Update – Taking Stock Before The Holidays

It’s been an amazing, record-shattering ride for U.S. equity markets in 2013. With Thanksgiving right around the corner, and Christmas less than one month later, it’s a good time to look back at several of our picks, evaluate how they did, and weigh in on how these plays may perform during the rest of the year and beyond.

Sharps Compliance (SMED)

Sharps Compliance Corp. (SMED), which I brought to your attention in late October, is in the business of collecting and disposing of medical waste, and a range of other dangerous potential contaminants.  Based on the company’s latest earnings report, indicating that business was booming, along with several other factors, I felt that there was some solid potential for an imminent short-term breakout in SMED’s share price. At the time, SMED was trading at about $3.80 per share.

In fact, that’s exactly what happened, with SMED shares running up to a new 52-week top of $5.24 per share at the beginning of this week. Profit taking finally kicked in earnest Wednesday, despite the continuing bull market run. As a result, it appears that it’s time to close out this position, which yielded optimal gains of about 40%. Congratulations if you saddled up early with some SMED and rode this one to some nice breakout profits.

Quint Media (QUNI)

Quint Media, Inc., operates as a digital and social media company in the United States. It focuses on connecting people with content relating to their passions, interests, and each other. The company’s Quint Media network is engineered with a digital ecosystem, matching content that is customized to user-interests. It primarily focuses on brands relating to lifestyle, entertainment, and fashion.

I first wrote about QUNI approximately two weeks ago, when shares were ping-ponging in a narrow trading range of $0.30 – $0.36. The following week they broke out to a new all-time top of $0.45 before recently pulling back into the low $0.30 range once again.  Relative to many other penny plays, this issue appears to have a solid chance at success, with a good management team, a well-designed web-site, and membership in a sector—social media—that should remain hot for years to come. I still rate this issue a “Speculative Buy” at current levels, and would regularly monitor the company for any significant business developments that may act as a share-price catalyst.

Highpower International (HPJ)
In early October I highlighted the shares of Highpower International, Inc. (HPJ), a Hong-Kong based company engaged in the production and sale of rechargeable nickel-metal hydride (Ni-MH) batteries, lithium batteries and battery systems. The company also recycles scrap battery materials through outsourcing and resells the recycled materials to some of its customers.  At the time I profiled HPJ shares, at $1.70 per share, statistics indicating sharp growth in the worldwide demand for lithium batteries had helped propel the stock to new 52-week highs.

Given that factor, and both from an earnings standpoint, and given the share’s technical trading history of establishing a lengthy base from which to springboard north, I felt that HPJ was a Strong Buy—both as a breakout candidate, and a long-term hold. As it turns out, in less than a month, HPJ had touched a new 52-week top of $3.45—a nice 100% gain—before pulling back to their current $2.85 level. Hopefully you took profits along the way. And despite their rapid ascent, I still rate HPJ shares a “Buy” at current levels.

The Alkaline Water Co. (WTER)

This past August, during the dog days of summer, I brought your attention to the shares of the over-the-counter issue The Alkaline Water Co. (WTER). As I wrote at the time, there are few products on the market that are as basic, or in more constant demand than water. The Alkaline Water Company Inc. was just beginning to launch a nation-wide roll-out of its own unique approach to bottled water—a pH-balanced bottled alkaline drinking water enhanced with trace minerals and electrolytes. The issue caught my eye, as trading volume was picking up, with WTER’s share price moving in a $0.50 – $0.60 channel.

Despite nothing but good, and very constant news from the company, selling took hold and drove WTER shares down to what appears to be a fairly solid base at around $0.30. With overall market bullishness, shares have bounced back to $0.40 in recent dealings. Like Quint Media, The Alkaline Water Co. appears to have a viable product that is gradually penetrating a growing number of markets across the U.S.  Until we see actual revenue figures from the company, however, I’m rating these shares a “Hold” at their current $0.40 cent level. That said, WTER is an especially liquid trader for an over-the counter issue, so the stock definitely merits watching in the weeks ahead.

Keep your eyes peeled, and as always, trade OTC stocks with caution!

Have a great Thanksgiving.

Warren Gates
Senior Analyst
Normandy Research

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