A Monthly Review of GeoInvesting’s Most Notable Activity — GeoInvesting January 2016 Newsletter

Our Calls to Action

Money-making Moves that the GeoTeam Conveys to its Premium Members

• January 19, 2016 – Educational Development Corp (NASDAQ:EDUC) — The sharp market selloff in January created buying opportunities as even stocks with positive fundamental catalysts got caught up in the downdraft. One that we highlighted for our premium members on 1/19/16 is EDUC.  We initiated a position in EDUC and published our reasons for optimism 8/26/15 when it was trading at $4.94.  We followed up with a detailed analysis on 9/8/16.  The company’s business exceeded expectations and management moved to aggressively expand capacity last fall. The stock followed suit rising to over $17.50 on 12/9/15.  EDUC then suffered a decline that was exacerbated by the overall market’s selloff, closing at $9.30 on 1/14/16. The shares have since recovered to trade recently at around $11.00.  Our reasons for optimism are still intact and strongly supported by a recent article published on Seeking Alpha.
• January 10, 2016 — Natural Health Trends (NASDAQ:NHTC) – Established short position 1/11/16.  NHTC operates a MLM business in the U.S. but derives most of its revenue from China.  The company has been trying without success for almost 10 years to obtain a Direct Selling License in China.  In the meantime, it has used an e-commerce model to move product into China from Hong Kong.  It now appears that Chinese regulators have NHTC in their crosshairs.  See our most recent research here, here.

Information Arbitrage News

News Before the “Rest of the World” Finds Out

• January 31, 2016 — BG Staffing Inc (AMEX:BGSF) — We recently completed several pro-forma financial models taking into account the company’s last earnings report and the full impact of the company’s recent acquisition.  It appears after consummating this acquisition, 2016 analyst EPS estimates of $1.05 could be far too low. Our model calls for $260M in revenue and EPS of $1.17.
• January 11, 2016 — UTStarcom Holdings Corp (NMS:UTSI) — We continue to follow UTSI due to the involvement of activist investor, Mr. Guoping Gu, and the high purchase price premium ($6.00) the investment holding company he leads paid for 5 million shares of the company’s stock in a private transaction. The company plans to purchase an additional 6.74 million shares from the same source during the first half of 2016.  UTSI acknowledged the transaction in a press release regarding the appointment of a new CEO and Mr. Gu’s appointment to the Board of Directors.  See our recent postings regarding UTSI here. We are starting to wonder whether or not UTSI is another China game, with the continual amendments and extensions of this key agreement. While we don’t yet doubt that the agreement will be executed, we’re certainly on heightened alert and concerned with the continued procrastination.

Top Performing Picks

Picks that GeoInvesting is Particularly Proud Of

• January 28, 2016 – Meritage Hospitality Group (OOTC:MHGU) — MHGU reached an all time high of $11.80 on 1/28/16, nearly 50% over its $7.90 market price when we initiated research and a moderate sized position on 6/1/15.  We coded MHGU a GeoBargain on 6/17/15 on the heels of strong fiscal Q1 results, robust 2015 outlook and a 100% increase in its special dividend.  We published additional research on 7/15/15, and added to our position.  We added to our position again on 9/28/16, ahead of the company’s Q3 release and maintained our position following the release of strong Q3 results.  The company announced a special dividend on 11/11/15 and increased guidance.
• January 19, 2016 — Super Micro Computer Inc. (NMS:SMCI) — Another stock that caught our attention in January’s broad selloff was SMCI. We alerted premium members that SMCI had been marked down excessively from a 52-week high of $42.00 to $24.43 on 1/19/16.  The shares have since rallied to reach an intraday high of $31.60 before closing at $29.78 on 1/29/16.   SMCI reported preliminary fiscal Q2 2016 results on 1/12/16 that exceeded analyst estimates for both revenue and non-GAAP earning.  Actual results reported on 1/28/16 were on the high end of guidance and the shares surged by nearly $3.00 on 1/29/16. We have moved on from SMCI to other opportunities.

GeoBargain Updates

Additions & Subtractions of GeoInvesting’s Best Picks

• January 20, 26 and 82, 2015 — Repro Med (OOTC:REPR) — A 13G/A filed 1/19/16 shows that Joseph Manko of Horton Capital Management acquired nearly 550,000 shares in the open market at prices of $0.46 to $0.55. The same investor filed Form 4s on January 21, 25, and 29, disclosing additional open market purchases in smaller lots of approximately 45,000, 35,000 and 37,000 shares bringing his position to nearly  6 million shares or an 11.9% stake.  The investor’s persistent buying in smaller lots indicates he is quietly building his position by taking whatever the market will give him in this lightly traded stock without bringing attention to his open market purchases and forcing the share price higher.
• January 20 and 26, 2016 — GSE Systems Inc. (AMEX:GVP) – On 1/20/16, we noticed a block of roughly 55,000 bought at $2.00. On 1/25/16, a 13D/A was filed after hours showing Angeleno Investors increased its stake in GVP to 6.5% from 5.5% disclosed in original 13D on 12/17/15.  See our research notes regarding the filing here and our reasons for tracking and recent research notes supporting our bullish stance here and here.

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