|Written by Rob Goldman|
A Landmark Issue
Happy Anniversary to us! This issue marks the three-year anniversary of our publishing the weekly The Goldman Guide. Frankly, I did not think we would reach this mark, for a plethora of reasons. A lot has changed. For starters, the key indices, which experienced a bit of a rollercoaster (especially during May 2010 when the S&P 500 Index declined by 8.3%) are all up anywhere from 44%-49% over the past 3 years. Gold was around $1185/oz. versus $11473 today and it reached a high of around $1900.
Today, the market is at all-time highs and 3 years ago investors were just hoping not to lose any more money. The sad thing is that considering that many investors stayed away from the market, most have not enjoyed the gains experienced over the past 3 years. The economy was still losing jobs eking out gains via productivity alone and yet investors’ appetite for risk was high despite losses and future uncertainty.
A number of investment banks that were major players in the small cap space have since merged or in most cases, just shut their doors. Electronic trading has taken on a whole new form yet major debacles have not been avoided.
As for Goldman Small Cap Research, we were just beginning to spread our wings and producing sponsored research on listed stocks, penny stocks, and non-sponsored stock and market research as well. When we began this newsletter, we have hundreds of subscribers. Now, we have many thousands and the redistribution reaches 6 figures.
We are at the one-third pole of the calendar year and it feels as if the market is just going straight up. While we have seen the herd mentality be a driving force in the movement of individual stocks, it is not necessarily so in the general market. In fact, it might be better to do the opposite. Granted, the market has averaged a 5.4% decline for each of the past 3 years, so it is overdue for a gain. Still, 5 of the past 6 years have recorded monthly declines. While it is possible that the up party continues, we recommend buying out of the money puts on S&P 500 Index ETFs that have a June expiration. It could save you some money and reduce risk, in case the market heads south.
Gold may mount a comeback, driven by central banks not having any other place to put their money, rather than inflation. The global economy may be contracting but U.S. equities remain the best place for investors. Although bonds are still not a good home, short-term cash may prove to be wiser than going all in on equities. We still maintain that health care and consumer stocks may outperform certain tech sectors and would focus attention in these areas. As has been the case for the past several years, buy the stocks under accumulation and avoid those that can’t get out of their own way. Be prepared to step in strongly if employment gains or positive revisions continue and step out as they decline. They will continue to play the role of big drivers of stock market direction.
Something Special for You
Three years ago, we planned to offer our subscribers more and varied content. We have done so with our daily blogs and premium small cap stock pick newsletter The 30-30 Report. In honor of the Guide and 30-30 anniversaries, we will be offering a special to all new 30-30 subscribers and a rebate for all those that subscribed in May. Be on the lookout for an email on this after Mother’s Day.
We also need your help. We have a number of new content and distribution initiatives and offerings planned for you (free and premium.) We will be sending out a very brief online survey to get the pulse of our subscribers and we would appreciate you taking 1-2 minutes to choose your responses.
Finally, at long last, we can say that the book we have been working on is nearly complete and we will provide you with more details as we get closer to publication.
Thank you very much for your continued support! Drop us an email anytime.
The Anatomy of a Short Squeeze
If you have been watching Nuvilex, Inc. (OTCQB—NVLX) of late, you probably are witnessing, or are about to witness a classic short squeeze. And, it is a beautiful thing to behold. Let me explain what is going on here:
NVLX has an ownership base that includes a minority that is maniacally attached to the stock’s story. Still, the stock is controversial and attracted vocal detractors which stir up the minority shareholders.
NVLX, which enjoyed a rise higher for a while, had a retreat down to around the $0.03—0.04 level, before its big move higher. How did it get there? The catalyst for the decline, in our view, was a number of short-sellers who do not believe in valuation, management, business model, technology, etc. and became more prominent and vociferous in their vitriol against the Company, in the absence of buyers.
Although shorts are supposed to have difficulty borrowing stock or at least restrictions, we have found that naked short-sellers abound. As a result, once they sunk their teeth in NVLX, it was very hard for the stock to bounce back, in the absence of substantive news or a re-valuation of the company (our reports). This put the first pressure on the shorts as it approached the $0.08 level. Try as they might, they were unable to smack the price down, as new investors have clearly learned the story and are not jaded like the evil shorts.
Now that it has produced new highs on heavy volume, and the secret is out (thanks to the Buyins.net) report about the level of stock short) we believe that some of the shorts could begin to drop off. Still, there is a long way to go before a squeeze kicks in. But, now that we have had a couple of closes at new highs, it looks like a short squeeze may be starting to emerge.
Why? The shorts have already taken a big hit, and that is always a trigger for short covering. This added buying causes a major and swift move to unprecedented heights. We would recommend buying along with their short-covering given the low valuation afforded the stock and the great wind at its back.
Until next week...
Analyst: Robert Goldman
Rob Goldman founded Goldman Small Cap Research (GSCR) in 2009. Rob has over 20 years of investment and research experience as a senior research analyst and as a portfolio and mutual fund manager. During his tenure as a sell-side analyst, he was a senior member of Piper Jaffray's Technology team. Prior to joining Piper, Rob led Josephthal & Co.'s Emerging Growth Research Group. Rob has also served as Chief Investment Officer of two boutique investment management firms, where he managed Small Cap Growth and Balanced portfolios and The Blue and White Fund. As an investment manager, Rob's model portfolio was once ranked the 4th best small cap growth performer in the U.S. by Money Manager Review. In addition to his work at GSCR, Rob is the editor of The Stock Junction (www.TheStockJunction.com.)
I, Robert Goldman, hereby certify that the view expressed in this newsletter accurately reflect my personal views about the subject securities and issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the recommendations or views expressed in this research publication.
This newsletter was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research, which typically highlights small cap and mid cap companies, and Goldman Opportunity Research, which features micro cap companies in a sponsored research format. Thus, the Select product reflects the Firm’s internally generated stock ideas while the Opportunity product reflects sponsored research reports. GSCR was compensated $4,000 by the Company for a research subscription service and has been compensated by a third party for various Nuvilex articles.
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