TPS Position Update – July 14, 2015

| July 14, 2015

TPS Position Update

. . . . KINGOLD (AMEX: KGJI) – Hold 

We recommended KGJI June 16th at $1.04 and it promptly swooned.

The stock has taken a 20% hit, thanks to the rush for the exits we’ve seen unfold on the Chinese markets the past few weeks.

Here’s what’s happening, and here’s why we remain believers in Kingold.

On July 7th, trading in over 90% of the 2,700+ shares on China’s exchanges were either halted or suspended.  Shares have fallen by a third in less than a month.  For political reasons, to make itself look good, the government is trying to prop up prices, and its efforts aren’t working.

There’s not much comfort when a stock you own is down 20%, but Kingold is surviving the Chinese market dive better than most.

Two other important things to keep in mind… The Chinese market hit takes prices back to where they were in March 2015, and the overall markets are still up 75% for the year.  

More setbacks could easily come, so the rough ride for Kingold probably isn’t over.

But hang on.  Overall, China’s economy is in good shape.  Growth has stabilized.  The real estate market, which went through its own bubble, is picking up steam again.  Money market rates are low, so the banks seem safe.  One concern to keep in mind:  lots of debt, 282% of its GDP, according to McKinsey Global Institute estimates.

What does all this mean for Kingold?  The reasons why this was a great stock to invest in last month are all alive and well today.

This is not the time to sell off even a fraction of your holdings.  In fact, it’s a good time to pick up even more. 

. . . . TOWERSTREAM (NASD: TWER) – Hold 

We weren’t happy to see Towerstream report a Q1 loss.  

But like so much of what happens in the tech business, steps taken by Google leave a big footprint, and even though there’s no direct business connection between Towerstream and Google, something that can be significant is brewing.

Google is getting into the WiFi cellular business.  This fits nicely with the Towerstream business model, and provides Towerstream with credibility and visibility. 

Towerstream President and CEO Jeffrey Thompson says, “It will likely spur demand for our network.”  

Is Towerstream a possible acquisition target for Google?  Tough to say.  I wouldn’t count on it, and I wouldn’t hold the stock for this reason.  It’s simply too much of a long shot.

Let’s hold onto Towerstream because of other opportunities and give it a chance to cut more deals with companies that want to use its rooftop WiFi.

As a so-called “Fixed Wireless Fiber Alternative provider,” Towerstream is in a good business.  It just needs to line up more customers.

Its technology is proven.  What’s unproven is its sales and marketing, but things are moving in the right direction.

We recommended TWER at $1.87 in April, 2014.  In less than a year, it gained 39%.  For the past few months, it’s been jittery. 

But jittery is something we’re not when it comes to Towerstream.  We’re happy to sit back and wait for stronger earnings news ahead.

Action To Take

  • Hold Kingold (NASD: KGJI)
  • Hold Towerstream (NASD: TWER)

Category: TPS Update

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