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mroc237 (22.74)

Penny Stock DIVIDEND? 44% Yield! 12/15 Ex-Dividend

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December 13, 2010 – Comments (27) | RELATED TICKERS: BMY , PFE , JNJ

I stumbled across this company: American Surgical Holdings Group- ASRG, recently. A stock price of less than $1.50, great business model and most importantly let alone revenue generating, they are PROFITABLE!

 

Actually very profitable! Annualized .32 EPS this year (.08 this quarter) and they declared a .16 dividend (after last quarter paying an .08 dividend)! This is one I'm sure UltraLong would flip out about. Small cap, huge potential in the health care market, sustainable growth and a steady stream of earnings and dividend payouts! I'll do my best to get UltraLong to check out the company and add his own two cents, but this seems like a huge growth stock.

 

Check it out youself but I had to say something, of course when I did my own diligence I bought a small "get to know you" position, so be aware of that and do your own diligence.

 

Positions: Long ASRG

27 Comments – Post Your Own

#1) On December 13, 2010 at 4:30 PM, ThankHedgens (64.80) wrote:

I saw that too, seems like a good long term play even regardless of the dividend. I'll probably get in tomorrow though before ex-dividend date. Don't wanna miss that 40% yield

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#2) On December 13, 2010 at 4:37 PM, mroc237 (22.74) wrote:

Yeah, def worth looking into even without the dividend

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#3) On December 13, 2010 at 4:57 PM, easynow7 (< 20) wrote:

Sounds like a scam

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#4) On December 13, 2010 at 5:27 PM, mroc237 (22.74) wrote:

A scam? I disagree, look at their financial reports. This is far from a scam, most penny stock scams go up on meaningless news reports. This company has made consistent profits, has revenues and even pays a dividend. Those are three things I've never seen a penny stock scam do.

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#5) On December 13, 2010 at 5:47 PM, kristm (99.75) wrote:

Awesome how everybody who loves this stock has a CAPS score below 50. That gives me the utmost confidence.

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#6) On December 13, 2010 at 5:54 PM, mroc237 (22.74) wrote:

Lol, good point but again all I'm saying is for people to do their own diligence, don't believe or disbelieve anyone just because of a number

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#7) On December 13, 2010 at 5:57 PM, RaiseMyDiv (52.19) wrote:

There are usually reasons that a stock would have such a high yield.

Sure it has a 44.14% yield as of todays closing price, but it has a very high payout ratio. The payout ratio is over 100%. Looking at the last 4 quarters, they made $0.19 per share. With a $0.16 dividend this quarter and a $0.08 last quarter, that makes a 126% payout ratio.

 Also, the price is extremely unstable. You can easily lose more than the dividend just by the price movement. It is $1.45 now, and only 1.5 months ago it was $0.97. That would easily make the dividend not worth the risk. 

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#8) On December 13, 2010 at 6:10 PM, mroc237 (22.74) wrote:

True, but if this trend of revenue, profit and dividend growth continues those concerns are unfounded. Of couse if you bundled in quarters where they didn't make a small loss then annually the payout ratio is above 100%, but in the two consectuvie quarters they did pay dividends they also made large profits.

 Also why would management declare consistent and increasing dividends if they expected profits or revenues to be unsustainable? That would make the company bankrupt, which doesn't seem to be in the best interest of owners, trading two quarters of dividends for a company worth nil, and btw 70% of the company is owned by insiders. I just don't see them sacrificing millions of dollars for .24 cents a share this year.

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#9) On December 13, 2010 at 6:15 PM, Seano67 (86.40) wrote:

Interesting. I'll be curious to see how this thing does over the long haul, so if you feel like updating its progress in the future, please do so. Good luck with it!

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#10) On December 13, 2010 at 6:17 PM, mroc237 (22.74) wrote:

Yeah I'll do that. Of course it could drop down to below a dollar in a month or two, but I seriously doubt even if it does it will remain there forever. The financial reports, business model, dividend announcments and general bullishness in the healthcare sector all look like huge positives for this company.

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#11) On December 13, 2010 at 6:29 PM, mroc237 (22.74) wrote:

Looking into financials more they are debt free and let alone growing 45% EPS each year, they are also sitting on plenty of cash with which they could sustain a quarterly dividend. If so this stock is like the perfect hybrid of growth and yield. I've never seen anything like it.

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#12) On December 13, 2010 at 7:10 PM, chk999 (99.97) wrote:

This is a tiny little company and those can be volatile. Be very cautious.

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#13) On December 13, 2010 at 7:21 PM, mroc237 (22.74) wrote:

Appreciate it, and of course there is inherent risk, but the data looks solid and prospects good, can't completely ignore the outstanding potential.

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#14) On December 13, 2010 at 7:49 PM, gman444 (28.79) wrote:

Facinating company--enough to do some research on.  I've concluded a few things from what I read:  First, just from a quick look at a 5-year chart, the stock bottomed at the S&P 666 bottom, and it looks like about a 10-bagger during 2009.  The stock has steadily decreased in 2010 until about 1 month before the Dec 1st announcement of the dividend--it has doubled since then.  This is a bit suspicious to me.

Even more interesting to me is what this development has to say about the direction of health care in the US.  The company appears to be riding the current of cost cutting in the delivery of health care.  My guess is that the surgical assistant replaces a physician on a particular surgical team, acting as assistant to the primary surgeon.  The hospital could contract with ASRG for the provision of surgical assistants.  This would reduce the hospital's costs significantly, both because the surgical assistant makes considerably less than an MD-surgeon, and because the hospital can cut it's workforce, replacing hospital employees with contracters--a type of outsourcing, if you will. 

Prominenlty displayed on the company's webist is the JCAHO gold seal of approval.  This company's survival would certainly be dependent on maintaining that.  If it can do so, and insurance carriers continue to pay for surgeries utilizing surgical assistants, this could become a new model for health care delivery (if it hasn't already)--it cuts costs.  On the other hand, if there is something unsavory about ASRG and they lose the JCAHO approval, they are toast.   What this means for the quality of health care being delivered is, well, the topic of another discussion.

The skinny on surgical assistants: 

http://www.caahep.org/content.aspx?ID=52

You can see that surgical assistants go through 10-22 months of training, and start out making 55 to 75k per year, with an ceiling of 120 to 200k. 

 Company website is:

http://www.asainc.us/

If you click on the "our assistants" tab, you will see that the people have a variety of non-physician backgrounds; there are also numerous physicians from 3rd world countries that have obviously been unable to get licensed as surgeons in the US.  This is a quote I cut and pasted from the website:

      An added auspicious aspect to the utilization of the services of surgical assistants, is the cost effectiveness to the patient, the insurance carrier, the hospital and the surgeon, offering a reasonable alternative to the runaway cost of one aspect of healthcare without compromising the quality of service to the patient.

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#15) On December 13, 2010 at 8:18 PM, gman444 (28.79) wrote:

As an investor/speculator, the question I'm left asking is why would a company increase its dividend 900% in one quarter?

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#16) On December 13, 2010 at 8:36 PM, mroc237 (22.74) wrote:

I honestly (like everyone else besides the board) have no idea. I can only speculate that its because they don't see immediate room for investing in internal growth. This might seem bad alone, but given their steadily increasing revenue and profits it seems very unlikely that they are in any trouble. It seems more likely they can continue to grow and be profitable with minimal capital investment, and in the meantime will pay what cash they have to shareholders.

 Gman did your research about the quality of service they provide make you wary of the stock or are you saying its just something to be mindful of? I guess I'm asking overall did your research seem favorable or unfavorable? Because the numbers and financial reports are very favorable, but granted they aren't the entire picture.

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#17) On December 13, 2010 at 9:56 PM, 5thand7th (< 20) wrote:

Maybe they declared the dividend because of the uncertainty about the tax situation for 2011.  Take your money in 2010, at least that was the thinking when it looked like taxes were going to rise in 2011.

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#18) On December 13, 2010 at 10:04 PM, gman444 (28.79) wrote:

Well, what it means for the quality of healthcare vs. how successful the company becomes could be two very different story lines.  The short version of the quality story is that if this is how surgery is performed in your town, a non-physician will be cutting on you (being supervised by the primary surgeon on the team of course). 

If everything is ok, the company would seem to be a frontrunner, with incredible potential for growth--another 10 bagger from here, maybe.  But JCAHO ratings are very involved, and if there is even a whiff of trouble, this company's ability to earn anything could evaporate very quickly.  And there are a million ways for things go wrong.  It seems to me that it is highly possible this company is just a contracter, run by non-medical people.  If so, they would seek out people with a surgical assistant certification, do the legwork of hooking them up with various hospital teams, and contract with the hospital for the surgical assistant's services. 

I don't know anything about the quality of the schools offering the training for the surgical assistant's certification.  There are many "diploma mills" out there in every area of study, who get accredited, offer very little in the way of actual education, and make a bunch of money. 

Another example:  there are many fine physicians from other countries whose experience and/or training is not recognized by licensing bodies in the US, and are unable to practice medicine here, unjustly so.  Some of these become licensed as nurses, or apparently, surgical technicians in this country.  There are also undoubtably those who are terrible doctors in Nigeria, or Afghanistan, etc., and this is part of the pool from which the sugical assistant population draws from.

You can see potentials for problems in both of the above examples, and there could very well be no way for ASRG to know what they are getting in their candidates until they get actual reports from the hospitals they are contracted to.  Take a careful look through the link I sent on surgical assistants, and read about what people are getting this certification.  It only takes one or two significant problems for ASRG to develop problems with JCAHO. 

And there are many other potential pitfalls here, but maybe you can get the idea from what I've already said. 

Here is my worst-case scenario for this company:  There is something in the pipeline that will affect their standing with JCAHO, or some other problem that has not yet come to light.  So the company insiders know the game is up and they will go under sometime in the next year.  They use most of their cash in an impressive dividend offering, which, combined with their nice-looking financials, makes them seem very attractive.  Insiders start to buy shares one month before the dividend is announced, resuscitating the price, which continues to rise after the dividend announcement.  At some point, before the bad news comes out (making it clear the company is essentially worthless), insiders sell their shares---a classic pump and dump scenario.

I have no way of knowing if my speculation has any merit, or whether this is a quality company positioning itself well to become a future 10--bagger.   But I am staying clear.  My advice, if I was forced to give it, would be to stick no more than a toe you can afford to lose into these waters.  But I would add that you must do your own research--do not stay away just based on my opinion--I would not accept any blame if you passed on a 10-bagger. 

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#19) On December 13, 2010 at 10:30 PM, metoo105 (28.58) wrote:

I purchased this a couple weeks back around $1. I was lucky enough to purchase right before the announced dividend. Here I was extremely lucky. The dividend figures that are being thrown around here are all incorrect. There is no 40% dividend. The company has not announced a regular dividend policy, and there is no indication that it intends ever to pay another dividend again.

The company appears to be very profitable. And I don't think that there are any reasons to doubt the financial statements. However, management controls this company. And the management salaries are high, and there are far too many people.

Having been around the block, I think that you might read through the lines here with respect to their statement that they are saving everyone money. Much more likely is that the patients and the surgeons are happy to have surgical assistants since neither of them have to sacrifice anything to have them there. (The patient might actually pay in an increased likelihood of an adverse outcome, but he or she is most likely not sophisticated enough to discover that fact.) The surgeon is happy because they need to commit less time to each operation.

In addition to the problem of management pay, there is the risk that the entire industry exists at the whim of Medicare reimbursement policies. This could destroy the entire business with the stroke of bureaucrats pen. Finally, there is the issue that the company is highly dependent on its employees. It is often the case the professional services companies trade at extremely low multiples for this reason. Or so I have always surmised. i.e. The chief assets of the company are its at-will employees. Given that the business is as profitable as it is, I'd guess that if it's not already so there will soon be many other folks throwing their hat into the ring. The competition will push up employee salaries.  

As a final point, there does not seem to be any logic to the locales where they do business. Going forward, this could be a serious problem.  

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#21) On December 14, 2010 at 12:32 AM, gman444 (28.79) wrote:

metoo:  Good points, all...

 

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#22) On December 15, 2010 at 5:17 PM, mroc237 (22.74) wrote:

Well the ex-dividend date has come and gone and the stock has traded down to 1.35 (ten cents lower than highest point right before ex-dividend date). So exiting now would still yield a return of .06 per share, or a 4% return in one day assuming you bought at highest price of 1.45. So the dividend trade looks good so far, and in about three months new earnings reports and seeing if another dividend is declared will be big catalysts. We'll see if the stock price continues to trade  between 1-2 or drops...

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#23) On January 02, 2011 at 1:14 PM, RaiseMyDiv (52.19) wrote:

So what is the latest news on your trade? Did you hang on to it or sell it?

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#24) On January 09, 2011 at 2:08 PM, mroc237 (22.74) wrote:

Latest news is I was right, ASRG was vastly undervalued and a private equity group stepped in and bought company for $2.87 in cash (plus other dividends, etc.) So basically over 100% return in about 2 weeks.

Next time you see a company that has PROVEN revenues and growth but is traded like its a junk penny stock don't discount it just because its a small company  (talking to you gmann and chk999). Look into it, do your own DD cause often times when something looks drastically undervalued, it is.

My next target is VPRO, they just locked up an ENORMOUS deal with SPPI yet are trading at a market cap of around 20 million. They are at least 10x undervalued at these current levels, and all my profits from spotting ASRG and going into VPRO.

Best of luck to all, sorry to those who missed out and didn't more than double their money on my ASRG reccomendation!

 Disclosure: LONG VPRO, (was long ASRG)

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#25) On January 22, 2011 at 4:11 PM, mroc237 (22.74) wrote:

For all those who were following this, my old boss (long time investor who just retired to trade personally) launched a new site focusing on reliable small cap picks and FDA biotech plays. He was the one who originally pointed ASRG out to me, and he is a very experienced and wise investor. His average pick outshines even my best lol. Anyway for those who may be interested I highly suggested trying out

 www.VolatilityJack.com

for great recommendations on legitimate high growth stocks.

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#26) On January 22, 2011 at 5:08 PM, ThankHedgens (64.80) wrote:

Wow, haven't followed this post for a while... but yeah, thanks for the update. I wish I had taken a larger position but hindsight is 20/20.

 I've heard of VPRO and I think that it def could be the next big deal. I checked out the new website, pretty rough design but great content. Really hard to find a free FDA calendar that has details past a few weeks out. Thanks for all the suggestions, keep em coming and I'll follow the site. Made a lot off ASRG buyout

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#27) On January 23, 2011 at 12:24 PM, mroc237 (22.74) wrote:

No problem, again thats:

www.VolatilityJack.com

Check it out, already some huge returns from the picks. Really hard to find legitimate small cap picks alone not to mention FDA Calendar; and all for free lol

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