Will They Ever Learn? Chat Rooms – Running With the Herd, Chasing and Paying Dearly For Rainbows!

There are two regular presences found on the chat rooms; they are dominated by the “living room day traders” whose chances for a loss are stacked against them with the odds playing 1080/1, and they are sprinkled with chat room investors. The first bunch think the stock market is nuts and that its primary purpose is to give each and every one an opportunity to buy and sell quickly and often such, seemingly, as to ensure to a maximum; the American dream the constitutional right to lose one’s money – albeit the losers will say, but the sweet and bitter adrenaline rush of talking big and talking day trade is well worth the pecuniary losses.

Meandering through the ever changing recommendations – stocks are usually promoted artificially on a mere say so, and this is particularly notable on the day trade chat rooms – one can see the pattern and it’s never good. The stress and dialogue is never on the company but on volume, chart, cryptic press releases and micro engineered pop ups to sucker the gullible all of which for the small companies being “discussed” are and can be easily manipulated. It’s exciting and that’s the point for the 1080 losers to every one winner: it’s great to be the one though!

Try an intelligent communication or posting some fundamentally and verifiable useful reason to buy a stock and the promoters (the 1 in the 1080 present on the chat rooms) download an arsenal of diatribe, even going to having the innocent soul “banned” from the site for suggesting some reading before letting loose on one’s dollars. Chat rooms are a sucker’s game designed to attract the unknowing gluttons for punishment who rather than Google a company to see what the press or news releases say, rather than Email the company and get some veridical information, will rush to buy on an unknown promoter’s – often moderator’s – say so. The feeling of owning hundreds of thousands, even millions of shares (of a stock selling for a fraction of a penny) simply is worth the loss.

The second batch believes the economy is doomed and so the overwhelming consensus triggers a reflex reaction since the end is near; let’s make a killing, what the hell. The selection process is simple, any one of the fraction of a penny stocks promoted to the herd grazing in the chat rooms. Drunk with greed, driven by the high, the participants mask the depression and dejection driving their internal mechanisms; they buy for the sake of buying, knowing that the promoter will soon drop the bottom out. Look at SPGN for one of thousands of examples I have documented all of which were heavily promoted on the chat rooms.

Personally, a swing trader right of Attila the Hun, I like stocks that sit in sideway trades slowly building their fundamental business rather than their volume and charts. The first will ensure the other and the market is full of small (market capitalization of $25 million or less) companies that meet exacting rules to justify investment. Let’s take one as a mere example of hundreds – Falken Industries traded on the OTC under symbol FLKI.

As a general rule I stay away from companies
(i) whose market capitalization is less than $ 10 million,
(ii) whose press releases are not backed up by articles and general industry press,
(iii) who are not rated “Current Information” on the Pink sheets, where most of these companies can be found together with Toyota and many other behemoths of international business,
(iv) that do not provide swing trade opportunities, not less than one and not more than three annually.

I like to see discussion about real deals at press conferences, not prospective deals. I like press releases that follow press conferences. I like to see products not pretty web sites neatly conceived by IR or promotion outfits. In fact the rule I usually find to apply in small cap situations is that success is generally inversely related to the size and complexity of the company’s corporate web page. I buy their products on their web store, touch them, feel them, use them and pepper their shareholder, info, or communications department with questions about products, products, and more products, a small company with less than 50 product conceptions and global distribution will not earn a right to my dollars. A small company that takes more than 48 hours to answer my Email will get no further attention either. FLKI passes all of these tests – and strangely enough, though it generated a juicy 1900% return for its investors in the last 52 weeks, it also generated 890%, 390% and 40% on three swing trades during 2009.

I am an analyst for the Automobile After-market industry. Consequently I admit to more familiarity (and a likely penchant) with companies such as FLKI who have a dominant global business in the industry. But the importance of the criteria is paramount and must be found, notably in a Pink Sheet stock, and this, whatever the industry you favor.

Of course one could simplify the advice for present chat room will be victims; as Keynes said, “the central principle of investment is to go contrary to the general opinion.” Good companies not unlike FLKI are of no interest to the dominant promoters which monitor the activity on chat rooms and spin their stock on volume and charts. You can be certain that when the chat room crowd sounds off on where a stock is going, that sudden burst is the center of the herd as it thunders toward a cliff.

Manic speculator is too kind a word for the 1080 / 1. They are a credulous kind easily parted from their money. Volatility, volume, charts and madness are the order of the day. Chat room moderators, all too often promoters pushing their wares sit around salivating – banning from their sites any participant polluting the environment with logical and edifying information: there should be no sunshine cast upon the goings on of their chat room.

Some will argue that the 1080/1 should have to pay for their sins of greed and leverage. I have to concede that this is tempting at least for the knowing, but chat rooms would have nothing to exploit if they were populated by anyone other than those noteworthy for their distinct credulity.

After every crisis one can find predictions abound that the crisis will be followed by a rebound and then a long period of sideway trading. I don’t buy it. Sure this is backed by past performance, but if the past was a a real component of the future, I and all other industry analyst would be rich.

Prudently I consider alternatives. As a contrarian I run from obsessions – much like those regularly found on chat rooms.

As for now my best gem in the rough, fundamentally sound, globally present and with more than 160 product conceptions out and an equal number in the pipeline, trading sideways for a time, rising bit by bit, I sound off on FLKI. Of course I know that because as you guessed it I touched it, felt it, smelled it, and confirmed it all before I put the whole dollar it took to buy 5 shares at the current 20 cent price.

Falken Industries Ltd OTC: FLKI is a diversified industrial conglomerate that operates in Chemicals, Wet Wipe and Biodegradable Technology. Falken Industries Ltd is the concept behind more than 160 products distributed through a network of global platforms and the recipient of trade awards for innovations, biodegradability and environmental and health quality standards.

Focusing on Global Strategy

If adversity is the best teacher, the Great Recession should have been a prime learning opportunity for companies worldwide. It certainly was for many companies in the Automotive After-Market industry, small and large, traditional and trend setting.

This is particularly challenging for small companies who garner as much as 90% of their royalty and license income from abroad, these company’s face challenges that were compounded by a strong Euro that cut deep into profits coming and going. Coming because sales into dollar based economies were impossible due to high prices, and going because now that the dollar has firmed up substantially, their currency losses for GAAP reporting are substantial – so substantial in fact that they wiped out singularly the entire second quarter profits of some of the best run companies. For some these represent mere paper losses of course where most of the purchases for raw material and research are European based – but still not designed to favor motivation among wall street traders that have unjustly clobbered the industry and its publicly traded members.

“We learned valuable lessons and gained a healthy sense of crisis” said the communications officer of one such company located in New Jersey.

As one would expect, the tactical practice orchestrated by the survivors requires a mindset totally different than that practiced in the industry previously. Management and the entire global distribution network of these companies had to realize that business as usual was not an option. Changing an industry’s ingrained distribution culture was not easy, yet some companies were able to accelerate a program of structural reform. “We consolidated overlapping functions and shortened supervisory processes” one executive explained. “Now we’re leaner, more reactive and able to provide stronger support for members of our distribution networks.”

The revamp also extended to the manufacturing units of these companies. Traditionally the industry had routed different research and productions in separate, dedicated plants and facilities. To improve efficiencies the trend is now to create multipurpose production units to manufacture chemicals and impregnated accessories such as wipes. Workers switch between different roles in the assembly process. The new composite system delivers such significant productivity gains and cost savings that industry executives involved are now keen to roll out the process globally. “The financial crisis taught us that we can’t control our environment. What we can do is have a culture that adapts to circumstances” an executive told me. The lesson to be drawn: Ultimately it’s the adaptable who survive.

To ensure that these companies grows and prospers over the next decade,some companies have devised a plan for the next stage of globalization. The multipronged strategy involves building up the product lines, expanding the reach, and moving even more aggressively into the emerging markets of China and other Asian countries, and not to be forgotten, diversifying into new lines of business, notably disinfection and medical care.

If the rapid success of companies with pipelined products is anything to go by, That part of the industry looks to be well on its way to meeting enviable targets. Aggressive product conceptions are shaking up the market. Products renowned for their convenience, portability and usability have attracted large new audiences; notably women where the purchase rate has tripled, and the middle aged, two groups generally ignored by the traditional industry players.

In medical and disinfection products companies are announcing goals which are equally clear. They wants to grow this rigid business by around 70% in the next five years. Social and economic trends are aligning to support this bold vision. Eager to expand, but aware that developing the business almost from scratch would require a huge investment, industry players are taking the bold step of going on the acquisition trail targeting small to medium sized companies in Chemicals, wipes, and related productions.

Of course the relative economic robustness of developing countries vis-à-vis the developed world is another major post-recession paradigm shift that no company can afford to ignore. Those companies with no debt and an effective distribution network, will experience growing market demands for their product conceptions.

Expanding into new business areas is as important as expanding into new countries. Thus, the industry leadership which is more so represented in the small to medium size corporate players, devotes a significant proportion of the roughly, on average, 10% of revenues they commits to research and development every year to move into promising new business areas.

But just as important to a company’s success is its policy on corporate social responsibility. Whether aligning itself with the UN’s Global Compact for sustainability and responsible business practices, or creating green products in environmentally responsible ways, all initiatives should be inspired by the “Social IN” philosophy. This helps people worldwide lead healthier and more fulfilling lives, and maintains that the value of a company that does right by its shareholders and society at large will inevitably rise.

I’m Sitting Back Watching That Time When Everyone Will Rush OTC-FLKI

The market is not happy, it kicked and moaned most of the time as the news went from bad to worse and people decided to feed up a nasty correction. Everyone is moving to solve the issues which ail the world and this from both sides of our planet. Where’s the sensible approach?

Lucky for all, I am neither a political analyst nor a guru of any sort preaching one thing or another. I am but a humble industry analyst and cover the most mundane of industries, the Automobile After-Market Industry; but mundane it is no longer. There’s money to be made here, and the big one’s are handing out both their money and market share to the small industry gems not unlike Falken Industries Ltd, a small company (market cap $ 25 million), brain child of a young Norwegian MBA and traded under symbol FLKI.

Very prudently, the company has been making its moves, it launched in 1997, and since its award winning product conceptions have lined the walls of award winners and the shelves of retailers and users globally. The company is responsible for more than 160 products currently in production. Through the thick and the thin this company moves early and has become an industry model at cost controls and in stemming the flow of its liquidities. Free of debt, it nurtures its business and as it names implies, from high beyond, it pinpoints a market and sweeps upon its unsuspecting prey. All too often, the hard won, century old markets of complacent monster sized competitors – but only a little bit will do you for this flexible instrument of creativity.

We don’t have year ends yet of course but we do have an Internet full of useful information. Just Google “FLKI” (without the quotes) and read on. Management, which tends to be right of Attila the Hun in my humble view, suggest that preliminaries might indicate that sales accelerated 1.9 percent for the month of December – a normally dismal period for that portion of its business dealing with auto-care products, this from 0.6 percent the previous month. My own bet is that sales climbed 10.7 percent in the fourth quarter.

For the first time since 1997, FLKI doesn’t deny acquisition or merger invitations or interest. It’s incredibly creative management doesn’t seem to take lightly its fall into major corporate America but the scuttlebutt suggest that at the $3 or $4 a share people are talking, the company is a done deal. Moreover there does not appear to be a controlling block so that astute competitors could quietly finesses at least positions of up to 4.9% (about 392,000 shares – a whopping $ 80,000 at these prices) before they sprang. The stock a basic unknown to the trading community is selling at 20 cents.

Let’s no forget that FLKI sits with the technology, skill, and purchasing knowhow to tackle a 9.5 billion dollar industrial segment.

As I see it, the market’s inaction, unwitting ignorance of this opportunity can’t last. It is possible because the hapless competitors circling have no possible interest in putting a light on it, and the investment community are too busy licking their wounds or for the smaller part wasting their time on chat rooms. Hapless I say about the competition, because given FLKI’s commanding global lead in product conceptions and branding, its is outrageously cheaper for them to buy the company than to try to take back the market share they have lost, let alone acquire FLKI’s or that of its collaborators.

To me, the market’s reaction is pretty entertaining – I’m sitting back watching that time when everyone will rush – the herd is on its way paying dollars for what they could have acquired for pennies today. I’m similarly amused from my reading of chat room commentary crafted by the know it alls who claim all the wrong thing as a prerequisite to a buy. Result a 1080:1 loss ratio. But say they, it’s the adrenaline rush that counts.

Falken Industries Ltd OTC: FLKI is a diversified industrial conglomerate that operates in Chemicals, Wet Wipe and Biodegradable Technology. Falken Industries Ltd is the concept behind more than 160 products distributed through a network of global platforms and the recipient of trade awards for innovations, biodegradability and environmental and health quality standards.