JADE ART GROUP INC (JADA.OB)

This is a quick update on a stock that I have covered frequently over the past few months:  Jade Art Group, Inc. (JADA)

It looks like JADA could be in play today!

Yesterday, the stock saw a massive selloff based upon uninformed traders who saw that JADA’s revenues dropped by 50% over the previous quarter.  The selloff was completely reasonable given the news of the drop.  However, the press release issued by the company was interesting in the way it was presented.  The press release only talked about how the current 2nd Q was such an improvement over the previous year’s Q:

• Revenues were up 42% over the previous Q
• Gross profit was $1.9 million, compared to $1.1 million in the second quarter of 2009.
• Net income in the second quarter of 2010 was $1.1 million, an increase of nearly 200% compared to net income of $0.4 million in the second quarter of 2009.
• Basic and fully diluted earnings per share in the second quarter of 2010 were up $0.01 from $0.00 in the second quarter of 2009.

BUT (and that is a big but)….Revenues dropped over 50% from the previous fiscal quarter.  It appears, from looking at historical financials, that their business is cyclical.  Most traders seem not to be aware of that.

Here is the chart:

Yesterday’s big selloff is a great buying opportunity imo!  This is a great company that is steadily increasing EPS…margins are good, cash in increasing.  Cyclical companies get punished for putting out numbers like these for the second Q, but savvy investors take advantage.

The knife might fall further for today, but I believe that you will see JADA make a strong recovery soon.  Watch it closely for any turn.

Here is what I am looking at for entry/exit points

Last Close:              $0.34

Buy Opinion:          $0.30 – $0.37

Short Term Sell:   $0.45

Long Term Sell:     $0.70

Good Luck and Great Trading,

Jeffrey Dean

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