Hot, Hot, Hot, Hot, Hot Stocks, page-6

The only small cap I follow that fits in is Adultshop (ASC).

-Market cap at 20c is $60m
-No Debt
-Managers own a big chunk of stock
-Operating cashflows on the increase
-Current profitability can easily support a share price of 40c.
-Are the dominant player in on line sex, both the pay sites and the retail sites.
-The top searches in Altavista (USA) and excite numbered 1-8 are owned by ASC for search word "sex". Note these positions fluctuate by the day but ASC has dominated the top 10 for the past 2 months (I've tracked this for 2 months).
-Sellers now are traders that expected the quarterly result to be better... there has been little press apart from the West Australian article and the big boys don't follow the stock which explains the immediate lack of interest.

If your patient and want to hold for 3-6 months 20c is an excellent buy opportunity. Looking at the market depth you might even be able to get them closer to 18c in the coming days.

Anyway, after more investigation this afternoon I have revised my estimates for the 2nd half to 10m profit after tax (which includes tax even though they probably won't pay tax given their past losses for a few years). This number also assumes a depreciation/amortisation amount of 1m per quarter.

Please note that the numbers above are my rough numbers only and that I grossly over-estimated this last quarters results.

With 11m in the bank and positive cashflows I'm quite confident ASC will trend up in the second half. I still own heaps of shares and will hold most till half year results unless a good trading opportunity presents itself.

Please feel free to ask any questions & read the red stuff below.