In a word, no.

Here's the bull case, and judging by emails there are more than a few of  you out there.   According to Pink Sheets, Quasar Aerospace sports a paltry $3.16 million market cap.  That sounds like a very small price to pick up what QASP claims will be $150 million in revenue and $33 million in EBITDA next year.  Both Quasar Aerospace, and its CEO, Dean Bradley, have been buyers of the stock, but the amounts involved are pretty small.

Dig a little deeper and the story falls apart.  Currently, Quasar only has a relatively small flight school operation in Jacksonville, Florida.  While Quasar claims that the flight school will expand rapidly, QASP doesn't say how it can fund the planned $23 million expansion.   We don't know how well Quasar is doing or what its financial state is because the pink sheets company doesn't file anything with the SEC.

The flight school is just a part of the mystery.  QASP's really big plans involve the rollup of four separate aerospace companies.  In what has to be one of the most bizarre conference calls ever, Bradley states that Quasar Aerospace has a binding option to purchase the first of these four companies but the company cannot be named.  He also said the target company is well-known and one of the most highly regarded independent aerospace businesses in existence.  And don't worry about financing — Bradley claims that Quasar Aerospace has lined up German and/or Swiss investors (who also cannot be disclosed) to supply $54 million in non-convertible preferred stock financing. 

Adding to the intrigue, Quasar takes the unusual position that all four of its acquisitions need to close on the exact same day to save on legal fees:

We would like to also update shareholders on the closing of our acquisitions. It is critical to do the four acquisitions as a single transaction on a single day. Doing otherwise would lead to excessive transactional fees and duplication of expenses. With the obvious complications of closing four acquisitions at precisely the same time on the same day, we have to find a day and time that is good for all parties and their support and legal teams. We will be soon choosing a day and time that is acceptable to all concerned. While we tried to make all of this happen for Friday, August 28, 2009, it simply is not possible. We will provide an update when it is prudent.

Investors buying Quasar Aerospace (QASP.PK) are placing bets that: (1) the mystery deals actually exist; (2) the four-way mega-transaction will actually close; (3) the financing is there; and (4) QASP management has the skill to pull this off.   That's a huge leap of faith.

DISCLOSURE:  No positions.

After the bell today, DDRX shares were halted while the company announced that Peet’s Coffee (Nasdaq:PEET) would buy Diedrich in a cash and stock deal valued at $213 million.  Peet’s will pay a combination of $17.33 in cash and stock worth approximately $8.67 for each DDRX share.

“Together, Diedrich and Peet’s will create new growth opportunities for Diedrich’s brands and further drive household penetration of the K-Cup market,” said Diedrich chairman Paul Heeschen. “As a result, this combination benefits shareholders of both companies, customers, employees and our K-Cup business partners. Our already strong K-Cup business will accelerate under Peet’s in a way we could not achieve alone,” said Heeschen.

DISCLOSURE: No position.

"Bold Stocks," the latest label of microcap promoter Pentony Enterprises LLP, bills penny stock Skinvisible as an H1N1 stock pick that "could not be more timely."  Perhaps that is because Pentony received 500,000 shares for hyping covering Skinvisible.

Hype aside, what is so special about Skinvisible?  SKVI claims to have " innovative polymer delivery vehicles and related compositions that hold active ingredients on the skin for extended periods of time when applied topically."  In other words, they now claim to have a longer-lasting germ gel. 

Skintastic also has "delivery vehicles" for about 30 other topical products.  What’s lacking is a delivery vehicle for revenues or profits.  Last quarter Skinvisible (OTC BB:SKVI) generated less than $70,000 in revenues.  Since inception, Skinvisible has incurred "net losses of approximately $17,817,346." 

In my humble opinion, it will take far more than an H1N1 outbreak to transform this penny stock into a profitable company.  Then again, unlike Bold Stocks, I’m not being compensated for my opinion.

DISCLOSURE:  No position in SKVI.  Long skepticism on paid promotion of penny stocks.

Happy Halloween to all!   If you haven’t seen it yet, take a look at my Halloween List of Spooky Small Stocks.

• Lots of negative feedback both in email and on Seeking Alpha to my post describing why I sold gold stocks, and daytraded gold futures on the short side.  The consensus believe that I am missing out on a long-term move by trading a short-term pullback.  Perhaps, but preserving capital matters too.  In the past few sessions gold pulled back more than $30, silver pulled back more than $1.50, and junior mining stocks took a beating.  I currently have no positions, short or long, in gold or silver stocks or futures.  That may change at any moment — I’m ready to take any cues the market gives me.

• Some traders learned a valuable lesson in RH Donnelly.  The bankrupt company’s old common shares traded for over 2 cents as recently as last week.  That may sound cheap, but RHD told investors it would cancel those shares, and the bankruptcy court approved the reorg. plan.   From that moment on, the shares were worthless.  The SEC refuses to halt trading in these to-be-canceled shares, but traders should understand that there is no upside to this loser’s game.  Still itching to trade shares of bankrupt companies?  Here are two much better strategies: (1) buy the shares for a flip just as bankruptcy is declared (this strategy is outlined in detail by James Altucher in Trade Like a Hedge Fund: 20 Successful Uncorrelated Strategies & Techniques to Winning Profits); or (2) buy the new shares upon emerging from bankruptcy (here is a Forbes.com article on the strategy).

• Over on the Slope of Hope, Tim Knight is looking for markets to rebound in the very short-term.  He contends that this will present a very promising entry for short positions.  I agree.  Also worth considering – Adam Hewison’s video on why the S&P probably has topped out in the intermediate-term.

• FPB Financial Corp. (FPBF.PK) announced another quarter of very respectible earnings.  I am considering pairing a basket of long positions in community banks that have posted strong results and have little exposure to commercial real estate with a short position in the mega-banks (aka the idiots who drove this country into financial crisis).  Unfortunately, FPB trades by invitation.  To date I have been unable to build a position, though I will likely continue to try.

• The CEO of Cel-Sci (Amex:CVM), Geert Kersten, says that if the H1N1 flu virus mutates, "suddenly CEL-SCI could be the most important company in the world."   Geert’s hype job helped boost CVM to a market cap of $162.9 million, but its hardly the most important company in the microcap space, let alone the world.   

• There is still plenty of time to enter the microcap stock picking contest.  You can enter at any time, and results will be measured from date of entry to year-end.  See the complete rules. 

DISCLOSURE:  no positions

As many of you have reminded me, I’ve dropped off in my posting of Century Club scan prospects.  Its not by design.  Other projects have kept me from posting, but I continue to follow and use the scan in my own trading.  Of course, anyone with a basic subscription to MarketClub can run the scan at will.  It simply uses MarketClub’s smart scanner with the tweaks described here.

PolyMedix (OTCBB:PYMX)

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Collector’s Universe (Nasdaq:CLCT)

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Mastech Holdings (Amex:MHH)

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Formula Systems (Nasdaq:FORTY)

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Scientific Learning (Nasdaq:SCIL)

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 DISCLOSURE: no positions

But when you look beyond the numbers, the trade looks a little dicier.  90% of Diedrich’s revenues come from "k-cups," those little single-serving beverage products developed and licensed by Green Mountain Coffee Roasters (Nasdaq:GMCR).  Diedrich expects $90-$95 million in revenue for the fiscal year ending June 30, 2010, about a 45-50% increase year-over-year.  K-cup sales will undoubtedly be the driver.  

K-cup demand growth depends upon the growth of k-cup coffee machines.  Each coffee machine creates an annuity of demand for the consumables sold by companies like Diedrich.  At least in terms of retail k-cup machines, those sales appear to be highly seasonal.  If the google trends chart is any indication, I expect another big holiday season for k-cup machines:

And all of those machines need a k-cup to produce every cup of coffee.  That’s where Diedrich comes in.  On Amazon.com, for example, Diedrich’s Coffee People and Gloria Jean’s brands account for 6 of the top 10 bestselling grocery items returned for the search "k-cups":

1. Coffee People, Donut Shop K-Cups for Keurig Brewers (Pack of 50) [Amazon Frustration-Free Packaging]

2. Gloria Jean’s K-Cup, Pumpkin Spice, 24-Count Box

5. Coffee People K-Cup Donut Shop Coffee for Keurig Brewers, Medium Roast, Extra Bold, 24-Count Boxes (Pack of 2)

6. Gloria Jean’s Coffees, K-Cup, Flavored Coffee Variety for Keurig Brewers, 22-Count Boxes (Pack of 2)

9. Gloria Jean’s Hazelnut K-Cups for Keurig Brewers (Pack of 50) [Amazon Frustration-Free Packaging]

10. Coffee People Jet Fuel K-Cups for Keurig Brewers (Pack of 50) [Amazon Frustration-Free Packaging]

Bottom line:  while the technical momentum for Diedrich Coffee may have slowed, I’m not interested in shorting DDRX ahead of what could be a very big sales push for k-cup makers and consumables.

DISCLOSURE:  no position.

Secured Digital Apps, based in the far east, provides mobile communication, business process outsourcing and multimedia content production services.  Today SDGL announced " a comprehensive plan to improve the Company’s business and to enhance shareholder value."

The restructuring plan involves 2 components:

1. transfer of certain core operations to Malaysian subsidiaries.  This is a "precursor" to listing the subsidiaries either independently or by merger with a US-listed company.  The subsidiaries are Juta Ketara Sdn Bhd, which will handle mobile communication applications, and Access Heritage Sdn Bhd, which will handle security related applications. These are real businesses.  In 2009, they are expected to generate revenues of $38.5-$41.5 million USD and income of $2.0-$2.6 million USD. 
2. sale of interest in V-Mobile Communications Pty Ltd. Australia.  SDGL says this investment is going to be disposed of at its historical cost of $1.385 million, which sounds like a wash to me.  That’s good news — I considered this investment to be a waste of resources.  Proceeds from the disposal of V-Mobile’s shares will be used to fund the restructure and expansion of the Malaysian subsidiaries to cope with an increasing backlog of new orders.

I’m long a chunk of Secured Digital, mostly put on while it was stuck in the recent trading range.  My initial target is $.05 — but like any penny stock I view this as a gamble.

DISCLOSURE:  Long SDGL.PK

1.  Silver non-confirmation.  For the last month, but especially the last few days, silver has noticeably underperformed gold.  Coupled with the fact that silver was unable to get anywhere near all-time highs even as gold set records (not inflation adjusted), this is a signal that gold may correct.  Of course, like any other divergence it could be reconciled by the lagging instrument catching up, but the divergence does increase the probability that gold pulls back.

2.  Junior mining stocks are relatively tepid.  Its hard to find a junior mining stock that posted gaudy gains over the past week, even as the metal hit new highs.

3.  Gold prices seemed to lose momentum just after they broke to record highs.  Could it be that stops were cleared, and now there is nothing to propel gold further in the short term?

4.  The anti-dollar trade feels *very* crowded.

Keep in mind that my analysis focuses on short-term movement.  For stock trades, I like to capture 2-6 week swings though I often hold positions for several months.  For futures, my holding periods rarely exceed a few days.  None of these factors change my long-term bullish outlook for gold.  Its just the next few weeks that worry me.

For a longer-term perspective, check out the way that Adam Hewison trades monthly signals on the gold ETF in his "Perfect Portfolio" series (free, reg. may be req’d).  The results are impressive, though obviously aided by some pretty strong trends over the past year. Like most trading systems, MarketClub’s trade triangles are trend-following. They will do well in trending markets and worse in choppy or lifeless markets.

DISCLOSURE:  for the moment I’m short gold futures and long USD futures.  I am a heavy user of MarketClub (MarketClub’s "Smart Screener" is the technology behind the Century Club scan I use to locate hot microcaps) and also an affiliate.

Its been a while since I discussed a true penny stock …not one that simply meets the SEC’s broad definition (under $5 and not traded on a national exchange).  No, I mean a real penny stock, with a price actually measured in pennies.

Here’s one that is on a roar today: NexMed (Nasdaq:NEXM).  Its traded over 18 million shares, and the day is not half over.  Currently, the stock is up about 38%.

NexMed’s move is in reaction to a company press release indicating a brighter-than-expected future for its foot fungus drug candidate:

NexMed, Inc. (Nasdaq: NEXM), a developer of products based on the NexACT^® technology, today announced that it has completed its post hoc analysis of NM100060, the Company’s topically-applied treatment for onychomycosis, commonly known as nail fungus. Based on this analysis, NexMed seeks to pursue signing a partner for further development of the product.

NM100060 has previously been tested in approximately 2,000 patients enrolled in three Phase 3 clinical studies conducted by Novartis. On July 7, 2009, the Company announced the mutual decision with Novartis to terminate the exclusive, global licensing agreement for NM100060.

Vivian Liu, NexMed’s Chief Executive Officer said, “The recently completed analysis of the Novartis data indicates a real effect of treatment in certain patient populations and continues to support our conclusion about the product’s potential for treating patients with mild onychomycosis. With the lessons learned from the Novartis studies, we are convinced that additional Phase 3 studies can be successfully conducted which, we believe, will generate significant results. Toward that end, we are currently sharing, on a confidential basis, NexMed’s highly extensive and proprietary clinical database with potential partners interested in licensing NM100060 for further development.”

If the chart breaks $.24, it could really move.  I initiated a small position at $.20.  Its a gamble — like all penny stocks — but the odds may be a little greater for a continued pop here than betting pass on the craps table.

NexMed (Nasdaq:NEXM) stock chart

DISCLOSURE:  Long NEXM (for a quick trade).