14 Tuition Breaking Stocks

You might have been like my friends and family in the past 6-months -- afraid to check the portfolio, afraid to accidentally see the latest Dow Jones beatdown, with an upset stomach from a depreciating portfolio of Large Caps that your broker said were a great buy two years ago. You might be in a state of denial. You might be sitting 100% cash with two years of fallout supplies packed into your basement. I challenge you to open your eyes and go hunt with me for bargains.

What sets Super Markets apart from Stock Markets is pretty straight forward. At the Super Market, a 50%-off sale draws people from across the country to line up at 4am and stampede the bargains. At the Stock Market, a 50%-off sale is like a bomb threat in an airport. There are those that make gobs of money in times when the stock market is 50%-off. The trick is not looking around for the 50%-off items, because those really aren’t the bargains anymore. There are stocks that are 95%-off in a 50%-off sale. I call this the clearance aisle. These goods are selling for less than their cost of production (book value). The trick here is differentiating ones that are high quality from those of lesser quality. I set my parameters as fairly straight forward. The companies I buy have to be profitable and growing.

Then, the trick is continuously learning how companies can and may scam their investors. I look for indications of accounting fraud, and try to eliminate those companies from my lists. Did you know that companies can boast huge numbers year-after-year and not be making money?

Now, I’m not saying that all 14 of these companies are going to be up 300% one year from today. What I am saying is that by being certain that I am uncertain, I can diversify my college tuition nest egg into 14 of the cheapest discounted cash flow companies out of the 5,000 I’ve sorted through. I can also do my best to minimize my risk by knowing how to identify accounting fraud and not paying more than book value for a stock. By doing this, I am certain that I will candidly beat the market over time. Don’t believe me? That’s fine. All I can do for you is give you the opportunity. The choice is yours to take it, or leave it.

Below I’ve compiled a table of all the plays I am considering or possibly in. Mind you that I have been betting my college tuition on my advice. Some of the numbers have been adjusted by me in order to reflect my feelings on the stock itself as well as potential dilutions.

	Earnings	Price	P/E	P/B	Growth	Bust Target	Boom Target	Exchange Listed?	Bottom?
CNO	$ 0.85	$ 1.35	1.59	0.15	16%	$6.80	$13.60	1	1.0
GHII	$ 0.13	$ 0.08	0.62	0.16	27%	$1.04	$3.51	0	0.7
NWD	$ 0.20	$ 0.17	0.85	0.13	13%	$1.60	$2.60	1	0.3
CAEI	$ 0.50	$ 1.00	2.00	1.06	25%	$4.00	$12.50	1	0.5
CHCG	$ 0.51	$ 0.92	1.80	0.55	20%	$4.08	$10.20	0	0.8
CYXN	$ 0.19	$ 0.27	1.42	0.68	25%	$1.52	$4.75	0	0.9
GNPH	$ 2.16	$ 4.95	2.29	0.54	12%	$17.28	$25.92	0	0.5
OPAI	$ 0.20	$ 0.14	0.70	0.18	30%	$1.60	$6.00	0	0.5
LTUS	$ 0.24	$ 0.30	1.25	0.32	26%	$1.92	$6.24	0	0.6
CKGT	$ 0.14	$ 0.30	2.14	0.23	11%	$1.12	$1.54	0	0.6
AKRK	$ 0.09	$ 0.19	2.11	0.35	20%	$0.72	$1.80	0	0.6
FAS	$ 4.00	$ 7.20	1.80	0.3	15%	$32.00	$60.00	1	0.7
CNEH	$ 0.70	$ 1.49	2.13	0.61	20%	$5.60	$14.00	0.5	0.4
XING	$ 0.65	$ 1.32	2	0.17	10%	$7.60	$9.50	0	0.5

I also figure that I’ll outline my sentiment. I’m bullish financials that are down 85%+ in the last 3 years that are likely to survive this downturn. I’m neutral-bullish commodity prices. I’m neutral-bearish the US dollar; not because of this narrative fallacy of monetizing the US deficit, but because of the US-Treasury bubble bursting and the reversal of the “run to the dollar for safety” trend. I’m bullish emerging markets.

Disclaimer: Glen and his investors currently own CNO, GHII, NWD CAEI, CHCG, CYXN, GNPH.OB, OPAI LTUS, FAS, CNEH.OB. Glen and his investors intend to purchase the other stocks mentioned in this article.

Comments

[ETFtrader:]

Some interesting ideas here, but I personally am wary of buy-and-hold, and will not do so at this time.

Apr 06 10:25 AM

[TaurusTrader:]

Interesting perspective .... Nice approach, Thanks.
TaurusTrader
www.taurustrader..word...

Apr 06 12:38 PM

[wobatus:]

Don't see how you can have come to much of a conclusion about these stocks being safe. Most of them are penny stocks and on the pink sheets. FAS isn't a stock at all, but a triple bull etf on financials. The rest are dangerous alone, and though safer as you have diversified among them, this isn't the way I'd play bottom feeding. Also, an interesting use of the word "candidly". But I like to look at dcf and book, and, applied to non-penny stocks, makes some sense to me.

Apr 06 02:42 PM

[Danny Furman:]

good article... glen, any insight on cnoa or chrn? both have numbers in line with nwd, although chrn has funky (seasonal?) books. other chinese lottery tickets i own and like: cyxn, ltus, ors (missed out on $1 spike), ghii. in the usa: wwon, ezen, awne, avna, apdn.

also took glenns good advice on cno; that is my large cap, stable company.

Apr 08 03:12 PM

[granger:]

Interest, thanks for the ideas. I will throw out my best idea for the long term, TECH, especially anywhere below 50 (might not see that again)

Apr 09 06:30 AM

[Just singin...:]

Glen,

Great stuff, as usual --- thanks.

Mffais show that Morgan Stanley bought 636,500 shares.

With this type of news, do you think CNO will likely run closer to $6.80 or $13.60?

Apr 11 07:02 PM

[Glen Bradford:]

hoooon,

funky does not mean seasonal. a seasonal company is still a normal company. good news! it gives those that understand how to deseasonalize company returns an edge. good news --- i am one of those people with an edge. Further good news, I'm going through a bunch of stocks this weekend and i'm looking through yours. Here's what i think in short.

cnoa looks good --- just watch out for uncollectible recievables, in Q3 2008, pretty much all sales were in A/R. i'm watching this one and probably going to pick up some shares. i am not really worried about the a/r because they were mostly accumulated because well hey! Q3 is seasonal. this was a record breaking year. wooohoo! plus, the CEO said that Q4 is set to be another blockbuster as well. go figure. the stocks i mentioned in this article, unlike ors and cnoa, have good A/R and cash from operations. but CNOA looks great. ORS could easily be an issue. MCI in 1995 had a big issue that i think is possible at ORS essentially propagating escallations of committment throughout small backboneless subsidiaries. the issue is the CEO only bought 500K Shares when over the last year, insiders sold out 20,000K shares. see what i'm talking about?

chrn --- doesnt have any revenues.. yuck. not interested in gambling. they just stopped getting revenues. Brilliant!

check up on CYXN's outstanding shares and convertibles, my estimates were half of what they should have been, since i believe therea are twice as many shares outstanding

dont like wwon, ezen, awne, avna, apdn.

Also, Granger: I don't like TECH. Too expensive.

found this:
seekingalpha.com/artic...
meanwhile, I came across FEED, also looks like it should triple up to $7 at this point. just my opinion. but again, not as great a deal as cnoa.



On Apr 08 03:12 PM hooooon wrote:

> good article... glen, any insight on cnoa or chrn? both have numbers
> in line with nwd, although chrn has funky (seasonal?) books. other
> chinese lottery tickets i own and like: cyxn, ltus, ors (missed out
> on $1 spike), ghii. in the usa: wwon, ezen, awne, avna, apdn.
>
> also took glenns good advice on cno; that is my large cap, stable
> company.

Apr 11 09:23 PM

[Glen Bradford:]

blues,

My estimates of CNO's EPS are now $0.85

I'd be all sold out of this position at a P/E of 15. That's $12.75

Further, in the current economic climate, I'd be all sold out at $8 --- taking advantage of other opportunities.

I'm going to start selling around $6.

Hope this helps,

Glen


On Apr 11 07:02 PM Just singing the blues wrote:

> Glen,
>
> Great stuff, as usual --- thanks.
>
> Mffais show that Morgan Stanley bought 636,500 shares.
>
> With this type of news, do you think CNO will likely run closer to
> $6.80 or $13.60?

Apr 11 09:25 PM

[Danny Furman:]

Thanks for the response, Glen. A certain Mr. Sykes turned me on to FEED and it's definitely on the watch list. Dumped wwon friday but like the chances of EZEN being bought out by HP, and really think AVNA will turn a profit this year (q4 08 revenue > all other 08+07+06 revenue, plus new government and private contracts this year). Back to China: Bought CHME friday, though I wish I'd found it 2 weeks ago. CBPO also looks filthy cheap. Thanks also for the CNO targets

Apr 12 12:54 PM

[Danny Furman:]

friday=thursday

Apr 12 12:55 PM

[goodandplenty:]

GNPH is the class of this group. Raised $30 m. from U.S. Institutional Investors a year ago @ 8/share, has $8/share in cash, projecting $4/share earnings in '09, healthy growth, recently appointed new independent board members, just acquired 22 additional new drugs in recent acquisition to drive additional growth, recently won arbitration against prior shareholders from reverse merger, using KPMG as accounting firm to upgrade SOX reporting in preparation for upgrade to senior stock exchange etc. etc etc.

GNPH - my largest position. I also own, FEED, HRBN, LTUS, GFRE, EGMI, PUDC, GFRE, CNEH, ADL, ANSW,YGYB, ALIF, MAIL, LIVE, SGZH, ONEV

CEO Crocker Coulson of CCG Investor Relations, the largest and MOST REPUTABLE investor relations agency in China for U.S.-listed Chinese equities, representing 60 U.S. listed Chinese companies, said in a March19, 2009 interview, that while Chinese companies continue generating profits and are growing at a rapid rate, many are trading at extremely low earnings multiples. In fact, some companies are trading at multiples less than net cash, "presenting historic opportunities to invest in the future of corporate China ."As an example, Coulson cited Genesis Pharmaceuticals, a fast growing, highly profitable pharmaceutical company from Shandong Province , which had approximately $83 million in cash as of December 31, 2008 and generated $26 million in cash flow from operations in the past six months but has a total market cap of only $44 million .

Apr 12 04:28 PM

[Karl Glazier:]

On GHII, the 10K sounds scary (same as LTUS): They own only a variable interest entity.

"In addition, the terms of these contracts expire in August 2016 and there are no assurances these agreements will be renewed."
If not, they have nothing.

I think that is the reason for the low price on these two, especially since there have been quite a few scams among the small cap Chinese stocks. Like ETLT.ob just lately. Also CXTI.
When they can't prop up the share price with news releases any more, they just stop publishing reports and disappear with the shareholder's money.

On CNOA: They spent $16.5 mill. to buy a California luxury estate which produced wine in the amount of $450k (sales, not profits) last year. Makes no economic sense.
They say they make a lot of profit buying and selling grains. That makes no sense, that must be a business with razor thin margins.
I smell a potential scam here.

GNPH has far more shares outstanding fully diluted than people assume due to their $40 mill. convertible bond.
On the balance sheet, the company shows only about $4 mill. liability, saying the other $36 mill. will be converted. But they are silent regarding what dilution this will cause.
Not an open and honest management.

What concerns me about these small cap Chinese companies is there is no intention to ever pay a dividend (even if growth is low like NWD) or buy back stock.
If the shareholders never get any money back that way, the stocks have no value, theoretically speaking.
I think that is the reason for their low p/e.

What I like best is an American stock that paid, until recently, $3 per share in annual dividends and trades for $2.5: ACAS.
The have violated some bank covenants, but that just means they have to pay 2% more interest on half their debt.
NAV = $15 per share.
It is a play on an economic recovery, and a normalization of credit markets.
Even if the recovery comes only in 2010.

Apr 13 03:05 AM

[Stockpickin...:]

yea, we own GHII and ORS and have been waiting for a entry into CAEI. Soon perhaps.
stockpickingpros.com

Jun 23 03:29 PM