My latest purchase was microcap stock GlobalScape, a file transfer software and managed services company.  Computer users know it best for its low end FTP products, CuteFTP and CuteFTP Pro.  But that’s just a small fraction of its business.  The revenues are mostly from the more advanced, server-based file transfer programs like EFT Server and EFT Server Enterprise.  Managed file transfer services are also growing.

OK, so the business is pretty boring.  For a tech company its difficult to find something more mundane than file transfers.  As a stock, however, GlobalScape has a lot to offer. I bought GSB over the last several days at $1.46 to $1.49.  Here are three reasons why:

1.  Fundamental turnaround.  After several periods of growth, GlobalScape posted both a sharp decrease in revenues and a GAAP loss in 2008.  The poor results hit shares hard, sending them down below $.60.  While the full year 2009 results are not out – and won’t be until the end of March – it looks like GlobalScape has returned to both profitability and revenue growth.  For the first third quarter of 2009, GlobalScape posted revenues of $4.296 million, or 14.83% more than last year, and earned over $575k.  There is always event risk going into an annual report, but GlobalScape faces easy comps. 

2.  Positive newsflow.  A series of positive press releases in the beginning of March, especially this one regarding new deployment of the high end EFT Server products at AMD, helped spike the stock intraday to $1.75.  Though it quickly retreated, I like to see the stock influenced positively by the newsflow.  

3.  Technical setup.  See that 15% jump, now fully retraced, in early March?  That spike and retreat formation has always served me well in microcaps.  It defines the risk — 10% down from here, and the pattern has failed.  But if it holds, its usually just a matter of time before the spike high is taken out and 52-week highs get challenged.  The longer-term picture is also bright.  After gaining over 300% in just 5 months, shares have had a healthy pullback and consolidation.  Anything can happen here but the path of least resistance appears to be facing north.

DISCLOSURE: Long GSB.

Both Tradeshow Marketing (TSHO.OB) and its paid mouthpiece, Skymark Research, have issued press releases pissing and moaning about Melissa Davis's article.   They call it factually inaccurate.  They threaten legal action.  But neither refutes the core facts that Davis sets forth.  I guess they can't.  Good thing for Davis that the truth is always a defense.

Tradeshow CEO Luniel de Beer whined:

"It has come to our attention that there may be an intentional attempt to falsely discredit our company, including our recent corporate developments and our overall business plan, through a systematic smear campaign. We have also been made aware of the potential that there may be organized stock shorting activities behind this smear campaign, which may account for the sudden erratic trading in our company's stock."

The paid pumpers at Skymark Research now hope to take their promotion underground.  They threaten their own subscribers with lawsuit for even sharing the promotional emails with the press: 

This email is intended for our private subscribers only and is not to be redistributed or disseminated by any means, unless otherwise given written approval by Skymark Research. 
Any parties that disregard this message will be pursued legally.

Nice try at a cover up, but I think they miss the mark. TSHO stock isn't down because of any negative press, or a "smear campaign."  Its down for the same reason all pump-and-dumps eventually come to an end: despite frantic attempts to inflate the stock, there will always be a limited supply of investors willing pay an extraordinary price for a mediocre company.  Nothing more, nothing less.

"Its different this time"

DISCLOSURE:  No position.

Pulled up these charts with the century club stock screen, my tweaks to the Marketclub smart scanner.

1. Interleukin Genetics (Amex:ILI)

I have no idea what is going on with Interleukin Genetics, a $37M market cap. developer of genetic tests.  I know its cash-strapped, but its chart seems to be perking up.

2.  Insignia Systems (Nasdaq:ISIG)

In-store display provider Insignia Systems (ISIG) delivered a strong quarter even though retailers were hurt.  It also has an antitrust claim against a larger competitor set for trial in April.  Are investors pricing in a favorable settlement?

3.  Orthologic Corp.  (Nasdaq:CAPS)

Beautiful chart.  Who cares about fundamentals when every period of congestion is resolved to the upside?

4.  MicroFinancial (Amex:MFI)

Microticket leasing company MicroFinancial is both profitable and paying dividends.  Looks like it could break out from about 9 months of congestion at any time.

5.  Pamrapo Bancorp  (Nasdaq:PBCI)

If you believe, as I do, that the community banks are in a “sorting out” process, the charts may give us the best clues about which banks will be winners and which will be losers.  While Pamrapo’s fundamentals seem horrible, the chart is decent.  Could the pig be through the python?

DISCLOSURE:  No positions.

UPDATE: I understand that Skymark has issued a non-denial denial of Ms. Davis's charges.  In fairness to Skymark I include their response below:

Today it has been brought to our attention that certain individual(s) have maliciously and fictitiously attacked Skymark Research; in addition they have attacked the Tradeshow Marketing Company Ltd. (TSHO) and other third-parties.

The individual(s) behind the article have not made any attempt to contact Skymark Research or its principals. We are in the process of starting an investigation into the reasoning behind the attacks. Our legal counsel is currently reviewing the matter and has suggested possible legal action against the involved parties.

Our position has not changed with Tradeshow Marketing Company Ltd. (TSHO).
This week Tradeshow Marketing Company Ltd. (TSHO) has launched its infomercial campaign. We anticipate continue success for Tradeshow Marketing Company Ltd. (TSHO): it is well-managed, maintains a tight share structure, and is delivering on its business plan.

————-

Melissa Davis's exposé of Tradeshow Marketing (Pink Sheets:TSHO) is a must-read, and not just because she quotes yours truly.  Melissa lays bare how promoters masterminded the inflation of this once-sleepy penny stock:

TSHO can thank SkyMark Research – a promotional firm operated by the apparent son of TSHO’s own founder – for reshaping its public image. For years, TSHO looked like a failed business with limited appeal to even speculative investors willing to place bets on high-risk penny stocks. After SkyMark launched favorable coverage of TSHO late last year, however, the company saw interest in its long-overlooked stock suddenly skyrocket.



Boosted by that tout, TSHO soared to a record high of $1.62 on massive volume earlier this month. Although TSHO has since fallen to $1.16 a share, the same stock fetched mere pennies – and, on some days, failed to trade at all – before SkyMark kicked off its aggressive publicity campaign.



TSHO is banking on infomercial sales of the “Ultimate Squeegee,” a window-cleaning tool that retails for $19.95, to reverse its poor track record. Although TSHO just began airing its first commercials this week, the company has already achieved a remarkable market value of $26 million – or 3,500 times last year’s sales – on paid forecasts of its future success.



Even before TSHO officially scheduled its TV infomercials, SkyMark had already predicted that the company’s stock could hit $30 a share based on future sales. Incredibly, the Microcap Speculator noted, SkyMark compared TSHO to SpongeTech (OTC: SPNG.PK) – a stock halted last year over questionable promotions – when making its bullish claims.

About Skymark, Davis writes:

Both John Kirk and Ben Kirk – identified by industry sources as brothers – have clear ties to SkyMark.



Indeed, John Kirk actually represented SkyMark at a special investor conference late last month. During his presentation, a conference program shows, he specifically highlighted “sizzle” – with its power to drive investors to act based on “pure emotion” – as a key ingredient in any successful penny stock campaign.



John Kirk failed to return a phone call from TheStreetSweeper on Tuesday afternoon.



Meanwhile, Ben Kirk promoted SkyMark’s presentation ahead of that investor conference. Listing himself as a writer for SkyMark, he personally touted TSHO itself as well.



SkyMark’s apparent ties to TSHO extend beyond the founding family, however. Wade Huettel, a partner at Carrillo Huettel in San Diego, has provided legal services for SkyMark and TSHO alike. He registered the trademark for SkyMark last October, Internet records show, and filed a legal opinion on behalf of TSHO – seeking to lift trade restrictions on the company’s stock – the very next month.



Since then, Carrillo Huettel has apparently expanded its reach in the penny stock arena. Although the law firm told TheStreetSweeper that it has never funded any stock promotions, website disclaimers specificallyname Carrillo Huettel as the financer behind recent publicity campaigns for two different microcap companies.

Full article: http://www.thestreetsweeper.org/undersurveillance.html?i=280

Well done, Melissa!  

DISCLOSURE:  No position, but only because I couldn't find shares to short.