| THE STEWART REPORT HOTLINE |
|
Friday, April 7, 2006 Punctuality aside, we must be doing something right. J Each of our three Stewart Stocks are absolutely on fire – and have been for the last few months. Even our red-headed stepchild, International Card Establishment, Inc. (NASDAQ/BB: ICRD – $0.33), has more than doubled since the last HotLine on St. Patrick’s Day (March 17) – and I didn’t even mention the stock in that particular report. In fact, you’d have to look all the way back to Feb. 23 for a Stewart Report reference to ICRD – and, even then, the missive was as vague as it was brief. And yet, there’s a strangely positive lesson in some of this… Sometimes, even the most nebulous wisdom – wisdom based on little more than a cursory view of an exceedingly ugly third-quarter financial statement and the gut-level feeling that management has the kind of street-fighter instinct needed to move things forward – can, in fact, be the spark for a remarkably good and accurate buy decision. As you might recall from that same Feb. 23 report, my buy decision was met with competition. The stock had been sitting there on the floor, bleeding to death, for months – but the second I gave the broker my go-ahead to buy just 50,000 shares, ICRD jumped from a dime to 14 cents before I even got a lousy $500 worth. That much I told you. What I didn’t say was this: I don’t know if it was my ego, or just unadulterated arrogance, but – for whatever reason – I was incensed to be so “right” and yet somehow get so little. In disgust, I walked home, stomped around the place, likely kicking some imaginary dog or some imaginary neighbor – or maybe I kicked an actual neighbor. After all, I’m not a very good loser. Anyway, I decided to get real serious about buying ICRD in real serious size. And I have. In the five or six weeks since then, I’ve upped my ICRD holdings to 150,000 shares-plus. I’ve also subscribed to another 100,000 shares that will have to be held for a minimum of a year under Rule 144. And, given the stock’s recent upsurge, my optimism appears to be paying off. Of course, the wisdom underlying that optimism is just as nebulous now as it was before. Here I am, still staring at that same Sept. 30 financial statement from Q-3 of 2005 – and that snapshot still ain’t pretty. At that time, the ICRD Boys had about $1 million to last them the quarter – a pretty paltry sum when you consider that, even after backing out the non-cash items, losses were running around $250,000 per month. With something like $660,000 (EBTIA), it didn’t take a TI-86 to calculate – math certain – that every one of the ICRD guys should have been out on the street about the same time that I started buying their shares. But, it’s now April, and the credentialed men behind this Company are still in there plugging – and I’m told, they’re now plugging without salary. I know these guys; they’re smart guys. Whatever it takes, they’ll refuse to lose – which is exactly why I think we’re all going to win. ICRD operates in a large and remarkable industry – the processing of credit and debit transactions. It operates on minuscule, but ever-expanding margins. It’s truly weird – so weird that you can mix your metaphors and get away with it. You could talk about little fish moving to bigger ponds, bigger sharks gobbling up littler fish, the notion of economic Darwinism – and dollars. It’s the dollars that ultimately count – and, as I’ve repeatedly promised you, those dollars will come with the “Whale Check” that the corporate buy-out finally brings. But, when the Q-4 and full-year 2005 numbers come out – circa April 15 – odds are good that the financials will still be ugly and the printed outlook will continue to frighten anyone schooled in GAAP. That’s why, if you choose to follow my lead and add to your ICRD positions, do so based on your belief in the Company’s management and their commitment to persevere – not the numbers. That’s what I’m betting on. And, while it’s certainly a long shot, the potential payoff more than justifies the risk. BUY more if you feel like speculating; HOLD what you’ve got if you need more proof prior to investing more cash. Both of our other stocks are doing a bit of consolidating this week – deservedly so given the runs they’ve had since the start of the year. A lack of any “new” news is contributing to the slowdown in price progress for Emergency Filtration Products, Inc. (NASDAQ/BB: EMFP – $1.68), but that’s alright. Orders for the Company’s nano-filters and masks continue to exceed production capacity, and will until EMFP finishes ramping up operations at its new facility in Nogales, Mexico. Every step the Company takes toward that goal brings with it an increase in revenue and, when production reaches full-speed on two shifts, the pent-up demand should spawn a whole new wave of orders – and still more revenue. That will rekindle the fire under the stock price and transform the current consolidation into a new breakout. Continue to HOLD … with both hands. FIRM. The mistake made all too often by all too many investors is that, sometimes, they forget to be greedy. Just because EMFP is up 130 percent while the DJIA is up only 4.66 percent is no reason to sell. If there’s a pause in price, it will be just that – a pause. We own a perfect technology, with a perfect future. Over time, EMFP can only reach higher. Amarillo Biosciences, Inc. (NASDAQ/BB: AMAR – $1.29) is the darling of the market. Volume out of Frankfurt and Berlin continues to amaze. And then there are all of the Johnny-come-lately’s who’ve just “uncovered” this stock over here. They will provide the support from which the next rally will launch. We will easily have a $2.00 to $3.00 stock before year-end. Bet on it. Maybe even $4.00. And, if I were you, I’d bet heavily. Obviously, the word “bet” implies speculation – and with every speculation, there is risk. Moreover, no equity instrument exists that features perfect straight-line movement. I don’t care if it’s Microsoft or Google, nothing goes straight up. Larry D. Spears – aka, The Rabbit; aka, our guy in Amarillo, Texas, who graphs out expert technical advice, even as today’s dry prairie fires threatened to singe his long ears and char his lovely home – says that, “Amarillo faces a correction at some point.” Personally, I don’t agree. But Larry says it could go as low as $1.10 before heading back up. If he’s right and I’m wrong – if it does at some point go to $1.10 – well, my goodness, BUY the ever-loving hell out of it! So much for the technical overview. Now here’s the Real News 101: On March 27, Amarillo Biosciences announced that the Ministry of Health of the Royal Government of Cambodia had approved the registration of licensee Global Kinetics, Inc., to use Amarillo’s natural human low-dose interferon alpha in the battle against avian influenza there, and in other Southeast Asian nations. Once Global Kinetics obtains a provisional import certificate, which should take another week or two, supplies of the drug – to be marketed under the name VELDONA – will begin flowing in from Japan. Actual numbers aren’t yet available, but there’s little doubt this deal will bring in a strong flow of added license fees and royalties for Amarillo. Importantly, too, it will likely be a door opener for other regions and other licensing agreements. That’s the way these things work. As a peripheral benefit, the Company – which sometimes gets overlooked publicity-wise because of either its size or its somewhat remote location in the Texas Panhandle – got a lot of media attention as a result of the Cambodian deal. Two of the local network television affiliates did major stories on AMAR at both 6 and 10 p.m. – with pre-show promos – and the Amarillo Globe News gave the story nice play the next morning. The CBS story was most impressive as the station showed shots of the Company’s Amarillo facility, put up several pictures of the oral interferon pills and packaging and aired a 45-second interview with Martin Cummins, AMAR’s Director of Clinical and Regulatory Affairs. In that interview, Martin detailed the impact of the deal, and the hopes of the Company and Cambodia regarding the role oral interferon could play in controlling the spread of the H5N1 influenza virus. Now that Dr. Joseph Cummins has returned from Europe, it’s my expectation that larger doors are opening. I have no proof. None, whatsoever. But it’s sort of like my earlier reference to ICRD – i.e., I’m not sure that proof is the required currency. In fact, having just written it, I realize now that proof, per sé, is the item that follows the process. Or not. We’ll just have to wait and see. However, present information on my end suggests that Dr. Cummins was accompanied by one or two directors – to appraise the meetings being held – so that was good. Also in attendance was a venture capitalist, who is said to have raised something like $3 billion during his IPO career. Please do not quote me on this, because this I cannot prove. However, at the risk of repeating myself, there is one thing I do know: If H5N1 learns to pick its own lock – i.e., if this horrible disease learns to travel itself from human to human – Amarillo Biosciences will be the biggest stock you ever owned. As always, thank you for listening, and for subscribing – and do something sinful with that extra hour of daylight.
Information contained herein has been obtained from sources believed to be reliable, but there is no guarantee as to completeness or accuracy. Any opinions expressed herein are statements of our judgment on this date and are subject to change without notice. J. David Stewart owns 150,000 common shares of International Card Establishment, Inc. David has also subscribed to purchase an additional 100,000 ICRD shares Restricted under Rule 144. J. David Stewart and affiliates of The Stewart Report may also have long or short positions in these and other securities discussed herein, including warrants and/or options, and may buy or sell same at their own discretion. This report contains or may contain forward-looking statements within the meaning of the "safe-harbor" provisions of the US Private Securities Litigation Reform Act of 1995. This report is intended for informational purposes only and does not have regard for or take into consideration the reader's investment objective, financial situation or suitability for this security. Consult with your financial advisor and perform your own due diligence. Copyright © The Stewart Report, 2006. |
