Taking Stock – Following Up On Some OTC Winners

It’s been a rough and highly volatile start to 2014 for market players. That makes now an opportune time to look at the performance of some recent recommendations and close out some older OTC positions, as the “easy money” bull market days of 2013 appear to be coming to at least a temporary halt.

Fusion Pharm (FSPM)

This issue was one of two plays that appeared primed to benefit from the capital rush into marijuana stocks that accompanied Colorado’s legalization of the substance in January, and plans afoot in many other states to pass similar legislation. As hoped, FSPM shares raced all the way to and through the $8 mark after we wrote about the stock in early January when it was trading at $2.90 per share. Currently sitting at about $6 per share, I would reduce my position here by half, take the 100% return, and hold on to the rest in anticipation of ongoing sector strength.

Endexx (EDXC)

The second of two “pot stocks” we profiled in January, this company’s shares have also seen a nice jump from about $0.14 each, to a recent trading print of $0.21. I like the nice steady rise in EDXC’s price, along with the fact that the company is well-positioned geographically to benefit from the Colorado law change. Until the sector shows signs of buyer’s exhaustion, I expect these shares to continue to grind their way higher. If you took a position in this one, I recommend leaving it open.

DLH Holdings, Inc. (DLHC)

This Christmas Eve pick from December truly was a gift if you chose to play it. Shares quickly ripped from the $1.60 – $1.70 channel they occupied when we issued an alert on this company as a potential breakout candidate, and that’s exactly what happened. Within two weeks DLHC had established a series of new 52-week highs, quickly pushing up and through 100% gains to a $3.50 top. Market conditions and profit-taking have since conspired to push this issue back down to about $2.50, but I would keep my position open pending the market’s reaction to the company’s earnings report set for the end of the week. If those results are good, I expect DLHC to eventually take out new 52s.

Emmis Communications (EMMS)

This bread and butter play in the radio broadcasting industry remained stuck in neutral for several weeks, hovering around our entry point of $2.30 per share in September, rarely budging more than a few pennies a day either up or down. Finally, buying interest increased dramatically at the end of 2013, pushing shares back through the $3 level. Although I still like this company as a long-term hold, market conditions are such that it’s a good time to cash out, with the stock still holding at about $2.80 per share—good for a nice gain of over 20%.

Information Services Group (III)

Also recommended in the summer of 2013 when shares were trading at $2.50, the stock has simply headed north, recently touching a new 52-week top of $5.50 per share. With the issue continuing to show solid relative strength, and still trading near that 52-week top, my instinct is to let this one ride. That said, a bird in the hand is worth two in the bush, so if you’ve had the courage to hold this 125% gainer since the summer, now is a good time to book those profits and monitor III for a fresh entry position on any significant price pullback—if there is one.

Octagon 88 Resources (OCTX)

Like EMMS, shares of this issue have traded in a relatively narrow range, but below the price the stock was trading at the time of our recommendation— $6.75 per share. Usually under volatile market conditions like the ones we’re currently experience, I would suggest eliminating risk and cutting losses in a stock like this, which is now at $6.10 per share. Instead, however, given that the company just closed a private placement of 750,000 shares, and updated their plans to proceed with the launch of their conventional drilling plans, my recommendation is to stay the course for now. That said, the risk-averse trader/investor should probably turn to other less speculative plays.

Alkaline Water Co. (WTER)

From almost the time we highlighted this company trading on the OTC exchange at $0.50, shares sprung a leak, slipping all the way down to a 52-week bottom of $0.17, before appearing to stabilize at the $0.21 level. Despite the company’s steady stream of new distribution agreements for its flagship product, sellers still appear to be in control of this one. That said, given that it appears to have scraped bottom, I’d hang on in hopes of the company posting solid revenues at some point down the road.

 

Good luck in all future trades!

Warren Gates
Senior Analyst
Oakshire Financial

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