AgFeed Industries Inc. (fka FEEDQ)

[corpchef]

Just an FYI.........
BI Research Biweekly Update Line 2/13/12- (NVIV.ob, CMFO, FEED.pk, CRR, KOG)

InVivo is up 14% at this writing to $2.70, marching steadily higher as the day progresses. I started writing the update below before this advance today became so pronounced. I don’t see any news so possibly an analysts or newsletter recommendation, or just a big buyer(s) who is enthused by this excellent story and taking a position. [As I wrap this up I see the shares then sold off to close up 4% at $2.45, geez- http://finance.yahoo.com/q/bc?s=NVIV.OB&t=1d&l=on&z=l&q=b&c= ] There was an article on Seeking Alpha on Friday, see below but not sure how much this accounts for. I would note that the shares took off more earnestly after lunch today http://finance.yahoo.com/q/bc?s=NVIV.OB&t=5d&l=on&z=l&q=l&c= but have been steadily ramping over the past 5 days. However, this and another piece is what I originally set out to discuss so here-

An initiation of coverage of InVivo with an Outperform by Zacks back in late July recently came to my attention and is still a very interesting read in that it attempts to value InVivo. Though 7 months old, I highly recommend reading this: http://www.zacks.com/stock/news/57851/Initiating+Coverage+of+InVivo+Therapeutics?print=print

The author estimates, with a number of reasonable assumptions, that the shares are worth $4.14 at present value (discounted at a harsh/very conservative 50% per annum to present value) on a go it alone basis but would be worth more like $7 to an acquirer who would have more muscle/resources to ramp sales higher and faster. Now while the shares have advanced 26% in the past five days [17% by the close, including 4% today http://finance.yahoo.com/q/bc?s=NVIV.OB&t=5d&l=on&z=l&q=b&c= ], I don’t think it is due to this old article, of course, nor the 2/10/12 article on Seeking Alpha also about why InVivo is an attractive takeover target, because much of this move occurred before this article came out. It’s hard to say, but definitely should get your antenna twitching.

In early February China Marine (CMFO $1.57) suddenly vaulted form $1.36 to as high at $1.75 on no news (+28%). However, a few days later it was reported via a 13-G filing that Prescott Group Capital Management’s Small Cap Funds had become a greater than 5% owner, reporting 1,685,000 shares owned or a 5.6% position. http://www.sec.gov/Archives/edgar/data/1099977/000119312512042974/d295805dsc13g.htm That’s all I know but this is encouraging. Hopefully this is well timed and the drag on revenue and EPS growth, resulting from the sag in demand for its salty seafood snacks caused by the nuclear contamination of the ocean in Japan (even though the currents go away from China), is coming to an end. The shares have since digested some of that gain but are back up 6% today to $1.57 currently.

Ag Feed voluntarily delisted from NASDAQ because it could not refile its financials in time, but the good news is that it was then able to begin trading on the pink sheets, where it now trades under the symbol FEED.pk at $.35, not too far from where it was when trading was suspended. The Company has acknowledged that Chinese management in the legacy Chinese hog farm division engaged in some accounting improprieties and that this was done without recent U.S.-based management’s knowledge. If they were cooking the books over there, they were sure doing a lousy job, reporting losses nonetheless. I think there is a worthwhile company in here somewhere, especially now that grain prices have backed off of their earlier high levels and hog prices have remained relatively high. The US operations are solid. The Company’s push into western style hog farming is now producing hogs for market at last, so that’s good. Under new management the legacy farms are… well… I don’t know… that remains to be seen once the smoke clears. But presumably there is a profitable nucleus there. They have already disposed of 7 or 8 losers in that regard. As to the Animal Nutrition business, before feed prices went up so much and hog prices went down so much that many of its customers went belly up and defaulted on what they owed the Company, it was sufficiently profitable in its own right that the Company was even preparing to take it public. So there appears to be is promise there as well, when commodities are even close to reasonable prices. However, since the early days of following AgFeed, commodity prices have often enough not cooperated, prompting me to once again urge the company to initiate some Hormel-style (like in the U.S.) cost plus contracts. Anyway, while you can technically bail now if you want, for the above reasons I have not given up on this one by any means.

I should note, however, that AF Sellco (Ag Feed Selling Co??) which is the entity that sold M2P2 to Agfeed, is saying their $9.7 million note to the Company (secured by the equity in M2P2), taken as partial payment, has experienced a default event because the financials were no good. However, while this is logical, this was not actually listed in the documents as one of the 9 events that could trigger a default. And in fact the lender is not at this time looking for repayment of the note, maybe just trying to keep its options open for now. Discussions are ongoing. Never a dull moment.

All too often lately the Wall Street process just turns my stomach. Most recently Carbo Ceramics’ (CRR $88.64) stock price is taking a beating because natural gas prices dipped so low that scores of rigs pulled out of gas plays like the Marcelus and Hainesville and headed over to liquids rich or outright oil plays. This has caused some delays in orders of things like proppants while the drilling emphasis moves and E&P (energy and production) companies refocus on less … gassy … areas. Of course, this necessitates a reconfiguration of distribution arrangements for those providing service to E&P companies. So no big surprise this is affecting Carbo Ceramics. In any business, stuff happens. Investors with a longer term horizon deal with it and wait it out, short term investors and traders bail out. This is not a sea change, Kodak moment. Use of proppants should only increase over the longer term. Investors always overdo things to the downside (and the upside) and at a certain