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Shares of Pure Play in the Online Investor Education Industry Up 40% on Stock Market’s Biggest Down Day in Months
May 5
By Michael Markowski
Yesterday (May 4, 2010), a day in which the Dow Jones Industrials declined by over 200 points, the shares of Global Investor Services, Inc., (OTCBB:GISV) gained by over 40% and closed at $.05.
Global, in 2009 underwent a significant surgery that it was lucky to survive. The company scrapped its high overhead and low gross profit margin brick and mortar business model and replaced with what I believe to be is a state of the art highly profitable online revenue and fulfillment model. For more information on this transformation I suggest a review of my report “Deal with Canada’s Fastest growing Online Broker Validates Emerging Company’s Business Model” that was published on November 11, 2009. I also suggest a review of my two articles “Betting the Odds” and “Cyber Gains” in which I discussed the opportunity that the investor education industry presents to investors.
Global’s financial statements have shown vast improvements in its results over its last two quarters:
- Actual gross profits increased even though revenue fell by over 40% in each of the last two quarters.
- Annualized Cash Flow From Operations improved for each of the last two quarters.
Both of the above are telltale signs of a successful transformation by a company from a change in its business models or products. When a company completely guts its existing business model investors should expect a sharp decline in revenue with an increase in gross profit margins. This is because the ramping up of the sales of the new products and services are masked by previous year earlier comparisons that were based on the revenue from the previous business model or products. Investors should not be disappointed as the most recent financial results by Global Investor Services indicate that this transformation is taking place.
Global’s new online business model is infinitely better than its previous one because it is highly scalable and its gross margins increase with each additional online customer they acquire. The model is scalable because the capital expenditures required for it to exponentially increase its revenue is insignificant.
I don’t believe that Global’s share price reflects the following:
- The relationship that the company recently had finalized to provide its online investor education products and services to Questrade, which is Canada’s fastest growing online broker.
- The recent announcement that Global had entered into an arrangement with a partner who is now providing it with capital to market its products and services online.
Shareholders who own shares at higher levels or investors who do not yet own shares should take advantage of Global’s extremely low share price and market capitalization. Global (former name; TheRetirementSolution.com) shares traded for as high as $.53 in January of 2007.
For more information on Global Investor Services, Inc., and the rest of the companies, who participate in the online financial sector that I am recommending go to www.onlinefinancialsector.com. For more on why I believe that the U.S. is currently in a Super Bear market and why I expect it to last until 2015 at the earliest go to www.bearmarkettracker.com. Investors should remain cautious and have their assets in 80% cash or equivalents such as short term U.S. treasury securities.
Disclosure: Michael Markowski currently holds shares in Global Investor Services, Inc.
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