Innovation creates value

Oct 14th, 2009 – Comment

Bio-Extraction Inc. (BXI TSXV) is in the business of using a low temperature extraction process to get more nutrient value from oil seeds such as canola. Whenever you can reduce cost and create more output you are on the escalator to the penthouse of profit.


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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bioHello Lou,

I been looking at NEM and BXI. What is your take on these stocks? Thank you.

Sincerely,

Lalit T. from Calgary

Hi Lalit,

You certainly have found stocks that are enjoying aggressive moves to the upside and there is nothing wrong with that. The key question in these cases is if there is more gas in the tank?

BXI (Click to Zoom)

BXI (Click to Zoom)

Bio-Extraction Inc. (BXI TSXV) is in the business of using a low temperature extraction process to get more nutrient value from oil seeds such as canola. Whenever you can reduce cost and create more output you are on the escalator to the penthouse of profit.

BXI (Click to Zoom)

BXI (Click to Zoom)

The three year chart is a classic example of a pennant formation. In 90% of occassions when the pattern is complete the stock continues the uptrend.

The three month chart provides a closer look at the break to the upside. In searching the datasphere for an event that might have triggered the move I found nothing substantial.

On a fundamental basis BXI appears to be well managed and is advancing its business plan. They have their first plant operating in Saskatoon and are generating revenue but not profits at this point.

From a technical perspective there is nothing to suggest that BXI is about to run out of gas and it appears it has the potential to add to its gains.

neo.jpg

Neo Materials (Click to Zoom)

Neo Materials (Click to Zoom)

Neo Material Technologies Inc.( NEM TSX) has benefited from the same business model as BXI in that is has proprietary technologies that allows it to operate at lower costs than its competition. NEM produces rare earth powders used in many technology products such as wireless phones, televisions, catalytic converters, computers, and electric motors.

Q2 revenue was $41.8M and the company returned to profit in the quarter. NEM has $53.6M in cash and will be reporting its Q3 results on November 12. When you look at where they generate their sales 51% comes from China and 23% from Japan.

The three year chart shows the aggressive advance that NEM has enjoyed since the March lows. It is meeting some resistance at $4.00 and there is further resistance at $5.00 and $5.50. After $5.50 we are talking an advance to potential new highs.

NEM (Click to Zoom)

NEM (Click to Zoom)

The three month chart gives a better view of the the resistance at $4.00 and the MACD signaled a shift down in momentum as we came into the end of September and we have yet to see a reversal towards a new advance.

Both companies have had great runs but from a purely technical view if I had to pick one of the two I would go with BXI.

MAKE IT A BIG DAY IN THE CITY BY THE BOW AND HAPPY CAPITALISM!

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