I like to buy stocks at the bottom, when the narrative has broken down and masses have left. This is when it gets interesting. Stock_price = company_value + public_perception so how can you buy on the cheap unless the sky is filled with doom and gloom.
I first bought ECIA around $0.30 and wrote up the stock a couple years ago at $0.39. It had dropped to support, near the all time low. With an exciting medical business and tons of potential I bought with dollar signs in my eyes.
What I do is buy tiny, low, sleepy stocks with potential then wait and watch. Potential comes from both business and stock. I like a business with room to grow. The stock should be low with capital structure tight, and bonus points for a theme that can be meme'd to the moon.
After the buy starts a years long process of optimistically following along. I can see the rise in my mind. If things don't go my way I wait longer and as the situation warrants I buy more. This is the story of puzzle pieces falling into place.
This whole stock thing is a gambling game. We all try to stack the odds in our favor but in the end no one knows what will happen next. I believe my edges are size, patience, comfort away from the crowd, and optimism.
As time moves along I read filings and watch the chart. I wait. Every press release is another piece of the puzzle, every filing a clue. What will happen next? What does the volume and chart say about public perception. Where might the company be in 5 or 10 years? I err on the side of optimism because you just never know what's going to happen. Given enough time in enough of these tiny stocks you will see life changing movement, the question is can you hang on for the ride.
I have read pieces about people selling stocks once they reach fair value and to that I say you are clamping a ceiling on your investment. I buy what is low and small with potential; I sell what is over priced. In between those points I wait and watch. If you sell when a stock reaches your previous definition of fair value you are missing out on the future. You are throwing away innovation and potential and chance. I aim for life-changing returns every time I buy a stock and for that I need optimism over a long time horizon. The big moves are made over years. Just open up a long term chart and you'll see it.
Oh you don't have a long term chart handy, well let me help you out. Below are charts from a couple stocks my mentor has told me about for motivation and history. Note I don't own NOTV or BIOQ. His style is my style and these charts reinforce the strategy.
He's held NOTV about a decade.
BIOQ held for decades and bought for pennies.
- TTM rev 8.8M
- earnings nothing
- BV 2.8M
- 11.6M shares common
- no preferred or warrants
- stock has been hanging around a dollar recently giving market cap ~$12M
- "In May 2020, the Food and Drug Administration issued a Safety Communication that stated that, "In addition to serving as an ignition source, monopolar energy use can directly result in unintended patient burns from capacitive coupling and intra-operative insulation failure.”" (from recent 10-k)
- "During our March 31, 2020 quarter, we received a letter from the FDA. The letter contained a questionnaire regarding Stray Energy and how to prevent patient injuries from Stray Energy during laparoscopic procedures. We provided the FDA with extensive information on burns and our program for eliminating them. A Safety Communication was released by the FDA on May 29, 2020" (from recent 10-k, see FDA letter here)
- ECIA put out a press release here, stating, "To the best of our knowledge, AEM® Technology is the only technical solution to this issue"
- "During the year ended March 31, 2020, our proprietary patient safety technology was recognized by the U.S. Department of Veterans Affairs and provides us with the opportunity to market our instruments and monitors into VA Medical Centers. The VA is the largest medical system in the U.S. providing service to more than nine million veterans across more than 1,200 facilities." (from recent 10-k)
- "during the year ended March 31, 2020, we were awarded a prestigious Vizient Innovative Technology Contract for monopolar surgical instruments and monitors. Vizient represents a diverse membership base that includes academic medical centers, pediatric facilities, community hospitals, integrated health delivery networks and non-acute health care providers and represents approximately $100 billion in annual medical devices and supplies purchasing volume." (from recent 10-k)
- in Mar 2020 ECIA "entered into a Master Services Agreement (“MSA”) with Auris Health, Inc. (“Auris Health”), which is based in Redwood City, CA and a part of Johnson & Johnson Medical Devices Companies. Under the MSA, Encision and Auris Health will collaborate on the development of equipment designed to enable the compatibility of Encision’s AEM technology with monopolar instruments produced by Auris Health"
- heavy insider buying in summer 2020 from $0.47-$0.64.
- In August 2020 ECIA "announced the introduction of Its AEM 2X enTouch® Scissors (“2X Scissors”). 2X Scissors bring new levels of performance and economy to the surgical scissor market by combining the best in class performance of Encision enTouch Disposable Scissors with the value and economy of a multi-use device."
- "2X Scissors are a game-changing product that will have a significant impact on the disposable laparoscopic scissor market"
- "We expect 2X Scissors to have an attractive sales trajectory and will become a significant part of our portfolio of products"
- In August 2021 ECIA "announced that Encision has signed a Supply Agreement ("Agreement") with Auris Health, Inc. ("Auris"), part of the Johnson & Johnson Medical Devices Companies. The Agreement will have an initial term of three years. During the term, Auris has agreed to buy certain AEM® Technology enabled products exclusively from Encision. Encision will receive an upfront payment and upon achieving certain milestones, a milestone payment in addition to revenues from proprietary product sales to Auris per the terms of the Agreement."
- Auris must really like what ECIA has to offer because they blew through the phase 1 service agreement then phase 2 and onto a supply agreement. Auris signed the service agreement in Mar 2020 with an initial term of 6 months at $320k. ECIA then got quarterly revenue from Auris of $23.4k, $99.1k, $163.6k, $363.6k, $290k before announcing the formal supply agreement.
But that last one I feel could be a game changer. ECIA now has a supply agreement with Auris Health which is a subsidiary of Johson & Johnson, acquired in 2019 for a few billion dollars. Makes me wonder if ECIA tech is going into Auris's new Monarch platform of surgical robots.
You see the traditional ECIA model is selling to hospitals. A quote from the most recent 10k, "When a hospital decides to use our AEM technology, we make recurring sales to such hospital for replacement instruments. Sales from reusable and disposable AEM products in hospitals represented over 90% of our sales in the fiscal year ended March 31, 2021, and we expect this sales stream to grow as new hospitals increasingly adopt AEM technology and existing hospitals increase usage of AEM instrumentation."
- "Encision is always looking for partnering opportunities to make laparoscopic surgery safer with AEM® Technology. What we may or may not be working on and with whom is insider information."
- when I asked what it took to get the deal signed with Auris, "It took a mutual appreciation for the objective and the differentiating potential. "
Here is where the guessing and gambling come into play. How clear is your crystal ball? With the stock rising we definitely have this new Auris service agreement priced in to some degree before getting a dollar in revenue. If Auris turns out to be immaterial the stock will probably fall back down to support at 0.30.