June 2006 Really Cheap Stocks and Mid Year Market Timing Analysis

Red Hot Poker Plant    
How in the heck did a Red Hot Poker Plant get in the wild flower bed?  They are tuberous, aren't they?

"The secret to living a long life is don't do things that tend to shorten it."
-Terrence Hill   from "My Name is Nobody"

Globetel Communications (GTE) @ $1.13

Apr 27 10:00 AM  (Strong Buy Ratings from DonHarrold.net)
Apr 28 04:10 PM  Sarraf Gentile LLP Files Securities Class Action Against GlobeTel Communications Corp.

May 1 09:42 AM  GlobeTel Declares Formal Default by Internafta

May 4 10:52 AM  GlobeTel Communications Corp. Responds to Sarraf Gentile Lawsuit

May 9 07:27 PM  Shalov Stone & Bonner LLP Provides Additional Information on GlobeTel Class Action

May 9 04:56 PM  Scott+Scott, LLC Files Class Action Lawsuit Against GlobeTel Communications Corp. on Behalf of Investors

May 10 06:02 PM  Schatz & Nobel, P.C. Announces Class Action Lawsuit Against GlobeTel Communications Corp.

May 10 04:17 PM  Milberg Weiss Announces the Filing of a Class Action Suit against GlobeTel Communications Corporation

Why all these class action lawsuits?

One day some months ago Globetel came out with a PR stating it had signed a 600 million dollar deal to install wireless in Russia with a Russian consortium called Internafta. 

The only thing apparently left was getting the money in the bank.  

Globetel announce they had a high $$ international law firm looking out after their interests and Globetels' stock jumped
over 60% that day.

I sold some short holdings and made out pretty well.  

Well, the key date for receiving finance from the russkies came, went and guess what?  No money.
The stock cratered so I did some buying at two dollars and change.

What Happened?  Well according to Globetel and the russkies, a transaction of 600 million dollars was very difficult to
accomplish through the international banking system. 

It would be much smoother to transact using smaller installment payments of 150 million.

The first payment date was extended and guess what - the russkies couldn't make that either. Globetel ended up
declaring the agreement in default and walked away.

Hence the class action lawsuits.

What more can I say about Globetel except that I sold two thirds of it.  So far they seem to have missed nearly every key
date.  There was some blather the other week about the rigid airship (not a blimp, mind you)  Sanswire 2 doing a test
flight at the end of the month. I'll believe that when I see it.

I really thought this stock had a chance of doing something positive.  They have had a number of announcements
regarding positive earnings but it seems not enough to really enhance the bottom line.

I'm holding on to a third of my original position just in case.

My recommendation on this particular stock is speculate only.  Swing trade the sucker and take as much profit as you

What did I do with my other two thirds?  

Mobilepro (Mobl.ob)  @ .18

Mobilpro is into wireless, broadband and other data com services. They have a customer base of approaching one
quarter million.  They have 200 -300 employees and seem to be moving in the right direction. The company has a
market capitalization of @ 100 million. Quarterly growth has been around fifty percent. At the same time, the stock has
lost about fifty percent of its value.  It has a beta less that -5, which means it moves five times more up and down than
its tracking index.

And of course shares outstanding are approaching 500 million.

For some years they had a rather unique financing agreement with a venture capital group which caused considerable
consternation among share holders. Several months ago they got rid of that albatross and now they apparently have a
much cleaner slate to work with.

My bottom line on this one is that it can't do any worse than globetel. Their PR department is better than Globetel. I think
their marketing is better than Globetel. Who knows, they may be better than Globetel.

The latest positive news:

BETHESDA, Md., June 23 - MobilePro Corp. announced today that it has signed a definitive contract with the City
of Yuma, Ariz. to design, deploy and operate a mesh wireless network in the community. Yuma is one of the
fastest-growing cities in the nation.

Jerry Sullivan, CEO of MobilePro's wireless division, said, "We believe that high-speed Internet access is an essential service for rapidly growing communities like Yuma. We expect to begin deployment of the network this fall."

The wireless network planned for Yuma will initially cover a portion of the city's total 106 square miles. The network
will provide state-of-the-art technology to the City of Yuma, its residents, businesses and more than 80,000
estimated annual visitors.

Subscribers will be able to access the wireless network from anywhere, at any time, within the coverage area. All
Wi-Fi-enabled devices will have free access to the network landing page, which will contain information about the
service and instructions on how to connect, and the city's website,

The Latest Negative News:

BETHESDA, Md., June 9  -- MobilePro Corp., a leading broadband wireless services company, announced today it
has elected to no longer pursue a project to establish a wireless broadband network for the City of Sacramento. Last
year MobilePro won a competitive bid and later conducted a successful pilot project in the city's downtown area that
provided outdoor public Wi-Fi Internet access and real-time video applications in Sacramento's Cesar Chavez
Plaza Park.

MobilePro said that after being declared the RFP winner and going through a lengthy permitting process, the city
forwarded MobilePro a counter proposal requiring that the company establish a free high-speed wireless network
supported almost exclusively by advertising revenue without the benefit of the city serving as an anchor

Not too bad, huh.

And my Homeland Security Pick -

Homeland Integrated Security Systems (Hisc.pk)  @ .03

I had a question several months ago about what was going to happen when HISC spun off some of their assets into
their new shell company.  Apparently a few other people did too and someone decided to issue a PR:

Homeland Integrated Security Systems to Retain Entire Product Line Including Rights to the Cyber Tracker (Thu, Jun

If that is the case then what is this shell company going to consist of?  I am not really sure about that.  I do know that I will
get one share of this new company for every fifty shares I currently own (big yawn).  

The spin-off date has been moved back again:

Also announced at yesterday's teleconference was that Homeland Integrated Security Systems, Inc. shareholder
dividend of EVSI shares, which was to be issued to shareholders of record as of June 29th, 2006, was extended to a
record date of July 27, 2006. All Homeland Integrated Security shareholders of record as of July 27, 2006 will
receive 1 share of Evans System Inc. for every 50 shares of HISC they own as of the record date. The dividend in
Evans System is expected to be valued at $.50 per share.

Exactly what is EVSI? No one seems to know.

Fifty cents a share, huh?  Another big yawn.  You see, what typically happens is those spun off shares usually get
locked up for several months where you cannot sell them.  During those several months the price of your new
shares drops precipitously, and sometimes to sub-penny level.  You might be able to buy a roll of toilet paper when
lockup expires.

Frank Moody, the president and CEO of the company was doing a pretty good job, I thought. Their PR department was
much better than GTE and the company was moving in the right direction.

And then this Friday:

ASHEVILLE, NC--(MARKET WIRE)--Jun 23, 2006 -- Homeland Integrated Security Systems, Inc. announced at
yesterday's shareholder teleconference that Fred Wicks has been elected by the Board of Directors to serve as
President and CEO of Homeland Integrated Security Systems, Inc......

What is going on here?  Not a clue in the PR.

Methinks there are company shells and then there are shell games.  Which is this?  Couldn't really say for

The stock reacted accordingly ending up around .02 with a bounce back to .03.

My outlook?  Jaundiced.

Market Outlook Going Forward

One thing about financial forecasting is that it is a lot like weather forecasting.  Most of the time you are wrong and
nobody expects you to actually be right. Leaves lots of latitude.

In case you missed it, we have been going through a correction for the last several months which has erased practically
all the gains for the year.  No big surprise there.  It has been three years or so since the market has corrected ten
percent or more.

If you have cash laying around,  I think now is an attractive entry point.  If you are in the position to take advantage of
investing in a Roth IRA , I would be doing that right now.  Roth IRA's use after tax money but monies coming out of these
accounts during retirement are tax free.

My allocations are pretty much the same as they were at the beginning of the year.  I am thinking about selling off the
rest of Muhlenkamp because of performance issues. I have only a small position left.

I have shifted a bit out of  small and mid cap value and am more emphasizing small and madcap growth.  

A few of these funds are  MSSMX, STSVX, FCGPX

I think the market still has legs and I think a healthy amount of international exposure is a good thing.  I would stay away
from  country specific sector funds and narrowly  focused emerging markets funds.

Some of the international funds I like are   NBISX, NBITX, FISMX,  TAVFX,  ARTIX,  and ADRE  for a small

And speaking of that:

Fund Closing - NBITX,  NBISX  - End of July, 2006

I am highlighting this for anyone who needs a good international fund.  I am heavily weighted in this fund in  international
side of the portfolio and I really like this fund.

If you are in need of a good international fund, look real hard at this one before it closes at the end of  July. Existing
shareholders can continue to make purchases.

If you like the fund but don't have much to put in it, put in the minimum.  Minimum in an IRA is $250.00.  Think about
starting that Roth.

Financial shows are still yammering about large caps it being due for them to have a nice run.  I still haven't seen
anything to convince me that this is an area worth exploiting. I did buy some FAIRX ( a Large Cap Blend), and have
some FDVLX ( Large Cap Value) more for diversification than anything else.

GE, MAS, CBSS in DRIP plans is pretty much my large cap exposure.

Sector Specific:

I still like Communications (5%), Healthcare (5%) and Technology (2%)

In Communications I have FWRLX and PRMTX

Healthcare consists of  ICHCX and FSHCX.  I am still watching FSHCX and would be leery about taking a position in
that at this time.

Technology consists of one fund - BUFTX.  The reason I like this fund is because it invests in all sorts of technology.  It
has the option of investing in medical, research, communication - any areas where there are developing technologies.

Investing for Income

You don't really want to be buying bonds in an environment where interest rates are rising.  As interest rates rise,
 principle decreases and sometimes it decreases more than interest rate increases.  So while you are getting paid
more interest, the value of your bond decreases.

The reason I bring this up is because the fed appears to be nearing its fiscal tightening policy.  Vangard GNMA's would
be very attractive for purchase at that time if you are looking at  investing for income or for some plain old
diversification.  For diversification I would be using a tax sheltered account.  Something to consider anyways.  This
would also be more appropriate for  mature ( I mean older) investors.

And the Professional Perspective

My Guru, Bob Brinker has been content to remain 100% invested in the market.  The only negative comments I heard
from him was just the other week where he  thinks the Fed may screw it up again and raise rates one too many times.
 This would not be good.  

He also belabors the point that high energy prices in an of themselves are not inflationary and wonders why some
members of the Fed don't get that.

The example he uses is this:

If someone has a 100% propensity to spend which is to say they live from paycheck to paycheck,  more money at the
pump means less purchasing power at Walmart. Energy prices at these levels will act as a brake on the economy.
 Higher interest rates piled on top of higher energy prices put on more of a brake.

 I will be watching this a bit closer.

A Final Note about  those Really Cheap Stocks

Stocks like the ones I talk about at the beginning of the letter are more for my amusement than anything else. It is
- gives me something to write about as well.

These types of stocks are some of the riskiest out there and should never be considered as a major holding. Heck, not
even a minor holding.

Usually this word of caution is reserved for men only because they are more naturally the risk takers.

There are some women idiots out there too.  

Case in Point:

A woman shows up on a GTE bulletin board I follow and proclaims GTE is the best thing she has ever found.  She is
pulling her kids college money (about 20k saved up so far) out of those stodgy growth and income funds and investing
it all in GTE in the high three dollar  range.  She just knows when that Stratellite flies (rigid air ship, not blimp), the stock
will go stratospheric.

I very rarely post on bulletin boards but I did this time and as nicely as I could suggested she not do that.  College
money is not something you gamble with and especially not on a penny stock.  I said growth and income is a great
place to be and if she didn't like the fund she had, I would suggest a couple others.  I did anyway.

Well, I was promptly placed on her 'Ignore' list.

Here we are six months later and I've seen a few posts from her.  She is still holding, even though she has lost over two
thirds of her kids college money.

An Analysis:  

I kept a spreadsheet of all my really cheap stock buys and sells.  I made for me what was a lot of money.  


If  I took that same amount of money and invested it in one really good small cap CGA (capital gains aggressive) fund,
 I figured I would have ended up making about four or  five percent less than playing with really cheap, risky penny

Was it really worth the risk  to get that extra five percent?

No, but it sure was fun!