Back in October we mentioned China Recycling Energy Corporation (CREG) as a stock with high potential to go on a major run. While that trade did not work out, we have had a chance to enter in at a cheaper price for a second go at a run well in excess of 100%. The fundamentals remain excellent and now there is substantial fund buying into the company in expectation of a run. We are up to 775 followers despite not giving out a lot of alerts, a fact that we think is indicative of a successful, diligent and prudent stock picking history. If you like our picks you can follow our blog by clicking the follow button on the top of the left hand panel. You can also follow us on Twitter @StockTradePicks. We have over 3,500 followers on Twitter as well.
We recommend that investors review CREG's SEC filings over the past couple of months as there are interesting deals happening with the company. But the tremendous upside potential for CREG can be expressed in much more clear terms than this. Funds specializing in small caps have been buying up large amounts of shares, likely preparing for a run, as disclosed in the following 13G filings:
CVI Investments disclosed a position of 661,694 shares, or 7.0% on October 29.
Intracoastal Capital disclosed a position of 661,694 shares, or 7.0% on October 29.
Anson Funds Management disclosed a position of 661,694 shares, or 6.4% on November 7.
Fife Trading disclosed a position of 830,189 shares, or 9.9% on January 28.
In total, that is over 2.8 million shares purchased by these funds. Why did they do this? Perhaps they are expecting a major deal to take place. But even if they aren't, CREG has more than enough fundamental value to justify a stock price 10 times higher than it is today. Let's review finviz data for CREG:
The key metrics to look at are:
Book value per share of $22.87
Cash per share of $7.78
P/B of 0.04
P/C of 0.12
P/FCF of 1.89
Shares outstanding 8.17 million
Float 5.56 million
Short float 2.02%
While the share count might not be properly accounting for the private placement in October thus overstating some of the ratio amounts, these values clearly justify a stock price at least in the $5.00 range. At $0.92, CREG is trading several times lower than its cash balance. This stock would need to increase over 5x just to come in line with the cash it has on its balance sheet and about 20x just to come in line with its book value.
Finviz doesn't recognize any revenue for CREG, but that is actually not true. It has a sales lease business model in which it records all of its income as interest income. The clue here is the P/FCF metric. While Finviz doesn't record any "revenues", it recognizes that it is generating free cash flow, and that its is trading at just 2 times its FCF.
It's becoming quite clear why the firms bought in so heavily. Prepare for a large run on CREG, with the narrative being that it is highly fundamentally undervalued.
Regional Health Properties, Inc. (RHE) is another pick that we think can do really well. It has had a few volume surges and price spikes since its reverse split at the start of 2019 and we think it is indicative of an imminent deal, similar to what has happened on LM Funding America, Inc. (LMFA) or MICT, Inc. (MICT).
We are not predictors of the future, but we do digging on SEC filings to come to certain conclusions. In November, our article titled "Investigative Report: LMFA - There Will Be a Buyout, RTO or Corporate Transaction" and follow up pieces disclosed how we thought LMFA would close a deal with a profitable company. That piece of news came out on January 17, resulting in the stock spiking to over $3 before pulling back. Given that we recommended the stock at around $1.50, readers had an opportunity to take a substantial gain. More recently, we recommended MICT at the start of the year when it was trading at $0.66 on the expectations of a $1.65 tender offer on 20% of the total outstanding shares. While the deadline has been passed and we still have had no definitive word on the status of the deal, at least the stock is trading at $0.92, so it has also been a profitable trade so far with potential for more upside if and when the BNN tender offer commences.
We give these two examples as precursors to the RHE write up because we think RHE is in a similar scenario and want to point out to readers that we have demonstrated recent success in catching these types of plays.
RHE is real estate investment company that invests primarily in real estate purposed for long-term care and senior living. It has gotten into some trouble with its overleveraged balance sheet, but one can assume that there are problems just by looking at a long term chart. RHE has a $1.9 million market cap with 1.7 million shares outstanding and 1.5 million float so we are not looking for the next Berkshire Hathaway here. RHE is well positioned both from a technical point of view as well as fundamental to go on a large spike if there is any sort of positive news, which we think is imminent.
RHE announced a forbearance agreement with a major creditor on January 7th. This eased the terms and remedies the creditor had on RHE in exchange for the following conditions:
"In addition, the A&R New Forbearance Agreement amends the Loan Agreement to require the Company to continue to retain the financial advisor as the Company’s chief restructuring officer (“CRO”) and to hire a nationally recognized investment banker reasonably acceptable to Pinecone no later than January 7, 2019 to advise management and the Company’s board of directors (the “Board”) on potential asset sale and related transactions and perform valuation debt capacity analyses.
The Company reserves the right to continue to attempt to refinance the loans in full, subject to the following conditions: (i) no later than January 14, 2019, the Company will enter into and deliver to Pinecone a term sheet approved by the chief executive officer of the Company and the CRO evidencing a third party lender’s desire to pursue the provision of a refinancing; and (ii) no later than February 15, 2019, the Company will consummate the refinancing. By January 23, 2019, the Company is to provide Pinecone a written plan for a process of soliciting bids for one or more asset sale or related transactions (the “Bid Solicitation”). By February 28, 2019, the Company and the CRO (whose responsibilities will by then be expanded to include all aspects of transaction planning, including the Bid Solicitation) must: (i) complete the Bid Solicitation; and (ii) negotiate in good faith and enter into with Pinecone an agreement that is acceptable to Pinecone, which shall require, among other things, that the Company engage in a process that culminates in (a) the consummation of one or more asset sale or related transactions and (b) the payment in full in cash of all obligations under the Loan Agreement with the proceeds thereof. The A&R New Forbearance Agreement also grants Pinecone the right to appoint a non-voting observer to attend all meetings of the Board and each committee thereof, subject to certain exceptions described in the A&R New Forbearance Agreement."
So RHE is required to actively seek out asset purchase deals or perhaps something even more substantial. Remember that this is a real estate company so it should not be too hard to find willing buyers. Unlike other long-term assets which can be subject to depreciation, properties rise in value with time so there is a good chance that the book value on these properties listed on the balance sheet may actually be understating their market value. The most important thing is the timing:
This agreement is structured in a way so that the creditor tries to get their money back as soon as possible. But based on how highly leveraged RHE's balance sheet is and how low the market cap is, the right deal could send RHE flying. RHE has $101.3 million in assets against $93.6 million in liabilities. RHE has $1.9 million market cap so it is trading well below its book value. One or more deals that take place could have substantial upside to shareholders while also paying off debt.
Disclosure: We are long CREG, RHE
2018 was a wild roller-coaster for the stock market, but a bad time in general for microcap stocks. Still, we made good money on some microcap stocks if you look at our picks over the course of 2018, both longs and shorts. As we head out of a volatile 2018 and into 2019, we have to figure out what's next. TradeMiner identifies seasonal trends and market cycles while the Penny Stock Prophet and Microcap Millionaires find the next big small cap plays in a multitude of industries.
Here are some other good stock market resources. This includes technical analysis and day trading, dividend stock investing, gold and commodities, sector rotation, options trading and microcap trading strategies:
The dividend stock report from dividendstocksonline.com
We recommend that investors review CREG's SEC filings over the past couple of months as there are interesting deals happening with the company. But the tremendous upside potential for CREG can be expressed in much more clear terms than this. Funds specializing in small caps have been buying up large amounts of shares, likely preparing for a run, as disclosed in the following 13G filings:
CVI Investments disclosed a position of 661,694 shares, or 7.0% on October 29.
Intracoastal Capital disclosed a position of 661,694 shares, or 7.0% on October 29.
Anson Funds Management disclosed a position of 661,694 shares, or 6.4% on November 7.
Fife Trading disclosed a position of 830,189 shares, or 9.9% on January 28.
In total, that is over 2.8 million shares purchased by these funds. Why did they do this? Perhaps they are expecting a major deal to take place. But even if they aren't, CREG has more than enough fundamental value to justify a stock price 10 times higher than it is today. Let's review finviz data for CREG:
The key metrics to look at are:
Book value per share of $22.87
Cash per share of $7.78
P/B of 0.04
P/C of 0.12
P/FCF of 1.89
Shares outstanding 8.17 million
Float 5.56 million
Short float 2.02%
While the share count might not be properly accounting for the private placement in October thus overstating some of the ratio amounts, these values clearly justify a stock price at least in the $5.00 range. At $0.92, CREG is trading several times lower than its cash balance. This stock would need to increase over 5x just to come in line with the cash it has on its balance sheet and about 20x just to come in line with its book value.
Finviz doesn't recognize any revenue for CREG, but that is actually not true. It has a sales lease business model in which it records all of its income as interest income. The clue here is the P/FCF metric. While Finviz doesn't record any "revenues", it recognizes that it is generating free cash flow, and that its is trading at just 2 times its FCF.
It's becoming quite clear why the firms bought in so heavily. Prepare for a large run on CREG, with the narrative being that it is highly fundamentally undervalued.
Regional Health Properties, Inc. (RHE) is another pick that we think can do really well. It has had a few volume surges and price spikes since its reverse split at the start of 2019 and we think it is indicative of an imminent deal, similar to what has happened on LM Funding America, Inc. (LMFA) or MICT, Inc. (MICT).
We are not predictors of the future, but we do digging on SEC filings to come to certain conclusions. In November, our article titled "Investigative Report: LMFA - There Will Be a Buyout, RTO or Corporate Transaction" and follow up pieces disclosed how we thought LMFA would close a deal with a profitable company. That piece of news came out on January 17, resulting in the stock spiking to over $3 before pulling back. Given that we recommended the stock at around $1.50, readers had an opportunity to take a substantial gain. More recently, we recommended MICT at the start of the year when it was trading at $0.66 on the expectations of a $1.65 tender offer on 20% of the total outstanding shares. While the deadline has been passed and we still have had no definitive word on the status of the deal, at least the stock is trading at $0.92, so it has also been a profitable trade so far with potential for more upside if and when the BNN tender offer commences.
We give these two examples as precursors to the RHE write up because we think RHE is in a similar scenario and want to point out to readers that we have demonstrated recent success in catching these types of plays.
RHE is real estate investment company that invests primarily in real estate purposed for long-term care and senior living. It has gotten into some trouble with its overleveraged balance sheet, but one can assume that there are problems just by looking at a long term chart. RHE has a $1.9 million market cap with 1.7 million shares outstanding and 1.5 million float so we are not looking for the next Berkshire Hathaway here. RHE is well positioned both from a technical point of view as well as fundamental to go on a large spike if there is any sort of positive news, which we think is imminent.
RHE announced a forbearance agreement with a major creditor on January 7th. This eased the terms and remedies the creditor had on RHE in exchange for the following conditions:
"In addition, the A&R New Forbearance Agreement amends the Loan Agreement to require the Company to continue to retain the financial advisor as the Company’s chief restructuring officer (“CRO”) and to hire a nationally recognized investment banker reasonably acceptable to Pinecone no later than January 7, 2019 to advise management and the Company’s board of directors (the “Board”) on potential asset sale and related transactions and perform valuation debt capacity analyses.
The Company reserves the right to continue to attempt to refinance the loans in full, subject to the following conditions: (i) no later than January 14, 2019, the Company will enter into and deliver to Pinecone a term sheet approved by the chief executive officer of the Company and the CRO evidencing a third party lender’s desire to pursue the provision of a refinancing; and (ii) no later than February 15, 2019, the Company will consummate the refinancing. By January 23, 2019, the Company is to provide Pinecone a written plan for a process of soliciting bids for one or more asset sale or related transactions (the “Bid Solicitation”). By February 28, 2019, the Company and the CRO (whose responsibilities will by then be expanded to include all aspects of transaction planning, including the Bid Solicitation) must: (i) complete the Bid Solicitation; and (ii) negotiate in good faith and enter into with Pinecone an agreement that is acceptable to Pinecone, which shall require, among other things, that the Company engage in a process that culminates in (a) the consummation of one or more asset sale or related transactions and (b) the payment in full in cash of all obligations under the Loan Agreement with the proceeds thereof. The A&R New Forbearance Agreement also grants Pinecone the right to appoint a non-voting observer to attend all meetings of the Board and each committee thereof, subject to certain exceptions described in the A&R New Forbearance Agreement."
- On January 7, the company was required to hire an investment banker to assist with any asset sale.
- By January 14, RHE was to deliver a term sheet to the creditor that proves third party interest in refinancing.
- By January 23, RHE was to have a written plan ready for a process of soliciting bids for one or more asset sale or related transactions.
- By February 28, the bid solicitation is to be completed with one or more deals on the table.
This agreement is structured in a way so that the creditor tries to get their money back as soon as possible. But based on how highly leveraged RHE's balance sheet is and how low the market cap is, the right deal could send RHE flying. RHE has $101.3 million in assets against $93.6 million in liabilities. RHE has $1.9 million market cap so it is trading well below its book value. One or more deals that take place could have substantial upside to shareholders while also paying off debt.
Disclosure: We are long CREG, RHE
2018 was a wild roller-coaster for the stock market, but a bad time in general for microcap stocks. Still, we made good money on some microcap stocks if you look at our picks over the course of 2018, both longs and shorts. As we head out of a volatile 2018 and into 2019, we have to figure out what's next. TradeMiner identifies seasonal trends and market cycles while the Penny Stock Prophet and Microcap Millionaires find the next big small cap plays in a multitude of industries.
Here are some other good stock market resources. This includes technical analysis and day trading, dividend stock investing, gold and commodities, sector rotation, options trading and microcap trading strategies:
The dividend stock report from dividendstocksonline.com
The dividend stock report from Dividend Stocks Rock
Goldmasterinvesting.com Ocean Of Gold Report for the top 15 gold mining companies
Trader Review
The Trader's Academy Club
The Wealth Builder's Club from beatthemarketanalyzer.com
MyBB: A Forum For Investors and Traders
Spartan Trader Forex Academy Live Daily Trading Room
And try the Z Code System if you're looking for other ways to make money systematically outside of the stock market.
Goldmasterinvesting.com Ocean Of Gold Report for the top 15 gold mining companies
Trader Review
The Trader's Academy Club
The Wealth Builder's Club from beatthemarketanalyzer.com
MyBB: A Forum For Investors and Traders
Spartan Trader Forex Academy Live Daily Trading Room
And try the Z Code System if you're looking for other ways to make money systematically outside of the stock market.
Bitcoin has gone from a concept worth pennies a few years ago to worth thousands of dollars. It may appear to some who are late to the game that the opportunity to get rich is gone. However, there are still plenty of ways to make some money trading in bitcoin and other cryptocurrency. Here are some links to valuable reports and strategies:
The Cryptocurrency Codex from the Cryptocurrency Institute
Secrets To Unlimited Free Bitcoin
The Crypto-Currency Evolution eBook
Bitcoin Complete Guide for Dummies
The Bitcoin Miracle Guide
The Bitcoin Cheat Code Book
The Crpytocurrency Course
Bitcoin Investing Live
The Cryptocurrency Codex from the Cryptocurrency Institute
Secrets To Unlimited Free Bitcoin
The Crypto-Currency Evolution eBook
Bitcoin Complete Guide for Dummies
The Bitcoin Miracle Guide
The Bitcoin Cheat Code Book
The Crpytocurrency Course
Bitcoin Investing Live
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