Paul Saad And Associates, LLC

New Blog ----

2011-08-30T11:10:00.000-07:00

Please find our new blog at our main site:

We usually have stock picks - or talk about shorting penny stocks

See you on the other side...

BSIC - MPAA - BOFI

2010-12-15T14:53:00.000-08:00

Just a little post to mention all of our favorite micro's:

1) MPAA has doubled since we mentioned it here as a buy. I no longer own it. It is around $12.50.
2) BSIC was promoted by a newsletter group and hit $2.40 at one point. I sold all of my shares for between $2 and $2.25. The stock basically doubled in short order. I am looking for a pullback to enter.
3)BOFI has been slowly climbing - now up to $15/share. I still own quite a few shares.

A recap for the year: We have done quite well. We would have done fantastic had not been for shorting the general market in spots and/or having put options expire worthless. In 2011 I will be concentrating more on the micro-cap market: Going heavy long the quality micro-stocks and hedging those positions by shorting promoted stocks. Should be interesting.

Sold my UNG calls as Natty Gas rises to $3.87 from $3.70

2010-10-06T14:09:00.000-07:00

Looking for a slight pullback to jump back on the UNG call trade. On a side note our BOFI is finally getting back off the canvas after being beaten down with the financials. BOFI continues to be our largest holding. MPAA was up as high as 62% from when I posted about the undervalued autoparts maker a couple months ago...

Cashed in on some market shorts today...

2010-10-04T16:12:00.000-07:00

Looking for a light bouce on tuesday and I will short into the ISM report. Will load up on more SDS calls. I am ultimately looking for S&P getting down to around 1080 (but will trade around positions daily).

(((Update - I did short into the ISM but got out when the market wanted higher. I still hold some SDS calls as a short term hedge. This market could collapse at any moment as the only thing holding it up is the Fed destroying the dollar by their anticipated QE2)

From Don Luskin's article...

The above chart and article discuss how some current policies (tax and tariff policy) are mirroring the 1930's. But what is even stranger is the near identical chart action seen above...

Picked up 40 ung oct calls today...

2010-10-04T16:00:00.000-07:00

Front month dropped to $3.70 this monday morning. Typical gas action with market pulling back after another weekend with no storms developing. Looking at the storage data, we are actually trending better than last year with storage levels down 4.6% from a year ago, yet the front month price of natty gas was close to $5 last oct this time last year.
Storage Reports ----

I am assuming we get a quick bounce in the front month with the first chill in the air as those furnaces fire up...

Traded ung calls 8 times during sept...

2010-10-02T07:34:00.000-07:00

7 gains and 1 loss. The large bounce in nat gas is not happening yet this year. The inventory storage data coming out each week is showing builds compared to 5 year data, but less than one year ago levels. Futures are showing $4 gas out for many months. I find it hard to believe we will be paying $4 for gas in December and I still plan to keep one eye on weather and the other on UNG.

Lately, during the hurricane season, I have been long UNG calls into Friday where I would sell towards the end of day (it seemed people did not want to be short over a weekend for fear of a hurricane developing). I would generally buy back on Monday morning when gas would open lower. My one loss trading in September was on a Friday when I did not get a run-up and was left holding for a downer Monday. Since the hurricane season is ending, the trading during the week will most likely change. Now the eye is on weekly weather reports. The next week appears will be warmer than average: not good for higher nat gas prices.

Remember, even if you are a nat gas bull, UNG is as terrible long term hold. It decays somewhat every month when there is contango - and contango remains. It should be used as a trading vehicle only (or a long term short hedge against being long a natural gas producer).

Nat gas front month at $3.75 on Sept 1st...

2010-09-01T15:52:00.000-07:00

I started purchasing UNG calls today (started with some Sept 5's between $1.27 and $1.33). The contango is still somewhat of a problem here as the roll from Oct natural gas to Nov may eat some more UNG value. Still I like the idea of nat gas for a trade going from September to around October/November. Just remember that UNG is a terrible long term hold due to aformentioned contango...

Studying the historical prices for natural gas, you will see a significant bottoming and appreciation after Sept 1 through November in most years.

Will most likely buy nat gas around Sept 1st...

2010-08-23T10:14:00.000-07:00

In some past years, the first days of September have been good trading bottoms. More than likely it is because the anticipation of colder weather (or perhaps some tropical storm activity during the first week of Sept).

Call: Looking to buy UNG calls.

BOFI nice earnings - stock dropping like a rock...

2010-08-23T10:08:00.000-07:00

BOFI is currently trading near $11/share. With new book value around $12.25 - a P/E of 5.5 and nice growth over the years (and looking forward) one really has to scratch ones head at this point. I truthfully did not think we would trade below book value since being added to the Russell 3000 - as I felt the higher visibility would keep a little more interest in the stock. At any rate, listening to the CEO talk about the new loan groups (especially the Jumbo unit from Thornburg members) you really have to be optimistic here. Not to mention the leverage we will attain from re-investing earnings going forward. Doing a back of the napkin calculation, since we made close to $5 million this quarter, we could leverage the balance sheet an additional $40 million. With that number (counting on about a 3% spread) you are looking at $1.2 million in additional earnings, just from leveraging up earnings (each quarter). Not to mention the additional capital which was raised near $13/share by Riley. I have been buying BOFI with zeal...

On a side note, I have been buying MPAA between $6.20 and $6.65. I sold some shares as high as $7.69. But this is another very undervalued play here (but in an industry that is currently on fire).

Buying TBT...

2010-08-01T09:54:00.000-07:00

Bond yields are seriously lagging again with the 10YR at 2.91%. So as was said before, there is a large near-term disconnect between the two markets (almost 25% according to my chart). So I have picked up some TBT here around 36. I have also started shorting the market just a little (but I am actually expecting the uptrend to continue a few more days). At that time I will lay much heavier into the shorts on the market. So there is a little arbitrage here between the bond and stock markets...
***update: I sold out of TBT as the 10 year lost support at 2.88%...

BOFI has been doing nicely. I picked up a few shares at the $13.65 area. We are now around $15.62 but I am expecting the upturn to last into earnings on (Aug 10th I believe).

Sold TBT calls for a quick gain...

2010-07-21T08:40:00.000-07:00

Now TBT is pulling back with the market. Yields are very low and it begs the question of who is right... The bond traders or the momentum traders trying to get S&P1100. We are in no-mans land here under 1080 on the S&P.

*Update: Yields have now made new closing lows on the 10 and 30 yr bonds - 2.89% and 3.89%. When bond yields plummeted in April (as the market kept rising) they portended the correction that started May 1st. The Dow is now down over 100 (thanks to Uncle Ben).

Covered shorts this morning when Dow was down 120...

2010-07-20T11:57:00.000-07:00

Seemed like we would go higher today and now we are +29 on the Dow. This market wants to go higher. I most likely will not attempt a short again until closer to 1100S&P. I did pick up some calls on TBT as bond yields are currently lagging this market rebound (TBT is an etf that shorts the long-end of the bond curve). So bonds are either lagging or bond traders are correct and this rally is just a head fake. With the VIX coming in again I believe we are heading higher now (at least for a few days).

UNG up (nat gas etf) 6.5% so far today...

2010-07-15T11:03:00.000-07:00

The inventory data was inline today. No huge builds. And a hot week across the country.
UNG on Yahoo...

Thinking about...

2010-07-14T18:09:00.000-07:00

going long nat gas in the next few days. Will purchase deep in-the-money calls on UNG. It will be a trade lasting no longer than 2 or 3 weeks.

I actually shorted the market yesterday at 1099S&P (I figured the first attempt at 1100 would not work). I covered at 1095 for a small gain. We really need to get through some more of these earnings before jumping on any shorts - Too much upside risk.

Looking for market to rise into earnings before initiating short positions...

2010-07-10T07:54:00.000-07:00

I bought on the turn when the S&P hit around 1020 or so. I sold too early (feeling slightly skittish) and will re-enter a short position through calls on SDS most likely between July 15 and and July 20th. I pick this time frame because the rebound in the market is also coinciding with corporate earnings releases next week. I studied past charts and found that the market generally peaks between the 15th and 20th during the month when Alcoa and others begin releasing. I was assuming that the S&P would hit around 1180 before I entered a short position. However with such a strong rally (it has taken only 3 days to get from 1120 to 1177) I may up my target to around 1100.

I have also started to dabble in some more value micro-caps. I know it is most likely too early to form large positions, but one has to start somewhere. I picked up a few shares of MPAA (Motor Car Parts of America). This is an extreme value play (looking at P/E and book) in a very hot market right now. As Autozone and AAP steam ahead, MPAA just slogs slightly higher (as MPAA took a much harder hit during the 2008-09 correction).

I am also still waiting to enter BOFI (aside from a few trades here or there). The correction has brought BOFI into the 13's but I am waiting just a little while longer...

BSIC - Earthstone energy files 10-K (annual report)

2010-06-19T13:14:00.000-07:00

The stock has climbed about 50% in the last few days. The entire micro-cap oil and gas sector has seen some momentum. With good reason: Dependable "on-shore" resources with a growing perception that higher energy prices will be upon us soon.
Friday after market close Earthstone filed their 10-K:

Nothing out of the ordinary. I broke out the last quarter from the numbers and found them to be a little light at $212K profit and $1.75MM rev. But I checked prior years and it seems that production does decline in the last quarter (for reasons I do not know). Still the stock is most likely at fair value here at $1.35 just looking at it on its own. But when you compare it to all the other micro-cap oils it is still about half value (but you could just say that PDO FPP ROYL and others are overvalued). No mention of reverse split or listing on exchange in 10-K. I believe they are required to act before year end. I may sell remaining shares if we get a little more juice on Mon - Tues and then place some lower bids back in...

Fighting an irrational tape...

2010-06-17T18:29:00.000-07:00

The market is now very close to forming a head and shoulders pattern (slanted right) between 1115 and 1130 on the S&P. The news headlines are bad. With each new bad headline the market has ignored it. Many say this is a bullish signal when news is ignored. Yes, it is very bullish to simply ignore fundamentals and plug the nose. I will start forming bearish bets here even though the hedgies are feeling frisky. Before the close today I picked up quite a few deep in-the-money July calls on SDS (ultra-short S&P).

BOFI - waiting to enter again -- Earthstone was pumped...

2010-05-16T17:38:00.000-07:00

B of I hit $19 a share and I am waiting for a pullback to re-enter the trade. Earthstone Energy - still trading under ticker symbol BSIC - was pumped the other day by a newsletter writer. We hit $1.41 the day after on heavy volume. I did sell my trading shares and a few more (making 30 to 50% gains). Now we are back to $1.02. Oil is down to $72 so I am not as excited at the moment for the sector, but you have to be in Earthstone as it trades at a significant discount to its peers.

http://finance.yahoo.com/q?s=BSIC.OB

BOFI over $15 --- BSIC approaching $1...

2010-04-05T11:17:00.000-07:00

I have sold all of my remaining shares of BOFI today as we run across $15/share. I feel we are fairly valued here and I will buy back (hopefully) with any pullbacks. BSIC - soon to have a new symbol - for Earthstone Energy - is finally approaching $1. I have an average around 76 cents and I am looking for $1.30 to $1.50 for fair valuation. Oil is over $86 which I do not believe is sustainable, but as long as we stay at these elevated prices Earthstone Energy will be making a mint everyday they are pumping goo from the ground...

Some of my other value plays lately that I have traded and still own:
ASTC
CAW

BOFI has screamed past $13.50/share. 61 cents in earnings for quarter...

2010-02-14T10:47:00.000-08:00

BOFI has been my number one pick for over a year. I have traded around spikes and pullbacks fairly regularly. Now trading about $2 over book value I have lightened up on all my trading shares again. It is really a beautiful story and I will add as we (hopefully) pullback to approach book value once again...

More reasons to own BSIC.ob - soon to be Earthstone Energy...

2010-02-14T10:25:00.000-08:00

BSIC.ob has expanded their share repurchase program to 1.5 million shares. They have already purchased 283,000 shares under the program. They are essentially putting a little floor in the stock here, as most of the purchases were done around the 80 cent area.

BSIC is clearly undervalued compared to other junior oil explorers of the same size.

Let's compare BSIC.ob to a couple of their peers who trade on Amex: Pyramid drilling and Fieldpoint - PDO and FPP.

PDO trades at a market cap of $22.5 million. The current bookvalue on the stock is $8.5 million. So PDO trades at 2.64 times book.

FPP trades at a market cap of $18.64 million. The current bookvalue is $8.9 million. FPP trades at 2.09 times book.

BSIC trades at a market cap of $13.52 million and a book value of about $13.29 million. So essentially 1 times book. (FPP also has over $5million is debt where BSIC has $5 million in cash.)

The math is simple. BSIC needs to trade at least double from current value to just be equal to the low side of valuations on the peers. So around $1.60. The listing on the bulletin board is holding the stock back from at least trading with peers. So with a reverse split and listing on a major exchange imminent, that should all change soon. With a 1 for 7 reverse, BSIC will trade around $5.60 at current prices. Once we float around on the Amex or Nasdaq for a short period, the stock should trade to around $10 or $11 just to match valuation.

It's almost funny to think that FPP attempted to take over BSIC last year...
Disclosure: Long and still accumulating.

BOFI - Bank of Internet - Blowout earnings (sigh) again...

2009-11-05T16:42:00.000-08:00

Yes, I may be sounding like a broken record, but BOFI remains my favorite growth and value stock rolled into one. Beautiful revenue growth, a P/E of about 6, and a tangible book value over $10/share (we are currently trading around $9.20. I am still trading around a core position here and liking every minute of it.

UPDATE--- 11/12/2009 --- The price of BOFI hit $11.49 today (which is about a $1 above book value) and I sold all of my trading shares. The trading action suggests a near term top here and I will be accumulating again starting around $9ish...

I wanted to add an old post for long term portfolio ideas....

2009-10-30T17:25:00.001-07:00

May 1 2009... I have been kicking around my long term portfolio ideas. I believe it is getting close to the time to get serious about this. So this is the thesis: The US will require an absurd amount of debt funding over the next couple of years to fulfill all the social policies that they feel are required. There is already a ridiculous deficit as we all know. It will only get worse with baby boomers retiring and hitting the social security/medicare dole among other social changes. So clearly bond supply will force interest rates higher. Deflation is a current concern and the Fed knows the only way out is to print money and inflate assets by virtue of default (it is a fairly easy inverse, of course until other countries do the same, and the dollar index merely floats with the rest). The Fed is now taking all the risk out of the private sector and placing it squarely on their own backs. This can be seen with the TALF - the TARP - the PPIP (etc.) - The direct and easy answer to this would be to go long the private sector and short the government. This gets back to the first point about the US issuing tons of debt and rates rising on the longer end (the government is certainly trying to keep the short end rates very low, so a nice yield curve is helping the banks emerge from insolvency... Gotta love those spreads emerging).

Portfolio for the typical IRA:

Long TBT (ultra-short 20 year treasury) increasing supply - increasing yields - lower bond prices - Short the government

Long SSO** (ultra s&p 500) Long private sector

FXA - FXC - DXDDX (aussie & canadian dollar, dollar negative fund) higher yielding currencies - commodity exporters

DBB - GSG (Base metal commodities* - World commodity index) reflation - inflation - weak dollar

BOFI (BOFI Holding - Bank of Internet) - Playing the interest rate spread. Solid undervalued bank.

*I believe current prices of base metals provide a better return than gold for an inflation trade. Some would use precious metals in this type of portfolio.

** Ultra-funds use leverage and are generally not good long term holds. It is best to short the inverse fund and use the decay to your advantage. However, in markets with less volatility (which we may see going forward) this decay may not be as pronounced. Also, I tend to trade positions every couple of weeks and therefore refresh new shares. For instance, TBT traded for a while in a pronounced pattern between 44 and 48. I traded this pattern several times. My ultra-shares do not get old and moldy....

Halloween Tees

2009-10-07T07:38:00.001-07:00

I am shamelessly promoting my niece's web site that we have an interest in. She has some great Halloween Tees in her Annabel Collection. Her selection of teen graphic tees is getting larger all the time. Check it often for your daughter (or the special young someone that your wife knows nothing of). They always love cool tees. The site specializes in graphic t-shirts for juniors -so the sizes are a little small. Women should just order one size larger.
Women's Graphic Tees - Burnout Tees - Cool Gothic Designs

BOFI - Bank of Internet Explodes...

2009-09-02T07:09:00.000-07:00

BOFI does 41 cents this quarter. Excellent growth and excellent interest margin spread. Their new mortgage banking unit seems to be doing very well and they plan on getting into the Jumbo market soon. Still trading well below new tangible book value ($9.79/share). Still our number one holding... I will add on pullbacks (which usually happens after these pops on good numbers).

New Business

2009-08-26T08:00:00.000-07:00

I just wanted to add a link to one of our new web sites. The site specializes in Girls T-shirts - including custom screen printed tees - So check it out. As we add to our portfolio of businesses, we are hoping the garment business will be a fresh and (hopefully profitable) venture. We also created a new character named Annabel - she is a little gothic brat that usually has smart mouthed replies. She may or may not be loved...

BOFI - Beautiful bank earnings once again...

2009-05-07T19:34:00.000-07:00

Third quarter earnings up 172% - BOFI - Bank of Internet parent - is still our largest holding. Things are looking nice. Great interest spread. New loan origination business. And most importantly, a solid balance sheet (unlike most banks). Bank of Internet is the 21st century neighborhood bank - reaching across the entire country.

LS Starrett - Extreme Value or Value Trap?

2009-02-27T09:36:00.000-08:00

I have been accumulating a few shares of Starrett SCX - as the price declines towards oblivion. Now trading less than 1/3 tangible book value (and still profitable). This has been a nice dividend payer for its entire "publicly traded" life span (this is a 120 year old company). So could the dividend be cut? Sure. Could they have a loss next quarter? Considering the economic climate, more than likely. But if the company is liquidated at present I believe it is worth a heck of a lot more than current market cap... Think Buffet or Graham. Disclosure: Long SCX and buying more as she drops.

BTW - I first heard of Starrett when I was just out of high school, working with precision tools in the Auto Sector in Detroit. Every shop had quality, American made Starrett gauges and tools laying on the benches.

BOFI - Blowout earnings...

2009-02-04T15:17:00.000-08:00

BOFI Holding, parent of Bank of Internet (BOFI) had an excellent quarter. Now is the time for conservative financial companies to shine. While other banks have been wallowing in a sea of red, BOFI is taking advantage of the market. They increased their interest margin to almost a 3% spread. Their asset quality still looks great, especially considering we just entered a melt down in the greater economy. The forward P/E is now around 3.5. Book Value is close to $9.

Disclosure: BOFI is our largest individual stock holding.

FPP Tender Offer for Basic Earth - BSIC

2009-01-17T05:48:00.000-08:00

According to this press release from FPP, the company is attempting to swap FPP shares on a 2 to 1 basis for BSIC shares. From the current price of FPP - about $2.50 - this would mean $1.25 for BSIC shares. BSIC shares popped during the day of the offer and closed off the high at around .90.

At this point I am fairly indifferent about the offer, as I have always felt FPP to be overvalued compared to BSIC. I had been buying Basic around 60 to 65 cents lately and had orders in for more. At 90 cents it is more likely that the market is putting a $1.80 value on FPP. The best opportunity at the moment would be to short FPP and long Basic. However I have been unable to short FPP as it is below $3.

So I suppose I will just wait and watch, and perhaps buy more BSIC if it drifts lower from here. FPP wants controlling interest but I do not see how they will get 51% of shares tendered. They will most likely end up as a minority shareholder and thats about it (unless the deal changes)...

*****Update: I have sold all of my shares of BSIC between .90 and .94 cents. Currently the stock is trading somewhat in lockstep with the price of FPP (although at a discount as previously discussed). I am hoping at this point that BSIC management and board will issue a statement saying that they will not take part in the tender and they suggest shareholders do the same. I will buy back BSIC if we float lower again...
******Update2: Basic Earth created a poison pill. Hopefully this chases FPP away for a little while and allows the stock to float back down to the .50 to .70 range (where I will most likely start loading up again).

Cheaper than dirt...

2008-11-01T13:39:00.000-07:00

There are some absolute steals in the small and mid cap market. During the market crash of October I have purchased SCX - LDL (in and out) - BOFI - LUB - and traded market etf's like DIA and SPY. Value investors are picking through the rubble. I am digging alongside.

I am not so sure that this rally is real. We may see a short term bounce for a couple of weeks but I am expecting to see the lows of 2002-03 by December or at least a re-test of Dow 7800.

When profitable companies are trading at less than 1/2 tangible book value they are certainly worth a look. And even though the risk of a lower market exists I can't help myself: I need to buy a little bit. Try DXD or some other market ultrashort for a hedge. That way if the sky starts falling again you can at least cash in some on the way down...

Fannie preferred and BOFI...

2008-08-20T12:08:00.000-07:00

It looks like BOFI's investment in Fannie preferred is in jeopardy. The company wrote down $1MM of their $10MM in holdings. Some think that the common stock is going to zero but the preferred may be safe because of the large number of banks that hold the GSE's preferred on their books. Unfortunately the market is not making this prediction at the moment. The preferred shares have lost much of their value (I believe a chart of FNA shows that it has dropped from $50 to $10). This issue will be hanging over BOFI (and many other banks) until it is resolved. Fortunately our stellar earnings will most likely cover most losses from this over the next quarter or two if losses come to fruition. The bad news is that short sellers finally have something tangible to stick their pin into...
BOFI quote and info

****UPDATE 9/8/2008 - We now know that the Fannie preferred is just about worthless. Look for an $8MM writedown next quarter. I have sold some shares here to lighten up and will buy back after the smoke clears... Possible good news is that the Mortgage Backed Securities that BOFI holds will most likely appreciate in value because of the Govt. takeover of FNM and FRE.

Earnings BSIC - BOFI - BLD - all in all very nice...

2008-08-19T16:08:00.000-07:00

Two out of three of our top micro-cap holdings had record earnings... the third had very nice earnings. BSIC and BOFI both had all time high earnings booked for the most recent quarter. As an oil stock, Basic Earth probably did not surprise too many with record earnings, but BOFI Holding (as a bank stock) should have. BOFI doubled earnings from last year - 10 cents to 20 cents. There was an issue with the fact that they hold some Fannie Mae preferred (which they wrote down 10% or $1,000,000), but all in all, very impressive. They also increased tangible book value to near $9/sh. Basic Earth had great numbers with 8 cents earned (a 381% increase). Annualize that 8 cents and you get a forward PE of about 5 for BSIC. Unfortunately the momentum has come out of oil related sectors and we are being whipsawed by oil fluctuations. Baldwin Tech BLD had a solid quarter with great overseas order flow for printing products. I believe the backlog was $54 million at the end of July.

Both BSIC and BLD had 30% pops when earnings were released. I sold some BLD. BOFI fell towards the end of the day when a heavy seller showing 10,000 to 20,000 at a time on the ask crushed the stock down toward $7/share. I am assuming this is a short seller adding to the larger short interest. The technique today almost seemed like bullying the price. I can not imagine a current shareholder selling would be so belligerent about showing on the ask...

Quote and info - BSIC - BOFI - BLD

Bear market thoughts...

2008-07-15T09:31:00.000-07:00

Micro-caps have been slammed along with the general market. BOFI - Bank of Internet - has been attacked by short sellers (as they are a bank/financial and they seem to be the "last bank standing") yet it is holding up much better than most. Last I checked it was trading just around $7. The tangible book value is closer to $9 (and these are solid assets, most of which are government backed securities). The CEO announced he sees earnings growth of 70% over last quarter (which is quite amazing). Hopefully the short sellers get caught on this one...

BSIC - Basic Earth Science - a profitable micro-cap oil play - has come off it's highs and now is trading just under $2/share. Still a nice 100% gain from a few months ago. I think we are waiting on big news related to their Bakken holdings in North Dakota. Most investors are also waiting on the new production numbers with regards to their Colorado wells drilled and placed online recently. This should be the ticket to get revenue and earnings growth, and therefore a much higher stock price.

A few other micro-caps that I have been buying - BLD (Baldwin Technology) a truly global play in the printing services industry. Just another very profitable penny stock trading well below book value. Trading around $2.30 now, I could definitely see a double in a year or so (of course I may trade in and out at various prices). There is also tons of insider buying in BLD. Another interesting true penny stock is Zunicom - ZNCM. I am buying here because it is basically a holding company which owns 40% of UPG (Universal Power Group) stock. It has 2 MM shares, along with debt that UPG owes them. UPG itself is a beautiful little undervalued play, however by buying ZNCM you are nearly getting the UPG shares for half price. ZNCM has been trading around .50/sh.

Value investors take note: BLD - BOFI - ZNCM - BSIC

BOFI finally getting a little respect...

2008-06-13T14:09:00.000-07:00

As you know, I have been beating the drum for BOFI Holding - an internet bank - for some time now. It has been trading well below book value, growing revenues nicely, and has quality assets: so undervalued it is. We just hit $8.04 - a new 52 week high - while most other banks are hitting 52 week (or multi-year) lows.

I noticed on a chart somewhere that we are now the number one performing bank in the past 3 months, as far as stock performance. Hopefully this is just the beginning.

Micro-cap Oil: Is it time again?

2008-02-20T18:37:00.000-08:00

When I first talked about Basic Earth Sciences - BSIC.ob - oil had "run up to" $40, and BSIC was trading around 50 cents a share. A year or so later Basic hit $3.00 and I was feeling pretty good about myself because of a great call.Today Basic Earth is a much stronger company - with a market cap of $18 million and cash on the books close to $5 million - and it is trading around $1.06. The most recent earnings announcement should show a trend for the year to come: Earnings increased 102% over the corresponding quarter of the previous year. While micro-caps have been beaten down, and junior oil explorers particularly hit hard, I believe that the time for the base and turnaround is now. While the main reasoning behind this call would obviously be the fact that oil will probably be trading above $80 for 2008, the company is also working on increasing production by aggressively drilling at various sites, most notably their Colorado Project. This should be the catalyst that the market needs for the next big leg up: Production gains.

On a side note, when you start some research on this stock, you will find that this is a very conservative company with a solid, easy to read balance sheet, and almost no share dilution (which is unusual of smaller companies). This is not your typical penny stock.

By the way, the current P/E ratio is only 9 and the stock is trading just above book value.
Full Disclosure: I have my money where my mouth is. I am long at an average of $1.07. I may buy more or sell at any time.

***Update - May 8, 2008 - Apparently it was time again. BSIC is now trading about 50% higher at $1.74. I feel the momentum is just starting to return to the micro oil and gas stocks. It could get fun here in the next few months!
***Update 2 - May 20, 2008 - Now trading at $2.70 (incredible). Momentum is now back...

Streamlining Foreclosures

2007-12-18T16:38:00.000-08:00

With a ton of bank owned homes now on the market in most states, it becomes a fairly tedious process to figure out which (if any) of these homes has value (Value being equity percentage according to appraised value). Just for fun we started going through some REO lists and compared the asking prices with their Zillow.com estimate. When it appeared that there may be a deal to be had, we posted the address and contact info onto our web site. Feel free to start looking for some foreclosures here.

We currently have some Arizona and California homes listed, and will add more soon.

BOFI now ridiculously cheap . . .

2007-11-08T16:01:00.000-08:00

Bank Of Internet now has a tangible book value of $8.50/share. Currently it is trading around $7.00/share. This is not a subprime lender on the verge of bankruptcy. This is an extremely conservative regional (internet) bank that has never had a loss associated with housing. With growing revenues and solid earnings I am very optimistic about it's future.

The new CEO - Greg Garrabrants, mentioned in the most recent conference call that he would like to see BOFI trade at "a premium to book value". Wouldn't that be something?

Please find more information about BOFI from their most recent 10Q - click here.

Disclosure: We are long BOFI

Land Development For Sale! Turn-Key Opportunity

2007-08-21T15:28:00.000-07:00

I just thought I would share a link to our new Land Auction. Basically, we have put together 49 lots in Lake Mead Rancheros, near Kingman Arizona, that we are selling as a whole package. At a little over $9,000 per 2.5 acre lot, this one is ready to go for profit (up to 3X profit according to current comparables of $26,000 to $32,000 per lot). Just follow this link to our land auction page for details. You will be glad you did . . .

BOFI increases tangible book value to $8.21

2007-05-02T06:55:00.000-07:00

Bank of Internet - (BOFI) - announced earnings today and they look nice. No surprises and the company is doing exactly as they say. Most importantly, tangible book value now sits at $8.21 a share. With the stock trading around $7.50, value investors should certainly like this one.

Disclosure: BOFI is our top holding for small cap stocks.

Bad day . . . Or good day?

2007-04-05T10:35:00.000-07:00

With some selling in ALRG.ob, SCND.ob and BOFI - I am buying (have bought or trying to buy) these three stocks from the list below. . .

New microcap stock list . . .

2007-01-31T04:45:00.000-08:00

After spending some time picking through balance sheets and income statements and reading SEC filings, the following microcap "penny" stocks have been added to the list. These issues would mostly be classified as value stocks. BOFI, for instance, trades at an actual discount to tangible book value (which was just over $8.00 on their most recent filing) - much of the book value of these stocks is mostly made up of cash or short term investments. Start your research by clicking the links and going to Yahoo! Finance (don't trust numbers you see posted -be sure to read SEC filings for complete company financials and information). The price/share listed are average prices that we have so far bought in at. We could buy more at lower or higher prices.

BOFI - $6.91 - $7.10 sh
ALRG - 80 cents/sh
SCND - $3.00 - 3.25 sh

All of these stocks trade at extremely low volumes. Use limit orders when purchasing microcap stocks. We have a fairly long term outlook for these stocks (at least 6 months to several years) but we will sell a portion of our shares if there is ever a quick run-up in price. If you are an impatient investor and want to see quick action then do not purchase these types of stocks. These are solid companies with very low profiles. They trade on Nasdaq or OTCBB. I will add more information about these stocks at a later date.

Back to Paul Saad & Associates Blog Main

Land Auction

2006-05-11T05:13:00.000-07:00

I just thought I would comment on our new land auction that we have set up at our web site. It is an extremely interesting idea (if I may say so, since it was my own) because we are actually completing a field survey and minor land division on a 36.5 acre parcel, thereby creating 5 parcels, so the winning bidder will have their own little land development to re-sell. We don't know what the best offer will be on this thing, but for instance, if it happens to sell for $40,000 the winning bidder will receive 5 parcels at an average cost of $8,000 each. We will also finance up to 50% of the cost if needed.

So check out the auction through the link above. . . and happy investing!

Itex is now our top pick

2006-05-09T19:38:00.000-07:00

Itex Corp. is now our number one pick! ITEX.ob (traded on the bulletin board) has been pursuing a solid business plan, through the vision of Steven White, CEO, including a major acquisition of BXI. Currently trading in the mid 50 cent range, we have been adding a few shares here and there to our portfolio's. We did very well trading ITEX from the 30 cent range to around $1.00 back last fall. With the stock trading at current levels, this may be an excellent entry point. We feel confident that this management team is taking this profitable little company to a higher level.

Disclaimer: We obviously own this stock. We are inherently biased.

Scientific loses distributor

2006-05-09T05:42:00.000-07:00

On Friday, May 5, SCND announced that Fisher Scientific (the huge lab catalog) would be pulling Scientific Industries' supplies from the printed catalog. Strangely, or more than likely, not strangely, on May 8 Fisher Scientific (FSH) came out with a press release saying they were being bought out by Thermo Electron Corp. On May 8 SCND tumbled on low volume - FSH soared close to $82/share then backed off.

Scientific Industries has been on our stock list for about 2 years now. It rose from $2 to about $4.40 in that time. However Fisher has provided over 20% of SCND's revenue. Its no suprise that Scientific fell to $3.30 ask/ $2.50 bid. If SCND can deal direct to those customers that purchased through Fisher in the past, then all is not lost. However, in the mean time I will stand silently to the side as I watch the management reaction to this problem. Perhaps this will be a buying opportunity if SCND hangs around the $2.00 range. I will wait and see.

A word about Tax Lien Investing . . .

2005-11-03T11:40:00.000-08:00

Through the years I have been able to profit and benefit by investing in Certificates of Purchase or Tax Lien Certs at county desks around Arizona. In many cases I purchased liens which were already delinquent 3 years and therefore ready to start the foreclosure process. Starting at the 2004 tax sale the scene started getting very competitive and somewhat frustrating. Interest rates were bid low (from the statutory limit of 16%) and decent pieces of land were getting harder to come by. The February 2005 auction was very discouraging. Mohave County began a new online auction process which greatly opened the door to additional bidders. Tax Liens on worthless strips of un-buildable land were being bid down to 0% interest. Other auctions were equally bad.
In our very hot real estate market and very low interest rate environment (not to mention the internet as an effective marketing and research medium) these sort of things are to be expected. However tax lien opportunity is not dead. There are still many counties with 1000's of old (+3year) liens on their books that are begging to be grabbed up and foreclosed on. In Coconino County the Grand Canyon Estates Subdivision is still ripe for the picking. I believe the Sunsites situation in Cochise is similar.
We pulled our Tax Lien Investor Handbook and other information from our web pages this year as we assumed we were only helping things get worse.
But if you are interested in Tax lien investing, my best advice currently is to visit some of the County sites and read all about the Treasurer's Information. There is a ton of material out there.

http://co.coconino.az.us/

Penny stock phone scam . . .

2004-09-17T19:16:00.000-07:00

If you get a call from Wendy on your voice mail or recorder . . . Beware. Wendy is looking to give a hot tip to a friend, and may have the wrong number, but her "stock broker boy friend" has a hot tip. The tip will be a penny stock being promoted by a new age boiler-room operation. I would name the stock and the operators that are currently doing the promotion but I value my life . . . to an extent. Also I noticed some nefarious web site operators are giving "microcap trading tips" which include requesting your stock certificates from your broker. They claim this is to prevent illegal borrowing of your shares and subsequent short selling. Don't buy it. The only reason they want you to do this is so it is harder for you to sell your shares.

High Yield in a junk market . . .

2004-08-28T16:15:00.000-07:00

Looking over the Solid 30 List, I noticed most of the microcaps we hand-picked have been holding up fairly well in this market. However, just to keep the new visitor informed, I suggest you follow this link for an overview of High-Yield Certificates of Purchase. Remember there are many alternatives to main-street investing.

~ stock picks

Penny Oil?

2004-07-31T11:40:00.000-07:00

At the beginning of last week when we updated our Solid 30 List, which currently only has 20 companies on it, Basic Earth Sciences was trading at just over 50 cents. Friday it traded as high at 74 cents; creeping up on practically no volume. With oil hitting over 42 bucks a barrel, it makes one wonder about penny oil plays. The President over at Basic Earth has been grinning from ear to ear in recent press releases. Here is an excerpt:

"We are extremely pleased to report that this marks the fifth year in a row that Basic has reported a profitable year; simply a tremendous turnaround from six years ago", commented Ray Singleton, president of Basic. "Furthermore, with our shift in strategy to include exploration drilling we believe that Basic has increased its upside exposure considerably and we believe, our higher share price reflects it. With strong cash flows from higher commodity prices reinvested in drilling, the Company has been able to fund an operational tempo not experienced for a number of years. We believe we are on the verge of a breakthrough to even higher revenues and profits and that this will translate into increased shareholder value."

Full Disclosure: Paul Saad and Associates currently holds no position in the company mentioned here.

Microcap Value?

2004-07-22T14:37:00.000-07:00

A favorite investing technique of many serious penny stock players is to consider the cash. Cash and cash equivalents is the amount of money a company has in bank accounts, savings bonds, certificates of deposit, and money market funds. It is usually difficult to place value on intangibles related to a company. With cash there is no guess work. Consider the facts: A company with plenty of cash needs to rely on no outside financing and shareholders need not worry about additional share dilution through private placements. A solid balance sheet means the company will be around at least as long as the cash lasts (do not invest in companies that are burning through their bank account). Research, new products, and marketing all need funding: Cash now means more revenues later. Keep in mind that a company with a tidy little sum in their bank account should have little or no debt. Steer clear of a stock with cash that was merely generated by a loan or other debt.

Here is a penny stock worth looking at:

AccuFacts Pre-Employment Screening Inc APES.OB
2180 State Road, 434 West Suite 4150Longwood, FL 32779
Phone: (407) 682-5051Fax: (407) 682-5051
Email: investorrelations@accufacts.com
Web Site: http://www.accufacts.com

Accufacts Pre-Employment Screening, Inc. is primarily engaged in researching and providing decision support information to its clients, generally Human Resources departments of corporations, through its wholly owned subsidiary, Maglio-Accufacts Pre-Employment Screening, Inc. These services typically include pre-employment background checks and screenings of new hire candidates and/or employees.

Cash: With a market cap of only $2.69 million and a cash position of around $1 Million, cash is close to 40% of market value. The current Bid price on the stock is 33 cents. Last trade at 40 cents. ***Alert - Accufacts is no longer a trading stock. According to this press release, APES has been bought for 75 cents a share.
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Visit us at: Paul-Saad.com

Disclosure: Paul Saad and Associates (or anyone associated with us) currently has no position in the companies mentioned here.

Penny Stocks: Trust No One

2004-07-07T12:16:00.000-07:00

Many investors (especially those just starting out) want to delve into the world of micro-cap stocks, mainly because of the tremendous potential for gain which stocks trading at or below $1 can deliver. Unfortunately many investors get most of their stock training by visiting web sites which specialize in nefarious practices under the guise of "expert opinion". The most important thing to understand about stock investing, and micro-cap investing in particular, is that you should trust no one. Do not trust company officials, investor relations representatives, web site operators, message board bloggers, stock gurus, grandma Miller, uncle John, or cousin Fred. Always find the facts for yourself. Never take anything for granted. Most web sites which profile micro-cap stocks are bought and paid for promoters. And just because they disclose this (which the SEC requires) does not make it better. However, the worst offenders are those not paid in cash but in free trading shares. Some of these operators will be dumping hundreds of thousands of shares (while you are buying). Kind of makes it hard for the price to rise, doesn't it? At bottom, there are several things for an investor in penny stocks to watch out for: high volume, strange financing deals, outrageous claims by the company.

High Volume: This is a primary red-flag for micro-cap stocks. A tiny company that trades more than a $100,000 in (dollar) volume on an average daily basis should be reason for alarm. Most tiny companies with high volume (dollar volume in particular) have a huge amount of shares outstanding and/or are being promoted (usually by dubious individuals).

Wicked Financing: Small companies have a hard time getting big cash injections. One way they get cash is by making complex deals with accredited investors. Some of these deals include warrants, preferred stock, and debentures, set up in ways that could cause a serious amount of dilution. Of course not all deals are bad for the company or for the other shareholders. It really depends on the particulars. Just read through the company filings and you will know when things just don't add up.

A New Breakthrough: When a micro-cap company comes out with a press release which makes a claim (such as a cure for cancer, etc.) be more than a bit skeptical. Outrageous claims are almost always fiction.

The best research is reading the corporate filings. Find them right at the SEC site.

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