QuoteMedia: Trading Volume Up 8-fold! A Prelude to Higher Prices?
Jan 09
QuoteMedia (OTCQB: QMCI) is a leading provider of stock market data and research solutions for online brokerages, clearing firms, banks, media portals, public companies, and financial service corporations. Its larger competitors include Reuters, Thomson and Bloomberg—each competing for a piece of a +$7 billion dollar industry.
The Dow Jones, Toronto Stock Exchange, Zacks, Business Wire, NASDAQ, Forbes, JP Morgan, FolioFN, just to name eight, are customers of QuoteMedia. Its cloud based software solutions consist of data feeds, data applications, interactive content, and portfolio management systems. With direct feeds from all exchanges in the USA, Canada, and Europe (70 exchanges worldwide), QuoteMedia is a comprehensive source for all market related information.
Stop, look, and listen
Someone or something has been aggressively accumulating QMCI over the past six months. On average, daily trading volume has increased 800% from roughly 10k to over 80k shares… while the stock has remained flat.
Why does trading volume matter?
Simply put, when investors buy or sell stock they are talking with their money— when people put their money where their mouth is we should listen, or at least take notice.
Accumulation: the calm before the storm
Chart patterns evolve in phases, the first phase before any large move higher is called “accumulation”. During accumulation, which can last for months or years, the savvier, more in-the-know traders are building their position(s). When a large player wants to acquire stock it can’t fulfill the whole order in one day without driving up the price, so it’s done slowly but surely over a period of time.
After accumulating a sufficient amount, traders will begin to “mark-up” (2nd phase) the price. Ideally, this would be timed accordingly with news flow. When all information surrounding a stock sounds and feels great, that’s normally when the traders who got in early will begin selling (taking some profits). The last phase, “distribution”, is part of the peaking process. When a stock is moving up 25% or more day after day on skyrocketing volume, the big players who got in early are distributing, only too happy to sell-out to eager buyers.
Mysterious moves: additionally, something strange happened on July 25th 2014, when on NO NEWS QuoteMedia’s stock traded up to 14 cents (+200%) on 3.9 million volume—the most activity since 2003! This could have been a meaningless pump and dump scheme, but either way it seems to have injected some life back into the name.
The next BIG thing for QuoteMedia
“Trade integration” with a brokers back office is the big catalyst for QMCI going forward. For at least 12 months now QuoteMedia has been developing software to incorporate trade execution and reporting functionality (brokerage customers have been asking for it)… and now it’s ready for adoption. Ultimately, we’re just waiting on the official announcement.
Why has QMCI been stuck in the mud for ten years?
After racing higher by 13-fold in 2003 QMCI has drifted down, down, and down some more. Literally, outside of causing financial and psychological pain to anyone holding it, this stock has done nothing for the past ten years!
So, in a kind of sort of way, the stock has already done so bad it must be good. One could actually make a strong argument that QuoteMedia is dirt cheap at today’s 4 cent price [Market Cap = $4M]. Total licensing revenue for 2013 was $9.4M and year to date revenues are $6.8M. Sure, the company is losing some money (operating loss $531k YTD), but it should be able to grow for the first time in a long time upon brokerage client adoption of “trade integration”.
Two more items have dinged this little company pretty good:
1) QuoteMedia lost one of its largest customers in 2013 do to bankruptcy; Penson Worldwide was worth about $300k in annual revenues.
2) Weakness in Canadian currency
Obviously, if revenues weren’t stagnating these minor dings wouldn’t have dented the income statement. I have to say: shareholders and anyone else still paying attention must be stumped by the lack of sales growth. Seemingly, QuoteMedia has competitive products and pricing, it has earned the business of a host of blue-chip clients… something doesn’t add up? Either this miniature-ship is going to turn around, or it will continue drifting aimlessly from upper right to lower left.
Skin in the game?
Management and insiders have quite a bit, of the 90.4 million shares outstanding only 54 million are held by non-affiliates. In other words, affiliates of QuoteMedia own approximately 40% of the equity (perhaps 53% if you include related trust accounts). In my mind, that one statistic improves the odds that money can be made by purchasing QMCI below five cents per share. From another perspective, a +51% controlling interest has probably prevented aspiring activists and takeover-types from stepping in.
Robert Thompson, Dave Shworan and Keith Guelpa have been involved since the beginning— if QuoteMedia goes to zero I suspect their stake would go down with it. Not just the shares either, QMCI owes $7.4M to “related parties”.
This has got to be the quintessential, value oriented, penny-stock-fans penny stock!
After trending down for ten years, if and when this thing turns around it will happen in a hurry. As I stated at the outset, something is bubbling underneath the surface, but it hasn’t boiled over yet. In my experience, when monstrous volume races in and drives a stock up 200% intraday on NO NEWS (Eg. July 25th 2014) someone knows or expects something.
I’m betting that something is going to be really good or really bad, and at current price levels the risk reward is interesting— over the next 12 to 24 months the downside for QMCI is 4 cents and the upside is 40 cents.
*Author has a long position in QMCI
