The Musings of a Skunk

((WARNING: The Skunk is about to share HIS OPINION. If you occasionally suffer seizures reading opinions you do not agree with – then do not go past this point! I expect less that one in twenty will agree with me – BUT I can handle that - can you??))

What makes a Turnaround Stock?

TWO THINGS.

FIRST a stock has to be so oversold nobody wants it. People sell it on emotion. They don’t want to be associated with a “loser”. The price falls; because the price falls; because the price falls; because the price falls. It becomes a closed circuit with only one input. Investors are fixated on the share price and the falling price. They are oblivious to other indicators. The stock becomes grossly oversold.

The SECOND thing that makes a turnaround stock is rising value. Notice I did not say rising share price, since at this point share price is merely a measurement of emotion. First revenues rise; then losses slow; and thirdly profits take hold. There is earning per share and a shareholder value is assigned to each stock. The stock is now worth more than just its potential. It has actual earnings value as well as the potential to earn. Investors can now see, taste and feel the value. Investors can ignore and be blinded to almost everything – but they will not ignore earnings per share. At this point the share price rises. New investors notice the sustained rise of the share prices and scramble to get on board. Speculators become investors. Over a period of months or years the price builds and perhaps after a certain point the stock goes up; because the stock goes up; because the stock goes up. Now the pendulum may swing past the worth of the share to an overbought position – and the perfect speculator/high risk investor sells into a market top.

Now the million dollar (literally) question is, "Is GERS a turnaround stock?" And if it is, where in this time-line are we?

You have to decide for yourself if GERS is a turnaround stock, or just another “loser” stock on its way to BK. The Skunk came here thinking the COES technology would make this company a turnaround stock. He believes that today with more conviction than ever.

How dare the Skunk say "that" when we are hitting new lows?!?!?!?!?

Well I don’t want to say that PPS does not matter – but in this discussion - “The PPS does not matter.” If it is a turnaround stock – then one should expect oversold lows. At this point in the time-line PPS is only a measurement of emotion. I hope not to trade or invest on my emotion. I will however, allow the emotion of others to benefit me. The question I hear over and over from other investors is "Why would anyone buy this stock? Its gone down so far!" The question I always ask myself is "Why would anyone buy any stock that was trading at or above its actual value??"

Skunk we are all ready for the stock to climb! Is it now?

Although a Nickel seems a good a spot as any, the Skunk is not calling the low today. In fact I think we are not quite ready for the climb up. We might have one, maybe two disappointments yet to suffer. We have certainly seen price decline. We have seen a lot of negative emotion. Some technicals made it appear we might have reached the bottom at a dime, but the reality on the ground was not ready to support that bottom. It was not to be and we have since darted down almost to a nickel. My best guess right now is that the bottom will be reached within the next sixty days.

What will trigger the bottom?

I now suspect that we may hit bottom after the release of the second quarter filings or perhaps in conjunction with some other unforeseen event. The reason I suspect the second quarter filings may produce the final low is not due so much to the lack of progress, but the failure to meet the high expectations of progress combined with investor fatigue. I see five reasons building for a final low after the second quarter release.

First we know that we only had only two COES producing about half? capacity in the second quarter.

Secondly, we know that the seed crushing plant may have slowed operations in anticipation of expansion and that their huge 1Q revenues were the result of a sell off of feedstock, something that cannot be duplicated. Even good numbers will pale in comparison to the 1Q revenue numbers.

Thirdly, we know that we did not take over NextDiesel until midway through the 2Q, too late for added value revenues to have much of an impact. These first three things point to lower revenues - or at least lower revenues than many may expect.

Fourthly, as of July 1st, GERS is contracted to start principle payments on the revolving credit for the COES. The greater of 100K or 30% EBITDA is due to YAGI at the beginning of every month. This added expense , combined with the 250K due on the debentures, may significantly increase our cash flow problem. Between the Annual and the 1Q report the only dilution was to purchase NextDiesel. If any has been sold since to pay these additional bills, it will be disclosed in the 2Q report. Stock dilution will apply short term selling pressure on the stock.

Lastly, we have not had a final technical washout. Sure we have had falling share prices, yet the volumes were very small. The price has moved up and down on small trades. In May we had a couple days above 500K shares sold. We have been below 300K since. We have had a few ol'investors sign off the message boards, but very few. I suspect before we can round the corner we may see a week with about three days above 500K shares selling into falling prices.

Skunk - You gave us some reasons for the stock price to drop after the 2Q release - but none as to why it will go up? Maybe it will just continue to go down?

Maybe, but I don't think so. I suspect that in the 60 days prior to the 3Q release enough good news will surface about the 9 revenue producing COES coming on line that the price will stabilize and slowly move off the bottom. I suspect during this time the share price will find support above a dime and below a quarter.

Skunk, you predicted a trading range of 45-75 cents and a 60 cent finish to the year. How do we get there?

The Third Quarter Report comes out midway through the fourth, about November 17. I suspect that enough timely good 4Q news will be included, that investors will be able to project that the company will be profitable or at least on the verge of positive net income in the ongoing 4Q. The share price will then break through the 10-25 cent trading range and move into the 45-75 cent range for the remaining six weeks of the year.

Have we seen signs of rising Revenue?

Yes. The 6.5M in revenues in the first quarter, after this company completely replaced its revenue sources from garbage sorting to alternative energy is a key fact that has gone mostly unnoticed by the very few investors who follow the stock. Most seem fixated on pre-clean energy company stock dilution and performance, personalities and most importantly: share price.

What are the signs of getting past the PPS bottom?

The only way I know to tell we are past the bottom is to look in the rear view mirror. We will only know we are past the bottom when we are past the bottom. Here are a few things the Skunk will be looking for:

1. Both monthly highs and monthly lows are higher than the previous month.

2. A secondary bottom develops at least 100% higher than the 52 week low.

3. A third bottom develops at least 50% higher than the secondary bottom.

4. The stock moves up on good news.

In conclusion, I am more concerned with financing and COES construction/production, than I am with today's PPS. If we have not seen it already, I expect to see our all time low within the next sixty days. I would not be surprised to see the 2Q report as the trigger for the final low. I expect us to move to between a dime and a quarter from mid September to mid November. I expect us to move in the 45-75 cent trading range in the final six weeks of the year.

Finally - no surprise to you regular readers - I am not a biblical prophet. If there is one covering Greenshift - somebody please send me his blog address! What I do is mostly let you look over my shoulder at any dd I scrape up. Today I tried to fill in the road between where we are today and where I think we will be at the end of the year. I am an optimist by nature, and that tends to affect how I see the future. Expect significant changes as the tires hit the road! In case you missed it - the biggest call I am making - and the only one that really matters - is that I am saying that in the next six months I expect this stock to have convincingly turned the corner.

FORECASTS
EOY 60 cents with 45 -75 trading range**
(using pre-interview assumptions)
$4.91 Share Price in FEB 2010**
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Note: I am a shareholder - I do not work for, nor do I receive any direct or indirect payment from GERS or anyone associated with them. (But it would be Kapitalist Kool if I did) I will not intentionally mislead - but I can be wrong (ask Mrs. Skunk for specific frequencies) - so do your own due diligence - and take responsibility for your own financial decisions – (and your own life in general) good or bad. And some good garage logic luck to ya.

Skunk