|Written by Rob Goldman|
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This Is It!
I have been all talk of doom and gloom for weeks on end and it culminates with this week. We have talked before about the old investment adage “sell in May and go away,” which is the second half of the Halloween Indicator that states the best returns in the market are derived from November through April. This week marks the beginning of May which we believe will start the slow short-term decline in many stocks.
Tech stocks tend to perform the poorest from mid-Q2 though August. It is a seasonal issue. Most technology stocks do not rise based upon milestone or target achievements but if you own one that does, perhaps that stock will rise above others during this sluggish period.
If a 10% correction occurs, we would feel very comfortable returning to a very bullish posture rather than a cautious one. In fact, considering that this is an election year, and the market rarely declines during these years, we feel pretty good about the overall prospects for the tail end of the year. It is just the next 4-5 months that likely offer little upside and modest risk, as a whole.
However, there are certain situations which deviate from this phenomenon and instead offer substantial upside potential.
You Must Own These Stocks, Part I
I must be candid with you. If I had to choose only 2 stocks in the market that I could own, it would be the two discussed on these pages. In fact I am kicking myself that I can’t.
Revenue should jump by leaps and bounds over the next 2 years as GOHE’s sought-after prepaid debit and payment programs are deployed in the U.S. and abroad. We estimate that revenue will be $5.7M in FY13, up from an estimated $1M in FY12, with operating profit of $1.2M as compared with a loss for 2012.
As milestone events occur in mid-2012, we believe that this low-float stock could easily reach $0.16, which is in line with the valuation afforded its peer group. Plus, with a first-mover advantage abroad, we believe that GOHE could emerge as an attractive M&A target. Looking ahead, as GOHE reaches its financial milestones the stock could reach the $0.20 – $0.25 range in early 2013, which would still represent a very favorable valuation compared to its peer group.
You Must Own These Stocks, Part I
On Friday we initiated coverage of LIG Assets, Inc. (OTCPK—LIGA—$0.06). The stock reached $0.09 before backing off at the end of the day. As in the case of GOHE, LIGA is a must-own stock. Furthermore, when I say you need to buy the stock today, in this case, there really is a deadline.
As we saw with trading on Friday, this low-float stock, with just over 3M shares in the public float, can zoom higher very quickly. Our target price is $0.50, which is only 7x 2012 estimated EPS, and represents a very low P/E multiple. The stock closed at $0.06. Plus, this target excludes the value of the share distribution.
We predict that LIGA will be much higher on its own merits and through its ownership in SuiteMagic. But why not own some SuiteMagic too, right?
Until next week...
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