Congratulations to subscribers who bought HumaTech. We recommended it when we noticed an upward trend beginning in November. The stock climbed 266%. The first time we recommended HumaTech in 1999, it went from $0.62 to $5.12. Also, we picked Global Seafood Technologies in Feb. 2001 and it went from $0.87 to $3.09 in one month.
Our new recommendation is Global Path, Inc., OTCBB: GBPAA. (The extra “A” on the end of the symbol is because the stock trades as a class A common stock.) Global Path recently agreed to acquire Entact Information Security, a Corporate Information Security company, and according to Wall Street analysts the Security Sector is one of the hottest sectors in the market today. In fact, during January 2002 the Updata Security Index was outperforming the Nasdaq by approximately 33%. Also, this sector is forecasted by the Yankee Group--an industry analyst (technology) that evaluates products, size of markets, etc.--to be an $11 billion industry by the end of this year. We believe GBPAA is at the beginning of a major up-trend, and we see GBPAA going to the $3.10-$3.40 level rather quickly, then higher.
Corporate Information Security
Corporate and government organizations worldwide have moved from storing information in traditional, hardcopy form to digital computer-based, integrated data. Most databases are now attached to the world wide web: credit information, banking, and sensitive governmental information are just a few examples now connected via the internet. These databases must be protected from hackers, both insiders and outsiders.
One reason this segment is of the fastest growing on Wall Street is because of current and upcoming Government mandates. HIPPA (Health Insurance Portability and Accountability Act), recently passed by the Federal Government, covers the entire Healthcare Industry in the U.S. It requires U.S. health care companies to meet strict security standards within a two-year period. Similar legislation has now made its way into almost every financial, business, government, and legal sector. Experts IDC, Gartner and Giga Group, industry analysts, are comparing these mandates as ten times greater than the Y2K problem. Remember the run-up in the Y2K problem-solving stocks in the late ‘90s?
Entact Information Security
Entact has been developing its security software for over 14 years. The company has over 60 international clients, including Hugo Boss, Ericsson, The Singapore Exchange, Swisscom, Readers Digest, Credit Lyonnais and Banca Di Roma. Entact has approximately 600,000 employees under management and its average customer has an estimated 10,000 employees. Also, this year Entact was recognized as a worldwide leader in providing security software solutions at the annual RSA conference. RSA is one of the leading developers and suppliers of Technology Security Products. Entact already has substantial revenues, but the company is about to take the next step and enter into agreements with 50 world-class resellers around the world who already service the Global 5000 companies.
So what is the significance of this? When Citrix--an applications and content provider that allows distribution over the world wide web-- moved to a similar reseller arrangement, sales exploded to over $600 million. Its stock shot up from the $20s to over $100 per share. Great Plains, an accounting software provider, also moved to a similar worldwide reseller arrangement and sales shot up to $300 million in only three years--later to be bought out by Microsoft--and Entact’s marketplace is much larger than Great Plains.
Investment Conclusion
If GBPAA is as successful as Citrix and Great Plains were with its reseller program, sales could surpass $100 million or more within 3 years. With a 20% net margin, earnings per share would come in just under $0.75/share after tax. Other stocks in this group trade at very high multiples. For example, Internet Security Systems trades at a 119 P/E, and Network Associates trades at a 230 P/E. If GBPAA trades at just a 40 P/E, the stock would trade at approximately $30 per share in just 3 years.
The chart shows us GBPAA made a textbook 50% retracement last week and is now poised to move up quickly to the $3.10-$3.40 level, consolidating before moving up slowly over the next year and a half into the double digits.
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Revision r1.1 - 12 Mar 2002 - 04:28 by EliMantel
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