Latam Logistic Properties, S.A. (LPA) moved from $10 to $500 in a handful of trading days last week. Unfortunately for the people who bought high on the back end of the pump, it will be hard pressed for them to make money. You have to buy these plays before they run and before they have large volume. LPA's trading days have looked like this:
What do we notice here? The volume was non-existent on the way up. The best days top out at 200,000 of volume. Now that it's sinking, it's dropping on higher volume, though still low compared to most other stocks. That's just the nature of how uniquely illiquid it is. Another one to look at is Ault Disruptive Technologies Corporation (ADRT):
ADRT has less than 100,000 shares in its float, and it sure trades like it. 330,000 volume on May 31 caused it to spike from $15 to as high as $76. HKD, the notorious stock that ran to over $2,000, has similar kind of low volume as LPA and ADRT. In addition to being low float, you need a stock that's low volume. Not attacked by trading bots that flip and/or short the stock several times a day so that the stock trades 10x its float and never moves anywhere. A good example of that is Actelis Networks, Inc. (ASNS), which supposedly has only 3 million shares in its float. On June 5th, it opened up nearly 700% to $3.71 from $0.47 on the previous day. But it was range bound most of the day on a ridiculous 90 million volume, nearly 30x its float. It then tanked 47% on June 6th, and an additional 20% on June 7th. What happened to this stock? Announcement of dilution from warrant exercises and the issuance of more warrants.
Some stocks can overcome dilution, but most end up tanking. Even GME which was hyped up beyond all hype thanks to Roaring Kitty created the next round of bagholders as the stock cratered nearly 40% on Friday after announcing another 75 million shares to be issued. If a stock like GME can't overcome dilution, what chance does a stock like ASNS have?
For a stock to have a chance to have an LPA-like move, it needs four ingredients:
1. Low float.
2. Clean share structure (no warrants, preferred shares or convertibles).
3. Low volume.
4. No threat of dilution.
We have identified three stocks - one SPAC and two recent IPOs that have these ingredients. They are:
1. Hudson Acquisition I Corp. (HUDA)
2. Fly-E Group, Inc. (FLYE)
3. Tungray Technologies Inc. (TRSG)
Finding the next LPA runner is a like finding a needle in a haystack. You can't just pick one stock and hope you get lucky. You have to spread that money around a bit. With these three picks, any one of them could go to $100 or more in an LPA-like spike. But even if they don't, all three offer compelling potential for some kind of gains at their current prices over the next couple of weeks. So the risk-reward trade-off is very favorable for those willing to buy in.
Hudson Acquisition I Corp. (HUDA)
The first flaw when picking a SPAC is that would clearly not have ingredient #2. SPACs have warrants or rights on them, and HUDA is no different. But here is the kicker with this SPAC that makes it unique. The business combination with Aiways Europe isn't expected to close until December 31st. Everyone who is reading this probably knows how it goes with these SPACs. Either they fail to find a business combination and they get redeemed, or they find a combination and shortly after de-SPAC, they tank (potentially with a few days of a pump immediately after, depending on how hot the story is).
A low float SPAC is like a daily lottery ticket with an expiry around the de-SPAC date. HUDA's de-SPAC is six months away, a ridiculous amount of time of this lottery ticket. Some SPACs have taken longer to de-SPAC, for instance Donald Trump's Truth Social from DWAC into DJT. But that stock was relatively high float (and still went to $100). HUDA has a 103,000 float according to @LF94Trades, the original source of our interest in HUDA. This is made possible as the vast majority of the shares have been redeemed. But the business combination won't occur until months later. That leaves lots of time to play with the stock while it remains very low float. Any derivatives on the SPAC won't be eligible for exercise until after the business consummation is complete, so they hold no relevance to the situation.
HUDA rose 52% to $16.70 on Friday. The volume of 630,000 was a little higher than we would like to see it, but still well within the range of a reasonably low float stock. Not something crazy high like ASNS. The major thing was after its initial pump to nearly $19, it dropped under $13 but then recovered strongly in the last hour. There is also enough hype around the stock to support the level of volume it showed on Friday while still having ADRT or LPA-like potential.
Fly-E Group, Inc. (FLYE)
FLYE is an IPO from last week that started trading on Thursday. After a hot debut, it dropped 16% to close at $4.00 on much lower volume of 570,000 on Friday. It sold 2.25 million shares of its IPO at $4.00. Of its remaining 22 million shares, at least 16.8 million of them are subject to a 180 day lockup period, making the float - at most - 7.5 million. It's trading is reasonable with 3 million shares on the first day, down to less than 600,000 on Friday. If volume continues to dissipate, that only increases its LPA potential.
While the float isn't as small as the other two on this list, what makes FLYE special is its fundamental value. At $4.00, the stock is just under a $100 million market cap. FLYE is an EV company that sells e-bikes, scooters and motorcycles. What makes it special is that it is actually profitable in an industry that never shows any profits from these small cap companies. Think about the utter disasters of past SPACs like Bird Global (BRDSQ) or Helbiz/Micromobility.com (MCOM). Now compare their financial performance, to this of FLYE (link to filing):
FLYE is profitable and growing. Revenue should be in the $30-$35 million range for the year, and up about 45% for the first three fiscal quarters. Gross margins also grew 45%. Operating income is flat due to higher operating expenses which is to be expected for a growing company and net income slightly down due to higher taxes.
Given its gross trajectory, profitability and ability to generate profits in a hot industry (or at least it was hot until companies like MCOM and BRDS came in and destroyed investor sentiment), it should easily justify a revenue multiple of 5x-10x. That would put FLYE in the $7.00 to $13.00 per share range.
FLYE's profitability also means one other thing. It is very unlikely to incur any additional dilution beyond the IPO and associated overallotment option. The fact that it dropped so much on its second day of trading is not a big deal. LPA did the same thing on April 1st, dropping nearly 50% from $16.00 to $8.75 on its second day of trading.
Tungray Technologies Inc. (TRSG)
TRSG may be the best of the three. We identified it as a potential LPA- like runner before, and its trading on Friday remained strong on very light volume. It ran 44% on June 6th on only 276,000 in volume. LPA began trading on March 28. TRSG began trading on April 19, three weeks after LPA. Now let's take a look at TRSG's price history:
Notice the volume is thinly traded like LPA, with most days trading well less than 100,000 shares. TRSG has only a 2.5 million float, which compares to LPA's 2.8 million float. Both of these stocks actually trade like stocks with 3 million floats, not like ASNS. Just like FLYE, TRSG is profitable so its very unlikely to dilute because it doesn't need to in order to keep the lights on. The other key is its chart:
A simple screen grab from Yahoo Finance will suffice because the chart is so easy to tell what's going on that we don't need a lot of in-depth technical indicators. When the stock debuted, it started high then sold off. TRSG has since recovered most of what it has lost. Now compare that to the price action on LPA. We have to use price history to illustrate the similarities because LPA's chart is screwed up from the massive run. LPA closed its first day of trading at $16, then dropped to around $7 for nearly two months. On May 16th it broke $10 for the first time since, then hit $14 on May 24th. The next day it doubled in price, and the rest is history. TRSG is the one you want to buy low before the next IPO supercharged run. Buy low, not high.
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Disclosure: We are long HUDA, FLYE, TRSG
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