Clearly Canadian - Is Now The Time To Take A Swing?
To tell the truth, it wasn’t the news from Clearly Canadian (OTCBB: CCBEF) today that prompted this blog entry…..that was just a coincidence. But, if the news comes up at the same time the chart hints at a move, so much the better.
The ‘news’ - It kind of struck me the other day how 15 years ago, Clearly Canadian’s novel water drinks were considered alternative beverages…..a term still used to describe them today. I think, however, it’s time for consumers to accept something - they aren’t really alternatives anymore. Healthy-choice drinks are now mainstream. While Coke and Pepsi haven’t been shoved into the corners of convenience and grocery stores just yet, today’s announcement tells me good ol’ H2O may be a bigger piece of the market than really anyone realizes.
The evidence? Canada’s largest grocer - Loblaw’s - now carries Clearly’s Natural Enhanced Water lines. The coup follows this product line’s introduction to 100 other supermarkets who have already added Natural Enhanced Water since April. This new water line is also starting to roll out in the United States - an even bigger consumer market.
Alternative? Not anymore it isn’t. For more on the news, click here.
In the meantime, here’s what I really wanted to show you……
We’ve all probably used the term ‘roller coaster’ to describe an up-and-down chart. However, I don’t think the description could be any more fitting than when applied to CCBEF’s current chart. We’ve seen nine ‘ups’ and eight ‘downs’ since hitting the November bottom…..not an easy thing to ride out.
However (eventually), this chop is going to cease, and we’re going to see a sustained trend. Could now be the time? Maybe.
The last three days have pushed CCBEF back above all of its moving average lines, after a not-so-bad pullback led to a low of $2.62. This is the second quick recovery we’ve seen in less than a month, and the volume behind the bounces has been better than the selling volume. And if you take a step back, you can generally see the ups have been better than the downs.
The counter-argument (and a decent one at that) is just that this stock, despite the slightly bullish bias, is still in a choppy mode. I can’t disagree.
Based on the short-term momentum, maybe now is a chance to take a swing on that long-term move. I guess it just depends on your trading tastes. Whether you jump in now or later though, I think the $3.00 level is a big one to watch….for better or worse.
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CCBEF barely trades - and a good deal of the trades have been the major owners selling. This is NOT a good stock to apply rote technical analysis to.
The reality appears to be that management is trying to manage by PRESS RELEASE rather than by RESULTS.
Simply read their own financials: Despite saying that they have “$7 million” of cash (as if that were a lot), they’ve committed to send millions of dollars out to several of their executives, who were the founders of two companies they acquired.
Moreover, all these distribution deals don’t translate in to SALES without marketing spend — and the company states that it may need to access the markets to get money for marketing!
These guys are coming to market to SELL EQUITY. There may well be a great story here — but they aren’t being honest:
Management and Bobby Genovese (60% owner) are busily SELLING millions of dollars of shares — and they know full well that they will be back in the market by mid-2008 at the latest.
Will the market be able to absorb $10 million of new equity? or $20 million? We don’t have any idea how much they’ll need.
When every single report and press release is rosily optimistic, its clear they’re pumping the stock to support their coming follow on offering.
Editor’s response: Hi Jay. Thanks for the well thought out opinions/observations. I don’t exactly agree with all of them (which is fine), but a lot of them are valid concerns. That’s why I’m sharing them with our entire community.
The one thing I take issue with…the synergistic growth in the pro-forma bottom lines is real. I understand what you’re saying about spending on marketing. I think we’ve all seen too many companies spend $2 to make $1. I don’t think that’s Clearly Canadian’s issue though. They are spending more than they make, but right now they’re in growth mode rather than profit mode. You have to spend money to make money. The question is, as I think we both agree, is how much do we have to spend between point A and point B, and is it worth it in the end?
I also do NOT think another round of multi-million dollar financing is on the near-term horizon. Like you, I just don’t think the market could tolerate that….and Clearly Canadian should know it. Plus, I’m not sure they’ll need it later. They’ve got $7 million in the bank, and tremendous (relatively) cash flows. (I think $7 million is a lot for this company.) Guess we’ll see.
Is it perfect? Far from it. The major insider selling is a killer. However, right now I tend to lean in favor of the company’s potential.
Any other thoughts or observations? Just click below.
Comment by Jay — 7/25/2007 @ 5:40 pm