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ARCHIVE - 3 Unknown Penny Stocks
Ready To Surge
By Brian T Mikes Editor, Dynamic Wealth
Report |
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Unknown Stock #1: A Tiny
Pharmaceutical Company Treating A Widespread Problem
Does your stomach hurt occasionally? If not,
your neighbors’ probably are. Possibly a co-worker or two as well.
It’s not exactly the conversation you have with casual
acquaintances… or anyone for that matter.
Despite its somewhat embarrassing nature, it is believed more
than 20% of all Americans suffer from recurring stomach
problems. If you take a visit to any drugstore, you’ll see the
section on stomach medications is the largest in the entire store!
You’ll see medications for IBS, constipation, gas, bloating,
heartburn, diarrhea, and on and on.
The doctors call these ‘gastrointestinal problems’ and often have a
tough time diagnosing and treating these problems effectively. Many
chronic sufferers are now told they have IBS- a ‘catch all’ for a
number of different stomach ailments.
As you can see, this is a huge market.
“IBS statistics are sobering: An estimated 35 million
Americans have the disease. It ranks second only to the common
cold as a cause of lost work time and accounts for approximately
3 million physician visits in the United States every year.”
– Today’s Dietician, February, 2003
Further, did you know in 2002 almost 400,000 people were
hospitalized for constipation? Physician visits for this problem
average 2.5 million per year. Can you imagine the number that never
see a doctor because of embarrassment?
So what can we learn from these statistics?
Simply, millions of people need drugs to help treat these
stomach problems. Current medications and treatments are just
not that effective for the long-term recovery of most people with
chronic stomach ‘issues’.
As such, there is a gigantic need for medicines that can help
alleviate and cure these disorders.
One company we found in this area, Sucampo Pharmaceuticals
(symbol:SCMP), develops and markets drugs to treat all of
these problems and more.
Sucampo’s key product is AMITIZA. Doctor’s use it to treat
constipation. The drug is also being used in Phase III clinical
trials for treatment of IBS. The drug must work wonders-
prescriptions for AMITIZA are increasing nearly every quarter.
And if AMITIZA is approved for the treatment of IBS, look out,
revenues will skyrocket!
Now, constipation and IBS aren’t the only focus of Sucampo. They're
also working on drugs to treat other ailments such as ulcers,
pulmonary disease, and even Alzheimer’s. This kind of diversity is
good for a small pharmaceutical company. You never know where the
next big drug breakthrough will come from.
Sucampo’s numbers are great already. They’ve got solid revenue
growth, and are spending aggressively on Research & Development. In
fact R&D spending has recently been increasing by over $3 million a
quarter because of ongoing clinical trials. These R&D dollars are
an investment that will hopefully pay big dividends down the road.
Year over year, the company’s growing revenues by over 12%. Not bad
in a tough economic environment. They’re also sitting on
over $100 million in cash, not bad for a ‘small’
pharmaceutical company..
Overall, we believe the company is well positioned for long-term
growth. With one hot selling product and several more in
development, it won’t be long before we see some serious growth. And
with this serious growth, we expect to see some serious appreciation
in the stock.
Unknown Stock #2: A Specialized
Hospital Play on the Aging of American
"National health-care spending, which hit nearly $1.8 trillion
in 2004, will increase as a percentage of GDP by 22 percent over
the next 10 years. For that the health-care industry can thank
the boomers, who are just beginning to enter the time of their
lives when drug, hospital and other expenditures rise
dramatically." –CNN Money
It is estimated that between 1946 and 1964, 79.6 million people were
born in the United States. These ‘Baby Boomers’ were conceived after
World War II and represent the largest segment of the American
population.
The effect this group of people is having on the economy is
profound. Now between the ages of 45 and 63, the ‘Baby Boomers’ are
getting to the age where medical and healthcare issues begin to take
center stage. More and more of the boomers will want and/or need
specialized surgeries.
This older group of people will need medical procedures that help
them lose weight, replace joints, fix bad backs, deal with strokes,
and reduce pain. And with the way the current healthcare system is
set-up, many of them will look for better and easier solutions than
what is ‘usually’ available.
This is where specialized-surgery hospitals like Dynacq
Healthcare (symbol:DYII) come in. Dynacq is a developer and
operator of acute-care hospitals in Texas and Louisiana.
These cutting-edge hospitals handle specialized surgeries in the
orthopedic, bariatric, and neuro-spine disciplines. They’re
typically part-owned by the surgeons who work there- giving them a
vested interest in the success of the hospital as a whole.
We think you’ll start to see more and more of these ‘specialized’
hospitals cropping up all over the United States and the entire
world (Dynacq has a joint venture in the works to build a hospital
in Shanghai, China). Besides the immense benefits for patients,
these types of companies are extremely profitable.
Dynacq has a profit margin of nearly 24% and enjoys quarterly
revenue growth of over 12%. Virtually all of the financial metrics
used to evaluate stocks are positive for DYII. They have a low
price-to-earnings ratio, a low price-to-sales ratio, good free cash
flow, and superior return on equity. They also have $32 million in
cash.
Once Wall Street recognizes the impressive financial condition and
performance of this company, I think you’ll see DYII shares really
take off. There aren’t a lot of penny stocks that offer tremendous
value, but I think Dynacq definitely is one of them.
Unknown Stock #3: The Stock Wall
Street Abandoned -But Is About To Rediscover
We all know the story. In the late 90s the internet craze hot the
stock markets. Any company with a '.com' at the end of its name saw
its stock skyrocket on a daily basis. You had companies that just
formed having billion-dollar valuations. ‘Internet’ millionaires
were being created at an unprecedented rate.
But everyone forgot one minor thing.
None of these companies were making money nor did they having any
prospect of doing so.
Once this fundamental law of capitalism was remembered, the shares
of these internet companies came crashing down to Earth. Most went
out of business, never to be heard from again.
But what about the ones that survived? What about the companies
that actually offered a useful product? Was the proverbial baby
thrown out with the bathwater?
For EasyLink Services (symbol:ESIC) we think this
may be the case.
EasyLink Services is a company that facilitates the electronic
exchange of documents between companies, departments, and
customers. In a nutshell, they simplify the delivery of purchase
orders, shipping notices, business reports, and faxes.
Going into how they do this is beyond the scope of this report.
Just know that EasyLink deals with both supply chain messaging and
on-demand messaging for hundreds of different companies in sectors
as diverse as apparel, consumer goods, financial, grocery, media,
pharmaceuticals, publishing, retail, and transportation.
Unlike many of its internet boom predecessors, ESIC actually makes
money (a novel concept-I know). Their revenue is approaching $100
million a year. Their gross margin is an unbelievable 67.9%.
In addition, their quarterly revenue growth is well over 300% and
their earnings growth is over 1,000%. This performance has allowed
EasyLink to amass $27 million in cash (and garner both a low PE and
price-to-sales number).
So yes, this company has a real business plan and is very, very
profitable.
Some of you may be wondering why the stock is priced so low? After
all, it was trading at over $100 per share during the dot com days.
That’s a good question. A stock that is growing this fast and
making money should be valued much higher. We think this will
indeed be the case as EasyLink continues to grow. At some point,
investors and institutions will start snapping up shares of this
promising company.
Make sure you get in before that happens!
How To Turn $300 Into $1.3
Million With Penny Stocks
Before concluding our report we wanted to do the math on how it
would be possible to turn $300 into $1.3 million. Now before we run
the numbers, you need to know that getting a return this high would
be difficult, but not impossible. Most investors would be happy to
get just a fraction of these gains.
| |
Start
Amount |
Return |
Gain |
Ending
Amount |
| Stock #1 |
$300 |
852% |
$2,556 |
$2,856 |
| Stock #2 |
$2,856 |
3,428% |
$97,903 |
$100,759 |
| Stock #3 |
$100,759 |
1,256% |
$1,265,541 |
$1,366,300 |
So there you have it. To turn $300 into $1.3 million, you’d need 3
consecutive returns of 852%, 3,428% and 1,256%. Difficult to do,
yes. Impossible, no.
One thing is certain however. If you’re going to attempt gains like
this, you’ll need to do it with penny stocks. It’s very difficult
to register gains of 1,000% to 4,000% with blue-chip stocks like
General Electric and Microsoft. You’ve got to find penny stocks
that turn into the next General Electric and Microsoft.
And you do that by finding high-quality companies with real products
and real potential. They’re out there- it’s just a matter of
finding them!
Sincerely,
Brian T Mikes, Dynamic Wealth Report
P.S. Our own penny stock expert Robert Morris has
just put together a report on a little-known SEC regulation that can
send penny stock prices through the roof. It may be the
quickest and
easiest way to turn $300 into
$1.3 million that we've ever seen. |
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