Three Tiny Mo-Mo Stocks for a Big Mo-Mo Market

By Michael Brush
Exclusively for InvestorIdeas.com
January 25, 2007

There’s so much bullishness in the market now as indices and many stocks hit all-time highs, you need to be careful. Often when bullishness gets to these extremes, a pullback providing better prices lies around the corner.

But if you insist on jumping on the bandwagon and buying stocks trading at or near all-time highs, why not go along with insiders who are doing the same?

That’s what you have with three small, uncovered companies:

• Tix (TIXC), which sells discount show tickets in Las Vegas


• Integrated Electrical Services (IESC), an electrical contractor


• FRMO (FRMO), a sophisticated investment research shop whose revenue is growing rapidly along with client assets
• 
  

All three of these companies have had great runs, and they are trading at or near twelve-month highs – if you ignore few anomalous trading days for FRMO at the end of December. What’s even better, insiders have been buying all the way up, including at recent prices. That shows a kind of moxie that says these little momentum names are headed even higher.

If you follow insiders into these three stocks, just remember as always to have a time horizon of at least a year or two – as insiders typically buy with the same kind of outlook.

Tix (TIXC)

What goes to Vegas stays in Vegas – and not only because the house odds are stacked against you. Long gone are the sweet deals -- unless, of course, you are flexible and you stop by any of the four Vegas ticket booths of Tix4Tonight.

Tix4Tonight, a division of Tix, sells tickets for Las Vegas shows at 50% off the original box office price, on the same day of the performance. The outfit has non-exclusive agreements with about 60 of the roughly 80 shows in Las Vegas at any given time. It offers tickets for about 50 shows each day.

Business is booming.

Revenue doubled in the third quarter of last year to $1.4 million, and the company reported three cents a share in earnings. Tix also looks financially sound. It has about $1.2 million in cash and minimal debt, and it produced about a half a million dollars in cash in the first nine months of the year, up from $44,000 in 2005.

Last summer, Tix launched Tix4Dinner, which offers reservations for discounted dinners at a set time at restaurants on the Las Vegas strip. This business contributed little in the third quarter.

But it just started, and insiders apparently see big things ahead. Since December 19, they have purchased $442,000 worth of stock for prices between $4.41 and $4.93, according to InsiderScore.com. The stock recently traded for $4.85. A director named Benjamin Frankel was recently selling, but that doesn’t bother me. He also sold a year ago at 50 cents a share.

Integrated Electrical Services (IESC)

When builders need an electrician, they call Integrated Electrical Services. Operating out of 121 locations in 48 states, this company does the wiring for everything from office buildings and power plants, to airports, theaters, stadiums, high-rise residential buildings, factories, and hospitals.

You might have second thoughts about buying shares of a company with exposure to the housing market. But I wouldn’t worry about it. Commercial construction is booming, and this company has gotten anywhere from 58% to 66% of its revenue from commercial and industrial work in the past three years.

Shares of the company, which was in and out of bankruptcy last year, are being accumulated by Tontine Management, a contrarian and value-oriented hedge fund. Tontine bought $2.8 million worth at $18.02 on January 3. Company insiders have purchased $120,000 since mid December for prices between $14 and $20.16. The stock recently traded for $22.80.

FRMO (FRMO)

FRMO conducts investment research for hedge funds and mutual funds, with a focus on ferreting out intellectual property that is undervalued and in the early stages of development.

It must be doing a good job, because research fees are growing leaps and bounds. Fees collected from one client called Kinetics Advisers’ Hedge Funds grew to $2.9 million last year from $960,000 in 2004. Revenue from another client called Kinetics Paradigm Fund grew to $2.1 million last year from $125,000 in 2004. All told, FRMO fees grew six times to $6.6 million last year from $1.1 million in 2004.

Now the research shop looks poised for more growth as it also advises newer funds called Horizon Global Advisers incorporated in Ireland and Croupier Offshore Fund, incorporated in the Caymen Islands.

Director Lawrence Goldstein has been a regular buyer since September when the stock traded at $4. His most recent purchase was a few days ago on January 19 when he bought $114,000 worth at $8.22. The stock recently traded for $7.50.

One drawback is that this company trades in the pink sheets, still one of the more Neanderthal exchanges despite recent attempts to modernize. Pink sheet companies don’t have to provide regular filings.

And buying this stock may require a call to your broker if you want your offer to get displayed between the bid and the asking price to get a better deal on your purchase. But this being the pink sheets, you may not get represented, even if you call. Pink sheet market makers, after all, enjoy the piggish profits they can make on the big spreads, for doing nothing.

The bottom line: If you are going to go long in markets trading at or near all time highs, you might as well go along with insiders who are doing the same. That’s what you have with these three stocks, which all look like buys right here. Just be prepared for a pullback if something spooks the bulls all around you.

Disclaimer
At the time of publication, Michael Brush did not own or control shares in any of the companies listed in this column. Mr. Brush is an independent columnist for this web site.
For more on Insiders Corner disclosure, see the disclosure section in About Insiders Corner: /insiderscorner/. InvestorI deas.com Disclaimer: www.InvestorIdeas.com/About/Disclaimer.asp . InvestorIdeas is not affiliated or compensated by the companies mentioned in this article.