TPS Position Update – October 13, 2015

. . . . Superconductor Technologies (NASD: $SCON) – Sell 

Superconductor Technologies has run into trouble.  It’s time for us to leave and sell our positions.

Last week, the company tried to raise much needed money, $9.5 million with a new stock offering.  It priced the shares at $0.35.

A year ago, the stock traded for $3.10.

Over the past few months, the stock has swooned and we don’t see a recovery.

What went wrong?

Sales and marketing.  The company hasn’t done a good enough job selling its core wire product, Conductus.  This superconductor is 100 times more efficient than regular copper wire when it comes to moving high voltage electricity across a utility’s grid.

Superconductor Technologies can’t sell enough products to cover expenses.  A shaky financial foundation is growing even weaker.  Also troubling is the absence of meaningful progress on the expense reduction front.

When Superconductor Technologies reported its Q1 results earlier this year, we weren’t thrilled with the revenues, which slid to $55,000 from $82,000 in Q4 2014.  

In Q2, there was a slight rebound, with revenues moving up to $71,000.

Too little too late?  We believe so.  We’ll cut our losses and move on.

 . . . . Nevada Gold (NYSE: $UWN) – Hold 

When Nevada Gold released its Q1 results last month, we saw the company holding steady in some areas, making good progress in others, and planning for future earnings growth.

Net revenues for the first fiscal quarter of 2016 came in at $15.9 million, the same as Q1 for fiscal 2015. Operating expenses were $15.2 million, down from $15.3 million the prior year. 

Operating income was up 33% to $0.8 million from $0.6 million.  Income before taxes was up to $0.7 million from $0.5 million from the prior year.

We are watching the firm’s acquisition of the Club Fortune Casino in the Las Vegas suburb of Henderson Nevada, scheduled to close before the end of 2015.

We recommended Nevada Gold in June at a buy price of $1.66.  Today, it’s trading at $1.71, a pullback from its peak of $1.83.  We like what we see, and are happy to hold in anticipation of new highs ahead. 

Action To Take

• Sell Superconductor Technologies (NASD: $SCON)
• Hold Nevada Gold (NYSE: $UWN)

Category: TPS Update