One Month Performance: RES Free Thinking Top 10 for 2010

First of all, the RES Free Thinking Top 10 for 2010 is actually Top Seven for now. Three places have been reserved. Here is how the picks are tracking after 1 month.

The largest monthly gain within the basket of stocks is attributed to Multiplied Media. Since December 16th, the Company has made significant announcements related to distribution in France, Spain, and Italy and it has announced an upgrade to the application to include local weather along with local gas prices. During the 2010 Consumer Electronic Show, it demonstrated its beta iPhone deployment, which is expected to be live by the end of January. These announcements have contributed to the exceptional stock price performance over the past month.

Bridgewater Systems and Descartes Systems have shown both progress and share price volatility, each alternating between 6% and up to 15% gains from December 16th, depending upon the day. Notwithstanding, both companies have announced significant corporate developments, which should support continued share price gains throughout the year. Descartes Systems is making major strategic moves this year, and Bridgewater Systems will continue to benefit from the ongoing need by carriers worldwide to handle the explosion of data on wireless networks.

Guestlogix is at an interesting point in its history where large implementations during 2009 begin to generate revenue and earnings during 2010. To the extent that large contracts, and service extensions begin to perform will determine how well the stock performs. Although many investors expect good things, there is still a bit of a "wait and see" perspective on the stock. RES Free Thinking anticipates that performance is likely to exceed expectations as the world economy recovers. In addition, it is possible that the stock could graduate from the Venture Exchange to the Toronto Exchange. Graduation should increase liquidity, and participation from larger institutional funds could also provide a shot of price adrenaline before H1 concludes.

IseeMedia has, until recently, shown significant gains in share price, and probably has more announcements to make related to the Indian mobile market, which should help to propel the share price higher as it exits Q1 2010.

PNI has demonstrated significant improvements in profitability over the past three quarters as it continues to monetize its major contracts with photo retailers worldwide. However, this is not a stock that will provide news related catalysts. It could trade in a range until its announces Q4 2009 results, while providing a hint of its earnings growth potential during its subsequent conference call.

Cyberplex is trading at a 6x EBITDA TTM earnings multiple. Relative to its recent earnings performance, and its earnings growth trajectory, the stock may be considered undervalued relative to its peers. However, investors may be concerned that Q4 2009 may not show much growth over Q4 2008, and there is continued concern among investors regarding the quality of its advertising client base. Until Management demonstrates more progress towards upper tier advertisers, and demonstrates that it can generate earnings growth progress over 2008 and 2009, the share price may be stuck in neutral. The stock should begin to show steady progress forward beginning in H2 2010 as growth trajectories are confirmed. If the Company were to announce a meaningful accretive acquisition in the meantime, the share price could be kick started upward ahead of H2 2010.

The bottom line is that this basket of stocks appears to be performing well on an aggregate basis after one month. Over the same timeframe, the TSX composite index has increased by just over 2%. The stocks within the RES Free Thinking Top 10 should be considered higher risk stocks because they are small cap and micro cap stocks. However, all appear to have relatively solid balance sheets heading into 2010, and most are generating free cash flow.

Disclosure: I own shares of CX, MMC, DSG, and BWC

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