GEO Investing

As we continue to build our list of Tier One Pinks, we have come the realization that some of those that have been added over the last year have been some of the best performing stocks on our radar.  Maybe these next four can follow suit.

Supercom Ltd Ordinary Shares (OOTC:SPCBF) ($0.87) On 7/1/13, when the stock was trading at $0.52, we told our premium subscribers that we would begin tracking SPCBF, an Israeli based company that describes itself as a leading global provider of traditional and digital identity solutions. Our curiosity was piqued by positive commentary from its fourth quarter 2012 press release.  Well, we have become more intrigued with the SPCBF story due to an announcement by the company that it has signed a definitive agreement with On Track Innovations Ltd (NASDAQ:OTIV) to acquire OTI’s SmartID division.  If consummated the company’s revenues would nearly triple to $30 million.

Furthermore, the acquisition is expected to be highly accretive to SuperCom’s financial results.  The transaction is valued at over $20 million, but the company has not disclosed how it intends to fund it.  The stock is up 67% from our first mention.

Conrad Industries (OOTC:CNRD) ($30.80) – Please see CNRD’s impressive second quarter 2013 financial results.  The company has now reported five straight quarters of impressive EPS growth and two consecutive quarters of significant top line growth.  At $181 million, the second quarter backlog is up 218% year-over-year and 45% sequentially.  We think the stock can go much higher over the coming months and believe it is a prime takeover candidate.

Costar Technologies (OOTC:CSTI) ($4.10) — CSTI develops, designs and distributes a range of security solution products including surveillance cameras, lenses, digital video recorders and high-speed domes.

  • The company’s revenues grew from $5.7 million in 2002 to over $27 million in 2008.

  • However, for the financial years 2010 through 2012 revenues gradually declined to around $20 million.

CSTI has a history of losing money but in its first two quarters of 2013 the company has experienced top line growth and strong profitability. CSTI just completed a restructuring process that began in 2008. Here is a quote from a press release:

“We are pleased to announce that the Company is debt free for the first time in its history. This completes our turnaround that began in 2008. The new additions to our sales team and the new network product offerings continue to provide year-over-year improvement. Our product mix, coupled with strategic product purchases, resulted in improving gross profit margins. While we remain cautiously optimistic due to the slow economic recovery, we are encouraged by our results and are dedicated to continue to deliver on our commitment of strong earnings and double digit sales growth”.

Meritage Hospitality Group Inc. New (NBB:MHGU) ($4.00) – We are adding MHGU to our Tier 1 Pink Sheet Screen.  The company describes itself as one of the nation’s premier franchise operators, currently operating 113 quick-service and casual dining restaurants.  The company appears to be growing rapidly through acquisitions.  For example, in 2013 the company acquired 20 Wendy’s restaurants.

  • Sales have grown from $77.5 million in 2010 to $98.9 million in 2012;

  • EPS ranged between $0.40 and $0.50 through this same timeframe.

  • The company is on track to report 2013 revenues in excess of $120 million and is solidly profitable on both the EPS and EBITDA front.

  • For the first half of 2013, MHGU reported EPS of around $0.40.

We will perform valuation analysis in the coming days.

To see these and more Tier One Pinks that the GeoTeam tracks, please go here.

Disclosure: Looking to establish positions in all above-mentioned stocks.


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