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Trading Alert: CPTC.OB

In my article about electrical transmission, I mentioned that I liked Composite Technology Corp. (CPTC.OB). I became increasingly bullish on this stock as a result of my changing understanding while I was researching the article. The article then initiated an email conversation with a long-time investor, where I learned more about the company's business. As a result, I just purchased more of the stock (at $1.33, using a limit order), quadrupling my initial position (acquired in February at $.91. My current average cost basis is $1.23.) Several of my clients also own this stock, which most of them bought below $1.

I've asked the investor to do a write-up on CPTC to share with AltEnergyStocks readers. It will probably be available later this week.

DISCLOSURE: Tom Konrad and/or his clients have positions in CPTC.OB.

DISCLAIMER: The information and trades provided here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.



was posted on AltEnergyStocks.com.


       

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Comments

I did a quick check on Composite Technology. They have nearly 180 million shares outstanding and have a (.18)/share loss. How much more revenue are they going to need to get into positive earnings? and how long do you think that will take?

Those questions are always tricky to answer. I based my own decsion on my belief that their sales will be increasing, in both the cable and wind units, both sectors are likely to continue rapid growth, and my belief that increased sales will lead to increasing investor visibility. When I buy bulletin board stocks, I tend to base my decisions on my judgement of psychological factors in the markets, much more than fundamentals. Obviously, this is extremely risky, which is why neither I nor my clients hold even 1% of our portfolios in this stock.

Perhaps the large investor I referred to above will have a better answer to your question.

Some of the losses are attributable to 20 million of deferred compensation cptc is carrying - chinese customer very slow for pay cable delivery. Another drag is the retooling to manufacture the Dewind 8.2 turbine. This has stopped turbine manufacturing in 2005. The upshot is that now cptc has escaped the clutches of GE patents, that stopped it selling into the North American market. Strategically the company has shifted its focus from smaller scale installations in europe, to massive windfarms in the US and Canada. cptc is carrying a hefty goodwill provision on its balance sheet, although they are sitting on what appear to be valuable 15 year patents for the cable and the turbines. Additionally, the goodwill is offset by the deferred income and 14.6 mil of warranty provisions. According to the 10k, cptc is confident about their products and views the guarantees as helpful in marketing a new technology. The German certification of the 8.2 should help with that as well. They expect the cable sales to become profitable this year and look for 2008 to turn a profit for all operations, since turbines have long run up cycles of about 8 months. The company seemed to have been distracted by undue legal activity and the disaster of bankrupcy in 2005. Part of the large float can be attributed to settlements of those suits, as well as the large holding of the ceo and ex president, of about 20%. I see cptc in a turnaround this year. Hopefully the very large order of 750 of the 8.2's from xrg in Minnesota, as well as the manufacturing partnership with westinghouse will give cptc more financial breathing room. Well these are just my opinions from reading the annual, and I think it will take another three quarters. I hope I answered your question Pam, and let me know if you have any other ones.

I have now sold about half of my own and clients positions in the recent spike, at prices from $1.51 to $1.61. Partly this was due to my feeling things were getting a bit overheated... too fast, too soon, and some concerns about management brought up by one of my readers.
I still like the company, and will be looking to replace the position I sold on this pullback if it comes down a little more. It's currently trading at $1.28.

I'm a small, private and inexperienced trader, trying to learn the ropes. I started purchasing CPTC about two years ago. All articles I can find are positive, there are "buy" or "strong buy" recommendations. However, The stock has continued a slide to around $.75. Am I missing some important data somewhere?

Tom,
With tiny stocks like this, it's very rare to find negative commentary because people who do not like the stock just look elsewhere. 

As for us being wrong, it happens. That's why I reccommend only putting a fraction of 1% of your portfolio in any stock that does not trade on an exchange. My personal holdings CPTC are less than 0.5% of my total holdings.

I enourage you to read this more recent article on CPTC, and this article about investing in off-exchange stocks.

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