Innovative Composites International Inc. needs to build a base

Jun 13th, 2012 – Comment

The death cross that surfaced in January of 2012 and the established downtrend adds another layer to this high risk investment.


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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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Hi Lou,

Could I get your opinion on Innovative Composites on TSX venture exchange.

Thank you,
O. Shahi

 

 

 

Hey O.,

Thanks for the assignment. Innovative Composites International Inc. (IC TSXV) is in a sector that I like. New material sciences provide for breakthrough opportunities that allow for reduced costs and improved performance. IC has developed a method of recycling used plastics and creating a series of light weight panels for use in the housing, storage, and transportation industries.

The rub in this case is that a company with a market capitalization of $14 million, sales of less than $8 million, and operating losses, will find it hard to keep investors excited.

A review of the charts will help inform our thoughts on IC.

 

The three-year chart indicates that the dream of replacing established materials in housing, storage, and transportation will take longer than anticipated. When that reality hit home astute investors made their way to the exits taking their profits with them.

The uptrend was breached in November of 2011 and the shares have been in sell off ever since. The catalyst for the decline was a bought deal that raised $10 million at $0.75 a share which introduced the issue of dilution of existing shareholders. The lesson to be learned from this chart is that investors who have taken a high risk ride need to book profits before they are no longer available.

 

The six-month chart illustrates the resistance that the stock has met along the 200 and 50-day moving averages and its inability to form a base. The death cross that surfaced in January of 2012 and the established downtrend adds another layer to this high risk investment.

I wouldn’t be a buyer until the downtrend is reversed and that isn’t likely to happen until it finds a bottom starts to build a base.

Make it a profitable day and happy capitalism!

Categories: New Material Science
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