TPS Trade Alert – March 21, 2014
March 21, 2014
Recommendation:
Buy mCig (OTCBB: MCIG) up to $1.00 per share.
Trade Rationale:
It’s been awhile since we’ve recommended an OTC stock for our portfolio. I typically prefer companies listed on major exchanges as they tend to be less volatile. However, sometimes there are OTC opportunities too good to pass up.
In fact, I’m sure you’re aware of the latest craze to hit the stock market… marijuana stocks.
With the legalization of marijuana in Colorado and Washington, as well as the many states that now allow medical marijuana usage, the industry has really begun to explode. Investors can’t seem to get enough of pot stocks – and all but two of them are listed on OTC exchanges.
Meanwhile, the marijuana industry has the potential to be enormous. The market in Colorado and Washington alone is estimated at $1.5 billion. The projected market if marijuana was made legal across the US is a whopping $46 billion.
And it’s not just marijuana that’s changing how people smoke. There’s also the whole E-Cig revolution.
E-Cigs, or electronic cigarettes, allow for the intake of nicotine in a cigarette-like format, without any of the tar or smoke. E-Cigs have become immensely popular – so much so that Wells Fargo (WFC) predicts sales of $10 billion by 2017.
Here’s the thing…
We’ve come across the best of both worlds… a company which will benefit from the soaring demand for both E-cigs and marijuana.
Introducing mCig (OTCBB: MCIG).
MCIG is a technology company focused on the two long-term trends I mentioned earlier, the decriminalization/legalization of marijuana, and the adoption of electronic cigarettes. The company produces the mCig, an affordable vaporizer (electronic cigarette) which can be used to “smoke” any type of plant material.
What’s more, the company owns Vapolution, a company which develops home-use vaporizers. And, MCIG has a wholly owned subsidiary called VitaCig, which will produce an electronic cigarette that delivers water-vapor mixed with vitamins and natural flavors.
In other words, the company is fairly diversified for a small business. However, we’re going to focus on the biggest opportunity – the mCig.
Check this out…
Despite its size and newness, MCIG already achieved its first profitable quarter.
Last quarter, the company’s non-GAAP net income came in at just over $30k on revenues of $85k. Those healthy margins are a good sign moving forward.
More importantly, the company would have pulled in a lot more than $85k had they not run out of inventory. Those sales reflect only 24 inventory days due to overwhelming demand and short supply related to the Chinese New Year.
As the company grows, it will certainly be able to meet demand more easily. Even better, the company is using the recent boost in shareholder equity to pay off all of its debt.
So while MCIG does have a whopping $213 million market cap with only $85k in sales, the company’ already profitable and has no debt. But more importantly, it’s clear there’s crazy demand for the product.
Once the MCIG streamlines its supply chain, revenues are going to skyrocket. And, as more and more states legalize marijuana, this stock has astronomical upside potential.
Go ahead and grab shares of MCIG while the stock’s trading under $1. Don’t worry if the share price bounces around a little, the long-term path for this company is only going to be up.
Remember to use limit orders when placing your trades. And stick to your position sizing rules.
Key Facts:
| Company: | mCig |
| Ticker: | MCIG |
| Recent Price: | $0.79 |
| Market Cap: | $213 million |
| Avg. Daily Volume: | 5,827,090 shares |
Chart:
Category: TPS Trade Alert
