1.5 million now was going for a paltry $500 or $600K.  

In fairness to Mr. Turner he's an effective communicator and very successful financial adviser.  He goes on cross Canada tours offering seminars to the sheeple who follow his blog, and you have to sound brash and confident if you want the herd to free up the capital in their homes and invest it in the vehicles you're flogging.  

For those who still think Garth's the man, here's what he was saying in October of 2008.  Homeowners, how much has your property gone up since then?

You will be basically unable to sell your home, unless you slash the price or take back financing. Even then, it will take months and months to find a buyer. Your line of credit will be withdrawn, called or the interest rate doubled. Double-digit rates will be common for car loans, if you can get one.

So relax housing bulls, unless interest rates make a big jump, then this latest fear driven dip caused by the foreign buyer tax and Capital Inc's recent troubles will be just another blip like we've seen before over the past 10 years.  By the fall market things will be back to what they've been, steady increases.

Capital Inc will probably survive, and even if they don't...other B class lenders will step in to fill the void.  Foreign buyers might represent 5% of the market, and even that is probably being generous.  When bidding wars start up again, it might mean 18 offers instead of 20.

But if you prefer doom and gloom and like drama....go read Greater Fool.  

  

Gasoline turning into barley and oats?

Its said that a good way to make the wrong decisions in the public markets is to listen to the news. The concept of contrarian investing/trading is to do the opposite of what the news says.  To run in the opposite direction of the sheep and ignore where the media shepherds are leading them.

But the media isn't always wrong, sometimes they're telling it exactly as it is.  As Freud once famously said:  "Sometimes a banana is simply a banana".

I was listening to the radio yesterday and heard a report about a professor of economics at Stanford who put out a paper called "Rethinking Transportation 2020-2030".  Among predictions of driverless vehicles dominating the roads it has some chilling forecasts for the Oil/Gas sector.  Among them a suggestion that gas stations are going the way of the horse and carriage.  Cars and busses and other mass transit systems will be running almost entirely on electricity and battery power if this report is right.  

I have to admit that hearing that news item spurred me to check the story out on-line, and then today I disposed of my oil stocks.  There were only two, and neither was an especially large position, totalling less than $5K.  Both were down from where I'd bought them, but as the saying goes...Pride cometh before a fall.  The stocks were EGL and PWT both on the TSX, Eagle and Penn West respectively.

Oil bulls might see this as part of some conspiracy to convince them to part with their oil stocks at what they consider cheap prices. I've been guilty of that type of thinking many times myself. Sometimes I've been right and other times wrong.  I'm more willing to accept this paper though because it comes from academia as opposed to traditional media.  If this were an analyst providing this info, then I'd be less willing to weight it as strongly as I have.

I don't think its as urgent for players in major oil stocks like ExxonMobils, but for smaller and heavily leveraged companies like the two I owned, I think the worm will turn more quickly.  

100 years ago there were people who thought gasoline run cars would never replace horses, wagons and carriages.  We all know how that worked out.  Sometime last year I had an appointment with a consultant whose office was in a building that was once a thriving business, a carriage works.  

The paper says this will happen in just 8 years....that gas stations will be hard to find and that people will be zipping around in EVs that drive themselves.  Eight years is both a long and a short period of time, and if it does come to pass, no doubt the oil sector will have pops and drops during the run up to this brave new world.  But over the longer haul, whether its eight years or longer, I do think the days of big oil are numbered.  There will always be a need for oil, but if we're all using EVs, whether self driven or not, then predictions of oil at $25 per barrel going forward for the long term are probably close to the mark imo.  

Reverse my ass!!! Its a mortgage

I hate it when I see what I consider to be deceptive advertising, I'm one of those cynics who believes in simple and easily understood language.  Some time over the past ten or so years dead end streets became "cul de sacs".  And the French word Faux, which means "fake", has been slapped on all kinds of plastic products to make them seem sexier,  as in faux oak or faux mahogany. 

And now we have the so called "reverse mortgage".  I don't allow profanity here, but what the FRICK is that???   I'll tell ya what it is, its a mortgage, but the marketing geniuses flogging this vehicle knew that wouldn't fly, so they found a new angle.  And in my view the way seniors are targeted, its on the cusp of being unethical.  Call it what it is, a payment free mortgage but underline that interest owed is added to the principle and compounded.  

Canada's population is ageing, which brings on many challenges for people who've retired, and financial considerations are often top of mind.  There are lots of Canadians retiring without a pension plan beyond CPP, and insufficient RSP holdings to fund their golden years.  But....many own their homes, often free and clear.

Its a big accomplishment in people's lives, paying off the mortgage, some still celebrate by having a party and burning the actual paper.  But there's an old saying in financial planning circles, you can't eat your house.  While it may be feasible and perhaps even desirable to move from a strictly financial perspective, many people in their sixties and older, they don't want to relocate.  And who can blame them?  You've spent 25, 30, 40 or maybe even 50+ years in a home.  So why not stay?

And that's where marketing comes in.  Knowing that many older Canadians have only one valuable financial asset, one they've spent a good chunk of their working lives paying off, these wizards know that the thought of taking out a mortgage is repugnant.  So instead of calling it a mortgage they call it a "reverse" mortgage.  How do they get away with this?

The ads tell people they can unlock up to 55% of their homes value, "and never have to make a payment".  But make no mistake, there is a cost, a big cost.  The interest rates on these so called "reverse mortgages" can range between 5 and 6% and even higher.  All that happens is the interest is tacked onto the principle owing.  

Why borrow money at prices that can be double what traditional mortgages are charging???

Imagine a couple with a property valued at $300,000 who want to "unlock" 55% of their home's value. That's $165,000 which leaves $135,000 of equity.  At a 5% annualized interest rate that's $8,250 worth of interest expense being added to the total amount owing, and its compounding, owing interest charged on interest.  The equity of the home is going to erode pretty quickly, and with people living longer and longer lives this could spell financial disaster. The one asset they've spent years paying off could end up being worth nothing to them.  

Imagine this scenario, a couple takes out this "reverse" mortgage then live another 15 years and get hit with a major expense, like having to move into a care facility.  They can sell the home, but then they have to pay off the mortgage, and the mortgage company is first in line for any debts.  It ain't a reverse mortgage any more.  Its conceivable they could be broke, all the equity in the home pffffffffffft, gone.  

  

I'll end this here....but I would urge anyone considering a "reverse" mortgage to consult with a financial advisor and to explore less costly options before taking out a high interest no payment mortgage.  Even one that uses the term "reverse" to make it seem like something else.  

If you want to read a more detailed, and better written article....here's one from The Globe & Mail from 2010 that still applies today, maybe more so.

http://www.theglobeandmail.com/real-estate/mortgages-and-rates/the-reverse-mortgage-quandary/article1391748/

Sunday thoughts on how the market really functions - An ethical dilemma

Its Sunday again, and though I haven't done this for a while I think its time again to contemplate those things that daze and amaze, astound and confound, the market tricks that both amuse and confuse a lot of retail investors.

Of late I've been doing a fair bit of negative posting on StockTwits (username growacet) on a company called Vuzix, trading under the symbol VUZI.  I had a position on the short side that has been closed for almost 3 months now, but still I chime in fairly regularly expressing a very negative point of view.  Why?  A big part of the reason is all the pumping that goes on, pumping that in my opinion is almost criminal.

Of course VUZI isn't the only stock that gets pumped in this fashion, but because its on my watch list I see it and it gets under my skin.  What am I talking about?  I'm referring to social media posting that paints a highly speculative stock as a "no brainer" type investment.  Here's an example of what I'm talking about:

Oct. 15 at 1:15 PM

joodles33

judy buckey

@jmcekc It will be rewarded! Vuzi really is a no brainer to be invested in. Great company, owner and fantastic products.

That was in October on the 15th, back when the PPS was still around $7, having collapsed after trading up well over $9 in September.  A "no brainer"???  Really???  A company that discloses a lack of long term commitments from its customers in its own SEC filings among a whole page of risk factors that could cause the stock to absolutely crater in value.  This is a sure fire winning investment?

Pumpers must think some investors are complete morons.  Well, sorry to say, a lot of investors are, (as the expression goes) dumber than a sack of hammers.  

The same thing happened with Ziopharm early in 2015 when its PPS shot up like a rocket to almost $15, and I was called an idiot and a moron for not seeing that this was a gold star winner destined to go to at least $20 and almost definitely, much, much higher.  One idiot was on twitter touting ZIOP as a #miraclecure.  

Sell $ZIOP for a mere $13+???  I had to be brain damaged.  

Why do pumpers engage in such reckless, and as I opined earlier, almost criminal behavior?  Because a lot of investors have more money than brains.  But there's more to it than that of course, they also understand basic human psychology at some level.  They know that people will follow strength, conviction and certainty.  If someone is wishy-washy, if they take note of the risks involved, then people aren't going to feel confident about clicking on the buy button and forking over their hard earned cash on an extremely risky stock.

You see it in all facets of life, take religion for example.  H.L. Mencken once quipped that:  

"A church is a place in which gentleman who have never been to heaven brag about it to persons who will never get there".  

Why are some Fundamentalist Evangelical Churches bursting at the seams on Sunday mornings? Because often times the Pastor in the pulpit has "absolute certainty" about what God wants and expects of people.  How does the Pastor know this?  Because he has read and studied the Bible and he KNOWS what God wrote in there and how it is to be read and understood.

Does the Pastor really know?  I don't think so, but that's neither here nor there.  My own personal view is that it takes far more strength and courage to acknowledge doubts and uncertainties, and that many who claim to be experts are simply intellectual cowards who can't face the prospect of not knowing something.  Even something as unknowable as God.

Okay I've covered religion.  Now what's that other taboo topic nobody is supposed to talk about for fear of offending people?  Oh yeah....politics.  The same principle of attracting the brain dead sheep applies in the political arena as well, the voting sheep also follow strength, conviction and certainty. Not everyone, but enough to fill a lot of churches and enough to get someone of dubious distinction elected President of the United States.  Just check out this video:

If you believe 'The Donald' nobody is better at: 

The military, building walls, treating the disabled, on equality, on being Pro-Israel, respecting women, attracting the biggest crowds, understanding the horror of all things nuclear, trade, infrastructure.....and on and on and on and on.  There's nobody better than Donald Trump at all these things.  He's the best at everything, just ask him.

You don't get to be the most senior elected politician in the world's most powerful country without getting an awful lot of people to vote for you.  You don't need a majority, but you still need to inspire confidence in a mass of people to get the job.  And you're not going to inspire that confidence in the minds of the people who behave like sheep if you give thoughtful nuanced answers, it ain't gonna work.  You have to sound like that Pastor who knows exactly what God wants and expects....the sheep will come.  

So what's the ethical dilemma?

While I do my utmost not to engage in this type of pumping, I have profited from it.  By buying stocks in speculative companies when they've been quiet and lightly traded I've been able to sell for higher prices when the herd moved in.  I'm not writing this to toot my own horn, there have been times where I've bought in when things were quiet on speculation that a stock might attract attention, but it hasn't happened, LMD.V qualifies in that regard.

I do write about speculative stocks here, RVX is a prime example.  However if/when a stock I've written about starts attracting wider attention, that's when I typically stop writing and liquidate at least some and often all of my shares...making note in the comment section of the original post and on the social media sites I frequent.

As I'm getting older I'm taking my Christian faith far more seriously, and the core belief of my personal faith is the so called "golden rule" of doing unto others as I would have them do unto me. But I also play the market where the golden rule is more "those with the gold make the rules", that or "do unto others BEFORE they do unto you".

Everyone wants to buy low and then sell high.  But you can't buy low unless there are others willing to sell at those low prices.  And likewise you can't sell high if there aren't buyers willing to pay the inflated prices.  The market machine is highly skilled at getting retail sheep to do the opposite of what the smart money players do.  Lambs get slaughtered by buying high and selling low.  

I reconcile my conscience (perhaps rationalize would be a better way of putting it) by knowing that no matter what I do, the market game will go on and on.  The machinery that entices retail investors to buy highly speculative stocks at grossly inflated prices will continue as it has regardless of whether I play the game or not.  

And I also realize that I'm a bit of a hypocrite, I can see the log in my own eye in other words.  If the market game were more above board, and retail investors weren't enticed to risk money on dubious investments the way they are and have been for ages....then the market machinery itself would break down.  The investment banks, the market makers and analysts....the promoters and chop shop players, they'd have to find other endeavors to earn a living.  And that's to say nothing of the entitled corporate executives and insiders who run these companies that are losing millions of dollars every quarter and yet earn 6, and sometimes 7 digit incomes.

That's enough for now....happy Sunday everyone.  

A pending breakthrough for Diabetes patients? Resverlogix Phase III trial progressing

Resverlogix (RVX.TO or RVXCF) is a Canadian biotech company based in Calgary that has developed a compound called Apabetalone that is currently in a Phase III trial for patients with Diabetes Mellitus.

Diabetes is being called an epidemic, and in our increasingly sedentary western world experts are projecting that it will get worse.  Like cancer pretty much everyone knows of someone who is diabetic.

According to the American Diabetes Association over 29 million people in the United States had the disease in 2012 (LINK).  And the International Diabetes Federation put the global number in 2015 at 415 million,  projected to climb to over 640 million (LINK).  In Canada 11 million people are living with Diabetes or Pre-Diabetes according to Diabetes Canada (LINK).  

Thankfully Diabetes is a treatable condition due to the discovery of Insulin by Canadian Dr. Frederick Banting and his team at the University of Toronto in 1922.  But while Insulin is a treatment, it is not a cure, and Diabetics have a number of health concerns to deal with while taking insulin to regulate the level of blood sugar.

One of the biggest concerns for Diabetics, if not the biggest, is Cardiovascular Disease (CVD), especially for older individuals. 

According to the American Heart Association at least 68% of Diabetics over the age of 65 die from some form of Heart Disease and 16% from Stroke, (LINK).  Even for those who are not seniors the risk is high, with the above linked AHA site noting that among adult diabetics the risk of CVD is two to four times higher. And that is regardless of how well diabetics control their blood sugar.

Obviously Cardiovascular disease is a major concern for those with Diabetes, especially those with Diabetes Mellitus which is simply the scientific term for those with full blown insulin dependent diabetes.  Most often its simply referred to as Diabetes.

While insulin is vital in controlling blood sugar levels, the incidence of cardiac events and strokes is a huge and as yet unresolved problem.    

The occurrence of Major Adverse Cardiac Events (MACE) is what Resverlogix is attempting to address with their lead compound, called Apabetalone or RVX-208.  Based on the results from earlier trials Apabetalone demonstrated a 55% "Relative Risk Reduction" (RRR) of  "Major Adverse Cardiac Events" (MACE) in patients suffering from Cardiovascular Disease.  And in patients with Diabetes Mellitus the RRR of MACE was 77%. (LINK)

How does Apabetalone work?  Resverlogix is involved in the relatively new field of Epigenetics.  For those who aren't linguists, the word "Epi" is Latin and it means above.  Thus Epigenetics means above the genetic level and it involves what are called Readers, Writers and Erasers.  If you think of it in terms of computers, genes are the hardware and epigenetics represents the software.  

Those wanting a detailed description of how Apabetalone works, I'll invite you to watch the following video which explains it in detail.

Based on results from earlier phase II trials Resverlogix is currently running a Phase III trail called BETonMACE.  The trial has been running for almost a full year and a half now and is:  Double Blind, Randomized, Placebo Controlled and is running in multiple centers.  A full description is available at ClinicalTrials.Gov (LINK).

The trial is being tracked by an independent Data Safety Monitoring Board which has given positive recommendations for the trial to continue without modifications on three separate occasions, the most recent coming on March 17th of this year (LINK).  Of note is that no safety or efficacy concerns were identified. The trial is event based and will be deemed completed once at least 250 Major Adverse Cardiac Events have occurred.  

Obviously a breakthrough of this nature, significantly reducing the risk of Major Adverse Cardiac Events for those with full blown Diabetes, in of itself this would be a major achievement.  However Apabetalone may have application for other disease indications as well.  

The company recently reported a positive meeting taking place with the FDA for the design of a proposed Phase 2a trial for patients with Chronic Kidney Disease, or CKD for short.  (LINK)  And third parties have found potential applications for Apabetalone for a rare form of Muscular Dystrophy and Neurodegenerative Eye Disease. (LINK)

There may also be applications with diseases like Alzheimers and Thrombosis and quite possibly more.  Most of the diseases either undergoing trials right now, or with the potential for application, they lean heavily toward older individuals and with our ageing population the market would be massive if they succeed in my view.

I don't think its overstating things to say that Apabetalone has "blockbuster" potential, and that's based simply on reducing the risks of Major Adverse Cardiac Events in patients with full blown Diabetes, its a huge unmet need.  And that's to say nothing of all the other indications that might bear out in clinical trials.

Given the potential I don't think it would be unreasonable to expect Resverlogix to have a Market Capitalization (MC) in excess of $1 Billion USD.  That isn't the reality however, the company has a MC of less than $250 million and that's in Canadian Dollars, with RVX.TO having its most recent close at $2.30.  In the US the stock trades OTC under the symbol RVXCF and sits at $1.72 USD with the market cap in American Dollars coming in around $185 million.

Why so low?  There are a number of reasons in my opinion, the biggest being uncertainty.  It is said that nature detests a vacuum, well so does the market.  With stocks though its not a vacuum as such, but uncertainty.  Uncertainty that can create opportunity if successfully addressed. In my opinion there are two major reasons for the low valuation, and they both revolve around money.

The first reason is a loan with Citi-Bank for $68.8 million which is due this coming August. The company must satisfy this obligation in some manner in the next few months.  If they default the loan has been guaranteed by Resverlogix's biggest investor Eastern Capital which is the investment arm of billionaire Kenneth Dart.  The collateral provided to Eastern is the patents and intellectual property of the company.  The company's CEO Donald McCaffrey has said they are looking at several different avenues including a secondary offering, licensing/partnerships or a loan extension.

The second reason is closely tied to the first, and that is the need for money....not just to satisfy the loan but to further finance the company in order to complete the Phase III BETonMACE trial as well as clinical work on Chronic Kidney disease, and any other indications the company wishes to pursue.

If BETonMACE succeeds though its my opinion that money will no longer be a concern.

The lack of financing represents a material uncertainty, and in my opinion it is the major stumbling block to Resverlogix attaining a much higher market cap.  However it should be noted that despite these uncertainties RVX has been trending higher over the past year.  As recently as this past summer shares of RVX.TO could be bought for somewhere in and around $1.10 to $1.30 per share. Obviously those who've been buying and pushing the share price higher, they're buying in spite of the financial uncertainty.  Here is the 1 year chart which shows the stock trading close to its 52 week high.

I will end things here with a special note.  If this is the first you're learning about Resverlogix I would strongly advise against making any investment decisions based on anything written here, I wrote this blog piece for informational purposes only and as a shareholder any opinions expressed are obviously biased.  Anyone considering an investment in RVX or RVXCF, I advise verifying everything I have provided and to conduct further and extensive research. I strive to ensure that everything I provide is accurate however I can make no warranty that there are no errors.

Consulting with an investment professional is always the best course of action for those lacking the requisite knowledge and expertise.

Comments are welcome, however they are monitored and those including profanity will not be published.

Vuzix - Has this company become a religion?

I haven't written anything on Vuzix for a while, in fact its been over a month since I've written anything at all here.  I'm still active on sites like StockTwits (growacet) and SeekingAlpha (Joe_Retail), but I haven't been contributing to my own blog.

I currently have no position in Vuzix whatsoever, but I did open a position playing VUZI on the short side in September, however that was closed in January.  That hasn't stopped me from chiming in fairly frequently on StockTwits where Vuzix has a large following of over 4,300 watchers, and sometimes on SeekingAlpha as well.  

I am often accused of either being still short on VUZI myself, or of somehow being compensated for my efforts by those who are.  Again, I have no position, and I have never been compensated to write anything about any stock, and would refuse any overtures of that nature regardless.

So, some will quite reasonably ask....Why bother commenting at all if you have no skin in the game?

Its a perfectly reasonable question, and one I have posed myself when confronted with persistent negative posting of a stock I own.  PPHM was being trashed mercilessly on StockTwits not too long ago when it was trading around 30 cents, and even now after climbing to around 70 it still continues. Some may be short players, others may just not like the company....Who knows why?  There are probably several possible reasons.

I will give my reasons for continuing to post my opinions on Vuzix despite have no financial stake.  

Its really not hard to understand why someone would post opinions on a subject despite having no financial stake in the outcome, all you have to do is look at social media sites like Reddit, Facebook and Twitter to name just three.  Its all about two things really, ego engagement with a bit of OCD (Obsessive Compulsive Disorder) thrown in.

There are threads on social media sites about who the best Star Fleet Captain is:  Kirk, Picard or Janeway.  On Facebook I have an ongoing feud with a friend of mine over whether the Toronto Maple Leafs are a .500 hockey team or not.  I say "not" because they've lost four more games than they've won.  My friend Scott insists they are a .500 team because 15 of those losses came in overtime or in a shootout, and in those losses the losing team gets a point.  Ultimately the Leafs are over .500 based on points, and under .500 based on wins and losses.  But the sword play is fun, and Scott and I like the exchange.

Sports, politics, the best captain....ego's become engaged and everyone wants to get the last word in.

But, as I so often do, I am digressing.

Before placing my bet on the short side with VUZI back in September I did my research and took out my position based on what I discovered.  The continual dilution coupled with an ever mounting accumulated deficit.  The huge 1:75 reverse split and the speed with which they burned through the $25 million Intel tossed their way.  On top of that of course there was all the paid hype and promotion, which is something I consider to be of vital importance when looking for stocks to avoid as long term holds.  Some promotion is to be expected, but when it is reported to be by as many as 21 different outfits.....Holy Pumpity Pump Batman.  

In the posts I've done on Vuzix I was also careful to underline that these were my opinions, and they could very well turn out to be wrong, especially when it comes to the PPS.  Ultimately a stock doesn't trade on fundamental performance, but rather on supply and demand.  Manipulation does play a role in my view, but it works both ways....stocks can be manipulated both higher and lower in my opinion.  

If fundamentals were the holy grail some claim then a garbage stock like CYNK would never have gone from one nickel to over $20.  I would argue that CYNK Communications also had a fair bit of manipulation involved in pumping it up to those levels, but no matter.....even though the company was fundamentally worthless that didn't stop some people from paying $20+ per share and getting creamed when the chickens came home to roost.

Of course for a lot of players, all that matters is the PPS.  If a stock goes up, no matter whether its just hype or solid financial results....Who cares?  I expressed my bearish opinion on a company that traded under the symbol ABRW back in June of 2016 just after its PPS had gone from under 50 cents to up around $2.  Subsequent to that posting the company changed its symbol to NBEV, was uplisted from the OTC Market to the Nasdaq and in November the PPS shot up to near $6.  

Strictly based on the PPS, and ultimately that's what stocks are all about no matter the reason.....I was wrong on ABRW/NBEV.  Its still trading over $4 as of last week's trading.  No question the higher share price has been a boon to the company given the recent capital raise they had.  In February they pulled in somewhere around $17 million through a public offering of over 4 million shares.  I'll leave any possible further comments about New Age for another day, and will wait until they have audited financial statements as their last 10Q came out when it was still an OTC stock without that requirement.  Suffice to say that up until Sept of 2016 the company still was not profitable with an accumulated deficit in excess of $5 million.  

But again, I'm digressing.  Time to get to the subject line of this post, asking if Vuzix has become a religion.

For those who aren't religious, the most important part of religion in my opinion is FAITH. Christians cannot prove that Jesus was crucified, died and resurrected, its something taken on as a matter of faith.  Muslims cannot prove that Mohammed was a prophet and Jews cannot provide definitive evidence that Moses led the Hebrews out of Egypt.  

With Vuzix, longs cannot prove that the company's new product offerings will do something that no previous products have done.  That is to make the company money.  But there are posters all over social media who seem to present it as fact, the same way some televangelists promise salvation, as a matter of faith.  And those like myself who are not convinced are attacked almost as heretics casting stones at the chosen one.  Puh-lease.  

I also believe there are likely some shareholders who have been convinced that the negative posting, be it by myself or others, that this is some form of PROOF that shares of VUZI must be a highly prized commodity and that its only because of manipulation that shares aren't worth at least the $9 they were back in September, if not much much more.  

I do get my back up when I see those promoting VUZI on sites like StockTwits presenting outright falsehoods in attempt to attract buyers.  Here's an example that just went up March 25th 2017:  

joodles33

judy buckey

$VUZI New money and present institutions adding shares. Reassuring.

It would be reassuring if it was a verifiable fact, but its not.  Adding is a 'present participle' denoting a continuing action in the present.  We can verify from filings available on Nasdaq's site that institutions WERE adding up to December 31st 2016 when the PPS was trading in and around the $7 mark.  But there are as yet no filings to tell us what institutions have been doing in January, February or March of 2017.  Have they been buying?  Selling?  Standing pat?  Nobody knows.

It could be that institutions have been dumping so far this year, which might explain why the share price is down from where it started the year.

If anyone has information about institutional activity since the calendar rolled over from 2016 to 2017 please share, otherwise I'll wait for the updated info to come out sometime in the month of June when we'll get to see the activity for the first 3 months of this year.

I know some were excited when Toshiba threw a little over $1 million at Vuzix, but I also remember all the posts about how Intel had given them $25 million and that wasn't even enough to forestall further dilution.  And now Intel has announced their intention to bail out.  

I'll wrap things up here by just noting again that I have no position, and to strongly advise anyone considering an investment in VUZI or any stock for that matter.....take message board and social media posting with a huge grain of salt.  Bashers are not always right, but likewise they are not always wrong.

Comments of course are welcome, with the usual caveat, no profanity.