Nutracea postmortem
Thursday, August 16, 2007, 2:43 AM
Stocks by John
My experiment with my first year of investing hit a big pothole yesterday. That pothole was Nutracea's second quarter conference call. I've tried to get a spread of stocks. Big cap, regular dividend companies, like BP. Small cap, high growth companies. And a PK and an OTC BB stock. Nutracea turned into an absolute nightmare today.
I'd like to believe the long term prospects are good for NTRZ. But, by their own admission, the prospects are horrid. They've all but written off the American market. They refuse to answer how much of the higher margin Phase 2 product they sold. They stated that their best markets were overseas where standards weren't as strident as in the US. Advertisements
Nutracea is stuck with its Phase 1 product, which is just animal feed. They aren't even selling any Phase 2. God only knows why. They claim they had to keep commitments to sell equine feed first, but that sounds like bullshit. If they had good orders for Phase 2, they would have burned their Phase 1 customers a to a friggin crisp.
Of course, these probably aren't people who ever read Machiavelli... still, these are not the actions of people who smells success nearby. These are the actions of men who are trying to build a dam while they hear the rushing waters a mile away. Not good.
I have simply had it with this company. Maybe NTRZ does have an upside. But, to be square, such second-rate people don't deserve to thrive. Not on my dime, if I can help it.
I made a big mistake, and reached a little lower for a stock than I usually do. I thought this was a BRLC, a stock that was being pounded even though it has a great product. It isn't. They have no idea how or where to market their product. They want to sell into animal feed, nutritional supplements and snack foods. They're too small to serve so many masters. It won't work.
Now they're trying to become a company that makes money by licensing their IP. However, there hasn't been a big rush to license the IP. Odds are, the market is better for the milled product than for the IP. Who wants to screw with so much effort on a low-margin product, when they can just buy it finished?
And why is this company sitting on cash? And why is it sitting on the right to dilute the hell out of shares? There is no buyback in sight. There seems to be no build out anymore. There seems to be very little utilization of existing capacity to produce higher margin Phase 2 product.
In short, NTRZ is doggie paddling and doesn't have a clue about where the shore might be.
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