Aug 27, 2010 10:04 AM PDT
Since there may actually be some substance beyond the induced-hype, a closer look at each company's pros and cons is time well spent.
To the company's credit, the paid-investor-awareness effort for Cobra Oil & Gas Company (CGCA) was a very good one. Most pumps are usually a 'cut and paste' job sent via e-mail, with little to no thought (but a few misspelled words). This PR effort Cobra Oil & Gas, however, was top-notch and expensive, suggesting the company is taking its awareness efforts very seriously. That's a good thing. In a nutshell, Cobra Oil & Gas is sitting on what's figured to be a massive oil field. Yes, lots of small oil companies think that, yet they never pan out. Cobra's may be for real though, considering Pioneer Natural Resources, Exxon, and Questar have also jumped into partnerships with CGCA to get in on the action.
What's our take? The whole thing's plausible. The worry is that CGCA is still such a young and thinly-traded stock, the hype may move the stock well out of reach relative to the fiscal opportunity here. Then again, the company has indirectly shown their commitment to PR efforts by using the services of a well-known professional that gets results.
It's difficult to assign a valuation to CGCA, but as long as the stock doesn't completely blast off at the open, this one may be worth stepping into for a ride.
Whereas Cobra Oil & Gas was thinking quality promotions, SMF Energy Corporation (FUEL) went with the quantity route. This ticker popped up in nearly every e-mail alerts service we're subscribed to.
In simplest terms, SMF Energy Corporation manages fuel distribution in the southeastern United States. Some of the company's clients are pretty impressive names, such as Chevron-Texaco.
In terms of numbers, FUEL actually looks pretty good...a market cap of $10 million, free cash flow of $4 million, and SMF Energy recently reduced annual interest expenses by $1.5 million.
Sounds great, right? It did, until you factor in that SMF Energy just completed a $40 million recapitalization program; short-term debt was lowered by $9.5 million, and total debt was lowered by $4.4 million. All well and good, but that's the red flag... if the company could reduce debt by that much, how much debt did it have in the first place?
Nevertheless, FUEL looks like it could offer some upside. Shares were at $1.00 in early 2008, and have rallied from 18 cents to 40 cents since March. That leaves a lot of room for recovery, and the pump just may do it. It's not a long-term holding though... too much debt.
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This isn't our first mention of Turbine Truck Engines Inc. (TTEG). We looked at it a few days ago on the day the promotional effort came out. And, it worked then - TTEG moved from 24 cents to 61 cents. As we said then however, you don't want to chase a blistering move like that no matter how strong the opportunity is. Here we are two days later, and the concern is now justified. TTEG shares did indeed move a little higher the next day, but the high-volume doji from yesterday says just as many people were getting out (taking profits) as there were getting in. In other words, Turbine Truck Engines looks like it's topped.
Today's downside movement - albeit is modest - confirms that interest is waning.
The promoter? He/she was pounding the Turbine Truck Engines table even harder yesterday evening and this morning in the shadow of last Friday's monster move. The almost-desperate tone may have been all the reason needed to continue making exits on TTEG.
While it remains to be seen if Mass Hysteria Entertainment Company, Inc. (MHYS) has enough liquidity to successfully be pumped, it seems to be working today.... sort of. Shares are currently back up to 84 cents after a brief stint at 30 cents this morning. That's essentially on par with yesterday's close of 84 cents. Mass Hysteria Entertainment Company is a film company, and as their own PRs have stated, they know how to create a press frenzy. What remains to be seen, however, is if they know how to create a profit.
Granted, for a short-term trade, profits are a little irrelevant. On the other hand, the film company is treating traders like film-goers on the news front. Unfortunately, the two groups respond differently...traders are a lot less forgiving.
Mass Hysteria Entertainment is a new company, and MHYS is new stock. Both are unproven, and there seems to nothing but hype. This is one to be avoided in the short run as well as the long run. The fact that the pump has created no net progress today is a red flag to that effect.
If you'd like to know of any changes in our opinion of these four stocks (or if we officially recommend them as trades), be sure to sign up for the free newsletter today. It's delivered 2 to 3 times per week.
