Dow Jones 12650.36 +207.53 1:33 pm PST, January 31, 2008 NASDAQ 2389.86 +40.86 For info, visit access.smallcapnetwork.com S & P 500 1378.55 +22.74 Change your subscription status here Russell 2000 713.30 +17.81 VOLUME 08 : ISSUE 10 Like Altoids, Some Small Caps Are 'Curiously Strong' Well, it looks as if the Fed managed to inspire someone to buy stocks today, despite a rather large pullback shortly after the post-announcement rally on Wednesday. One day doesn't make a trend, but a few days does. The interesting part about the last few strong days is the group of stocks that has emerged as a leader.  Hopefully my comment at least prompted you to ask 'which stocks?' Glad you asked. We'll be talking about some of them today. But first...  I'm not going to belabor the point that small and micro cap stocks have an on/off switch, and it's been off for a while. I've also mentioned - in passing - that I'm starting to sense the switch could be flipped 'on' soon. And while I'd love to say "as of right now, yes, small caps are absolutely leading the market higher", I can't...not yet anyway. I can say, however, that small and micro caps have had a much better performance in the last two weeks than their mid and large cap brothers have.  In other words, much like Altoids candy, some of these small caps are 'curiously strong' now....curious enough for all of us to take notice. Let's look at three of these Altoid-like stocks, and then I want to wrap up with one final thought.   Spicy Pickle  'Business as usual' can be a very good thing, if your usual business is growing a solid revenue machine. Spicy Pickle (OTCBB: SPKL) has turned out to be a great example of how good companies don't have to worry too much about their stock's price as long as they continue to execute the right plan.  Take today's news as an example. They announced they've signed leases for two new corporate owned restaurants (as opposed to franchisees). That shouldn't come as a shock to anybody, since they announced that was part of the plan back on December 15th. Is the news complicated? No. Is it life-changing? No. Does it show progress? Yes, absolutely. That's my point.  If you look back closely at the news and follow-up Spicy Pickle has made, what they've done is real simple...they told investors what they're going to do (i.e. total transparency), then they go do it. Brilliant, eh? A lot of other companies could learn the same lesson.  I truly believe that's why the stock has been able to hold its ground relative to early November's levels. Just for perspective, since November 8th, SPKL is about even. Since the same date, the S&P 500 is down 7.0%.  The major support line appears to be around $1.10, and was basically established on November 8th. Since then we've seen some modest accumulation days, with very little distribution. That hasn't necessarily helped yet, but I think it hints at the underlying opinion. Consider the environment and the comparative numbers above...if SPKL can hold its ground in a very tough market, I think it could do very well when things are better.  By the way, the corporate owned stores are desirable for investors because these stores tend to make more money for the company than franchised ones do.  The franchised units send 7% of their top line sales to Spicy Pickle every week, and the average franchise ends up paying royalties of about $50K per year. The remaining profits are retained by the franchisees. The corporate-owned stores, by comparison, basically get to keep all the profit. The trade-off is involvement - when you own your restaurant, you also have to operate it. When you franchise it, someone else operates it and pays you royalties.  The full press release appears below.   Applied DNA I actually blogged this observation on Wednesday, but I thought it was important enough to put it front and center here in the newsletter.  What's gotten into Applied DNA (OTCBB: APDN) over the last few days? On the 18th, the stock jumped off the 20 day moving average line and hasn't looked back since. It reached 16 cents yesterday, a mere penny shy of matching a multi-week high. You could argue the market-wide rebound was the reason, but APDN started to move before stocks finally made a bottom on the 22nd.  The odd part is how the rally took shape without any simultaneous news. After a fairly lengthy quiet period, they unleashed a wave of good news in the middle of January. Apparently that was enough to put and keep things in motion for a while...which is a good thing.  Or, perhaps this is an omen. In my experience I've seen stocks 'predict' news as often as they reflect it. We also know that Applied DNA has been working on a lot of different projects, each of which could bear fruit. (See this page for a synopsis of the company's open projects.) Maybe another piece of fruit is ripe, and that's what the chart's saying. Anyway, the three key aspects I like best about this chart are...  The buying volume is starting to grow. Tuesday's 370,000 shares is the biggest accumulation day we've seen in a while, and we're starting to see quite a few of them. With the exception of January 23rd, distribution (selling) days are very mild.  APDN is above all of its moving averages...again. I know this is a painfully simple tool, but it's also something that can't be misinterpreted. If you like momentum, moving averages tell you everything you need to know. (If you're a bottom fisher, they tell you nothing.)  The aspect I almost like? APDN is on the verge of new multi-week highs. Technically that level is 17 cents, though 16 cents is significant too. A move to 18 cents I would consider a victory, but also a great breakout move. Yes, that means trade-worthy - at least in my opinion.  Look for more as things develop. I suspect we'll have news soon.    Stockgroup OK, Stockgroup Information Systems (OTCBB: SWEB) isn't one of those small caps that's been 'curiously strong' over the last couple of weeks. However, it was wildly strong on Wednesday, with huge volume to boot.  The 1.1 million shares we saw trade hands was the highest volume we'd seen in over a year, and the fifth highest volume day ever for the stock. And no catalyst?  I have to believe that's institutional buying, since most individual investors wouldn't be buying so boldly just three days after a multi-month low (nor would most people be buying when they see SWEB's long-term downtrend). Institutions, on the other hand, have the time and resources to shop for real value. Half of a million dollars worth of the stock was traded. So, somebody - or somebodies - with deep pockets may have been waiting for this stock to really get to a deeply undervalued level. And, I'd say the move from a peak of $1.45 to a low of $0.42 (a 71% pullback) more than qualifies as just that. Picking up on an undervalued stock the rest of the market didn't pick up on, I think they pounced.  The question to be asking is obvious - what do they know that nobody else does? Hmmm.  By the way, they made a pretty big announcement this morning about finding a partner in Norway. The wireless financial data service they developed and started promoting about a year ago? Trigcom AS - a big player in the Norwegian BlackBerry/wireless arena - will be promoting that service in Norway.  I don't have enough room here to get into all the details, but there are two I do want to convey about Trigcom's decision to start selling the MarketStream service.  One,this may only be one market, but I think this relationship (sharing subscription revenue) can serve as a model for other regions and telecom service providers to do the same. When you start to add the same offer in other countries, all of a sudden you're looking at an annual seven-figure opportunity.  Second, this is high-margin stuff for Stockgroup. The software platform has already been developed, and Trigcom will be doing most of the marketing work. So, any new revenues should largely go to the bottom line.  For all the details, click here.   Final Thoughts As promised above, some final thoughts on these and other curiously strong small caps....  Though the Fed has been dovish due to fears of economic slowing, I think at this point a recession is inevitable. Like I said in Saturday's edition though, it's not a reason to freak out. Some stocks actually do well in a slowdown.  One of the potential beneficiaries of a cooling economy are small cap stocks. These companies tend to nimble and lean - something very important when navigating a tough environment. Still able to perform even when large companies are struggling, investors tend to seek out these relatively protected stocks during a recessionary period.  Is that what we're seeing now? Maybe. A recession has become a much greater threat in the last two weeks, and the Russell 2000 has started to lead the market (after a very long drought, I might add) as of then.  Or, maybe the small cap market is rebounding because they've been beaten up so badly for months.  Or, maybe it's a combination of being undervalued as well as the threat of recession - which happens to be my opinion.  At this point it doesn't matter, since I don't think we have wildly-conclusive evidence of anything. I did want to put it on the table though, so we can come back and discuss the idea later. If we enter a full-blown recession caution is merited, but I suspect we'll see many small caps start to thrive. I'm actually kind of excited, but I also know of a couple of new companies in the pipeline. More on that later.  Here's the Spicy Pickle news.   Spicy Pickle(TM) Expands With Two New Corporate Locations to Open in Spring  New Director of Corporate Operations Hired To Manage Corporate Locations  DENVER--(BUSINESS WIRE)--Spicy Pickle(tm) Franchising, Inc. (OTCBB: SPKL.OB) announces the signing of two leases for new corporate restaurant locations, both to be completed in Spring of this year. In conjunction with the expansion of its company-owned units, Spicy Pickle(tm) also announces the hiring of 17-year fast casual veteran, Mike Neil, to manage the corporate store division.  Construction has begun on these two new Spicy Pickle locations. Once completed, there will be a total of three company-owned restaurants, including the new corporate commissary bakery and training facility already in operation at 1298 S. Broadway in downtown Denver.  The first new restaurant unit, located at the high-traffic intersection of Parker Rd. and Iliff St in South Denver, is part of a newly renovated restaurant park known as the Promenade on Parker. Spicy Pickle will share common space with Chipotle, Starbucks, Tokyo Joes, and 5 Guys Burgers.  Marc Geman, CEO of Spicy Pickle Franchising, Inc. commented: "We are very pleased to have secured this lease in an underserved area of Denver. The complimentary restaurants will significantly add to the customer traffic in the Promenade development."  The second new site will be located in Ft. Collins, Colorado at 2120 E. Harmony Road. Spicy Pickle will share retail space with Chipotle in this newly constructed shopping area. Nearby is a large Hewlett Packard campus and other white-collar offices that represent the ideal Spicy Pickle demographic.  To help manage the growth in its corporate operations, Spicy Pickle has recruited Mike Neil to run the operations of its company-owned restaurants. Neil previously worked for the Jason's Deli chain for 17 years, and managed their growth from 5 units to over 100 units. Neil is a Certified Franchise Executive with the International Franchise Association, and earned his MBA degree after leaving the company.  Mr. Geman commented, "Mike Neil is a great addition to our infrastructure, and this is key to running a successful restaurant operation. Mike comes to us with significant experience in growing a concept and has overseen restaurants with similar operations. We expect Mike to make an immediate impact on our system."  About Spicy Pickle(tm):  Founded in 1999, Spicy Pickle Franchising, Inc. (OTCBB: SPKL) serves high quality meats and fine artisan breads, baked fresh daily, along with a wide choice of eight different cheeses, twenty-two different toppings, and fourteen proprietary spreads to create healthy and delicious panini and sub sandwiches with flavors from around the world. As a leading "fast-casual" concept, Spicy Pickle(tm) offers menu items that are far beyond traditional fast food, but without the price point of casual dining. The hallmark of a Spicy Pickle(tm) restaurant is quality, service and an enjoyable atmosphere. The company is headquartered in Denver, Colorado, with franchised locations now open across 12 states and many more in development nationwide. For more about Spicy Pickle(tm), including franchise information and inquiries, visit http://www.spicypickle.com.  Forward-Looking Statements:  Certain statements in this press release, including statements regarding the number of restaurants we intend to open, are forward-looking statements. We use words such as "anticipate," "believe," "could," "should," "estimate," "expect," "intend," "may," "predict," "project," "target," and similar terms and phrases, including references to assumptions, to identify forward-looking statements. The forward-looking statements in this press release are based on information available to us as of the date any such statements are made and we assume no obligation to update these forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements. These risks and uncertainties include, but are not limited to, the following: factors that could affect our ability to achieve and manage our planned expansion, such as the availability of a sufficient number of suitable new restaurant sites and the availability of qualified franchisees and employees; risks relating to our expansion into new markets; the risk of food-borne illnesses and other health concerns about our food products; changes in the availability and costs of food; changes in consumer preferences, general economic conditions or consumer discretionary spending; the impact of federal, state or local government regulations relating to our franchisees and employees, and the sale of food or alcoholic beverages; the impact of litigation; our ability to protect our name and logo and other proprietary information; the potential effects of inclement weather; the effect of competition in the restaurant industry; and other risk factors described from time to time in our SEC reports.  Contact:  Spicy Pickle Franchising, Inc.  Marc Geman, CEO, 303-951-2530  ir@spicypickle.com  Source: Spicy Pickle Franchising, Inc.   We Value Your Feedback   Got comments, questions or suggestions? 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To the degrees enumerated herein, SCN should not be regarded as an independent publication.  Click Here or go to http://access.smallcapnetwork.com/compensation_disclosure/ to view our compensation on every company we have ever covered, or visit the following web address: http://access.smallcapnetwork.com/profile_disclosure/ for our full profiles and http://access.smallcapnetwork.com/alert_disclosure/ for Trading Alerts.  TGR Group, LLC has been paid a fee of $30,000 cash and 1,000,000 shares of newly issued restricted stock by Applied DNA Sciences Inc. for coverage of the Company.  Larry Isen, the editor and publisher of the OTC Journal, through various entities he controls, has purchased 1,200,441 shares of Spicy Pickle at an average cost of $.2125 per share. These purchases were made in Spicy Pickle private offerings. The aforementioned purchases were made between August of 2005 and August of 2006. 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