The recent decline in the US stock market has created a “massive buying opportunity” as analysts are predicting there is an additional 30% room to the upside in the tech sector over the next 12 to 18 months.
In a note to clients late Thursday, Wedbush analyst Dan Ives said he believes the current tech stock sell-off has run too far.
“The momentum names in tech are down anywhere from 15% to 25%+ this week and in our opinion, this sell-off is way overdone given the $2 trillion of digital transformation spending on the horizon coupled by a massive M&A spree set for the next few years in the tech space,” Ives said.
This sell-off in the tech sector has also extended to a number of other markets, one in particular being the OTC markets which is primarily driven by market sentiment and investor behavior. From this, the vast majority of OTC stocks over the past few days have taken a significant hit, and in a way, has reset it self from the January frenzy.
The issue with the OTC right now following the significant sell off over the last few days is that a vast majority of stocks listed are either shells (no current operations) and companies that are inflated due to hype and frenzy buying.
However, a lesser number of OTC companies that have very strong revenues and assets also took a hit, simply due to the association among the collective OTC market as a whole. In a way, they have been driven down far below the current book value of the company. This presents an immense buying opportunity among these companies since they are dramatically undervalued, and with quarterly reports coming out within the next few weeks, this presents an interesting period for the OTC markets.
One Example with a Criteria of Significant Assets and Pink Current Reporting Status
- Status: Pink Current Reporting
- Share Structure: Unchanged in 6 years
- $52m revenue (2019)
- $39.5m assets vs $5.5m in Liabilities.
- Book Value: Sliding range $0.13 to $0.32
First quarter revenue($3.8M) is pretty much in line with 2019 numbers ($12M). With the company now announcing that Chinese real estate investment has resumed following COVID-19, and China now beginning to initiate its $13 Trillion Dollar infrastructure expansion to 2030, these numbers should be in a much higher category within 2021.
To put this into perspective. Right now, if the company had no news, no development, and stopped all operations, the book value of the company based solely on its Assets vs Liabilities puts the company at around $0.13 to $0.32. However, the company is currently in the middle of a number of large projects, outlined below.
- Announcement: Copper Nanotechnology for Building Materials to Fight COVID-19 Transmission
- Announcement: Recently won a 3 year long court battle (as of February 1st)
- Announcement: A number of Current Patents “Active”
- Announcement: The company changed its official “Business Scope” to include Medical Technology (COVID-19 Copper Nano-Tech)
As CV-19 has spread, so has our fear of surfaces. Zhuding International Limited is optimistic about the trial for copper nanoparticles on the building materials. “Due to their positively perceived characteristics, nanomaterials are increasingly used by the construction industry on building surfaces creating so-called “nano-effect,” said Xiang Mulin, Chief Executive Officer of Zhuding International Limited.
Xiang Mulin Further said,
“We are taking the first step in applying copper nanomaterials on construction products to prevent the spread of bacteria and viruses. And we want to make this affordable and ready for commercial use.”
However, the most striking visual of how undervalued this company currently can be seen by the recently released statistics from the National Bureau Of Statistics of China.
According to National Bureau of Statistics of China, from January to June, the national real estate development investment was 7,532.5 billion yuan, an increase of 3.4 percent year-on-year, and the growth rate was 1.5 percentage points higher than that of January to June. Among them, residential investment was 5,568.2 billion yuan, an increase of 4.1 percent, and a growth rate of 1.5 percentage points.
Since ZHUD’s revenues are directly proportionate to the above growth, it stands to believe that while the company has reported strong revenues in the last couple quarters, the next couple quarters could be their biggest to date, due to the dramatic growth in China’s real estate market.
This is all but one example of asset based stocks currently listed on OTC markets, that is dramatically undervalued purely based on its book value. As with all investments, investors should pay special attention to recently released news and filings with OTC markets to get the most transparent and accurate information. This is another reason why the OTC is shinning away from holding non-PINK companies for a long period of time. Transparency needs to be increased, according to market officials.