Replies to post #114654 on Savvy Trades and Investments

[nelson1234]

PSIX not saying this will allay your concerns, but I believe the financing 'renewals' have been continuously for one year at a time. At this point, I believe they only have a small amount of loans/line of credit outstanding at the China bank 'Standard Chartered', and a large loan/line of credit from Weichai, although lower year over year.

[mankind]

Because even if you knew with 100% accuracy what the next 12mo earnings were going to be, you'd still go through decades where there was zero correlation to stock prices.

[stevhoff]

Wade the period when the stock went down, no one was paying attention to the company. Look at trading volume for that period, averaged arund 6,000 shares/day. Now a few people like myself did notice the turnaround and I was quietly accumulating in q4 2003 and q1 2004.I think a few people in the Microcapclub were doing the same, as MikeDDKing stated he had been buying.https://microcapclub.com/about. I might add there is very little float in this stock by the way, check the last 2 proxy statements. When a low float stock suddenly gets attention, its almost like a short squeeze and crazy things happen to the stock price. Now the last reported quarter I believe was when a brokerage firm (Craig Hallum) decided to get involved, they were looking for confirmation of what management was stating in previous quarters. The company were coming through on a consistent basis with profits and cash flow while managing expansion. See their website under the news section, you will see they have recently set up a new plant in Beloit WI to produce enclosures which doubles their capacity for that product line, this product line I believe is generating most of their profits. So now volume picked up and with it price. Stuff like this gets noticed and then you have a write up on seeking alpha, generating more interest. Then the action tends to feed on itself from there. That's about the time I started checking aroung social media sites like this one and stock twits. There was a lot of growth in followers on stock twits and a few more on the antiquated yahoo stock comments section where I was talking to an empty theater.
Now as for cash flow, they have been focused on paying down debt. They had a new CEO, Dino Zykis, come in and I think that was his mission. So he reduces inventories, speeds up collections and with a reduction in sales, A/R naturally follows that trend if everything is kosher with sales. And if you have smart managers, you can also reduce inventories if you have a good handle on sales forecasts. So reduce cash tied up in inventory and A/R, use that excess cash to pay down debt. Reduce debt, reduce interest cost, that leads to better profit margins.
As to previous history of the company. Previous management did some naughty things, cooking the books to boost sales so they could boost the stock price. At the same time they gambled the companies future and sunk them into debt that they couldn't pay back. The SEC got involvled and filed suit against Winemaster the founder and previous CEO. So there were lots of litigation expenses and this took a lot of focus off the business.They got punished for that. Previous management got booted, along with the board of directors. Weichai saw an opportunity to get their technology which compliments their business for cheap and jumped at it, I think it helped that both companies were basically across town from each other, they had to have been familiar with each other if they were worth their salt. Now there are still some unresolved issues, the company has a going concern notice from their auditors for instance and there are a couple of unresolved lawsuits against them- those are in the 10-k. They can't get relisted on NASDAQ until at least the going concern note comes off. The key event is going to be what happens when the Standard Chartered LOC gets paid off, or if a new debt agreement or stock issue happens to pay off the rest of the LOC's to Weichai. This may be why Craig Hallum started covering the company, to get investment banking business from them. If refinancing doesn't occur and the Std Chartered LOC gets paid off, then I would start to worry about the companies future. I'll leave it to you to speculate what could happen then.
I've followed this company since 2012 or 2013 made really good money but sold out to early when I initially bought the stock.Bought at 14 sold at 45 and kicked myself when it crossed 80. But then had a laugh when the bad stuff started to get revealed and the stock crashed. I started trading it again a little back in 2020.Then started quietly accumulating as I said earlier. Let me tell you those were nervous times, I felt all alone on this one and was always double checking my assumptions, but I look for opportunities where stock price doesn't follow company results. I'm a student of businesses and this has been an interesting story to follow, definitely worthy of a case study writeup for business school. I hope I have answered some of your questions, its good to be sceptical, that's how you hang on to your wealth.