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As I indicated earlier in my previous report, Dataram Corporation (Dataram) presents us with several technical bullish factors that I believe will develop over a period time to provide us with sustainable gains. It is my belief that DRAM has greater longer-term gain potential than merely a one or two day trade opportunity, therefore the opportunity to examine and secure what could be considered to be a historically cheap entry position is just as alive now as it was when I released the initial profile yesterday.
Firstly, what particularly interested me in DRAM was the massive upside volatility it experienced a few days ago. As it turns out, after reviewing further I came across DRAM CEO’s shareholder letter that was visible only on the company’s website (I could not find it in the company’s press releases using publicly available news-feeds like Yahoo Finance). Generally that would be alarming, but what the letter indicated was in my opinion a plethora of important potentially positive news for the company indicating that this may be an interesting turnaround story that has been massively discounted by the market thanks in part to the fact that the recently released shareholder letter has not yet been seen by many.
Below I have posted several excerpts from David Moylan’s (CEO) letter to shareholders:
In late January 2015, and with new leadership, the Company began aggressively streamlining operations to establish the foundation for global growth, while maximizing shareholder value. The last nine months have not been an easy journey – we made many difficult and necessary decisions to ensure the Company remained viable and relevant.
Since January, we have:
Reset the business strategy: we terminated the agreement with AMD and exited the consumer business. We consolidated the strategies and operations of four entities under a unified Dataram umbrella to leverage Dataram’s brand, unified manufacturing and support functions, and streamlined executive reporting.
Transformed our go-to-market efforts: we realigned the global sales team, added sales talent, deployed a new customer relationship management (CRM) solution, and developed and communicated a new value proposition to business partners and customers. The Company engaged partners to extend sales operations into geographies and segments where we did not have an active presence, and to assist us to penetrate further into principal territories and segments where we already did have a presence.
Reduced operating costs: we implemented aggressive efforts to increase the efficiency of our operations and improve the affordability of our products and services. We believe that these operational improvements can potentially generate nearly $4.0 million in annual cash savings, and include organizational realignment, space reduction, network optimization, benefits improvements, contract renegotiation, and improved purchasing and supply management.
Improved Corporate Governance: we updated all documents governing the Board of Directors and its committees as well as the Company’s Code of Ethics. We have updated countless operating and financial policies, and added experienced business, financial, and technology leaders to the Board of Directors.
Here is where I found the letter.
Additionally, if you have been following the news, Sandisk received a buyout offer on October 21st from Western Digital valued at $19B. Shares in SNDK raced to a high of $78.50 on the news. Normally that wouldn’t by itself peak my interest, but the recent trend of corporate buybacks and mergers suggests that this could potentially provide increased investor interest towards company’s in the memory industry, such as DRAM. The turnaround story indicated by the company, if executed successfully, could be an area of value added to investors.
DRAM appears to be developing a longer-term bullish trend line from 1.04 (low) after consolidating at 1.12-1.125 area.
DRAM has shown an increase in volume, indicative of rising momentum, confirming to me that there is potential upside here.
DRAM experienced a surge of 20% on Friday, to a high of 1.49 – which is why I have decided to alert it today, following a retracement of this move back to its consolidation level on the upper trend-line.
DRAM has less than 3 million shares in the float (very small), which helps explain the massive upside it is capable of experiencing.
Conclusion: I believe DRAM is positioned to become a positive opportunity for us to secure longer-term gains for multiple reasons but here are the highlights. The company is in the middle of a turnaround. If this strategy is successful then there is potential for substantial upside. Right now DRAM is trading at under $1.50 meaning there is a lot of room to move higher. DRAM also has less than 3million shares in the float. Low float plays like this have the potential to move fast and loud and any positive developments released by the company could send shares higher. Also, the shareholder letter that was released recently gives us a peek into what the company has been up to. $4 million in cost cutting is no small story and with this news basically going unnoticed by the street it gives us an opportunity to act on before investors and major media outlets pick up on it.
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