HC2 Holdings, Inc. (OTCMKTS:HCHC) Extends the Steady Climb

HC2 Holdings, Inc. (OTCMKTS:HCHC) chugs along despite the low volumes. In the past days, the telecoms holding almost conquered a higher price range, stopping at $3.99. HCHC is growing at small increments, adding half a percent net on Wednesday, as dollar volumes reached $1.49.

This ticker is a bit of a paradox, with a solid business model and a rather respectable price moving without dramatic fluctuations. Still, little is expected of the company that competes in a sector filled up with much larger companies, able to easily invest in newer technologies. HCHC may be already doomed to fail in the longer term, though the stock price grows for now, doubling in the past year.

HCHC rarely offers PR statements, but in the past few days it offered a financial report, plus updates on research possibilities. For the first quarter of 2014, the results are as follows:

• $43.3 million revenues

• $2.24 million gross profit

• $4.1 million net loss, narrowed from $19 million for the last quarter of 2013

• $8.9 million cash as of December 31, 2013, down from $21 million in 2012

• $33.2 total liabilities, down from $233 million total liabilities in 2012

As it is easily seen, HCHC has improved on many accounts, but it still remains a boutique stock, drawing in a limited number of investors. The ticker has never seen an email promotion, and it is in a category of solid companies that are an anomaly on the OTC markets. Still, even those kinds of companies holds risks, as periods of exuberance and growth sometimes end in corrections, or even crashes. Investors’ boards are also quite inactive, so HCHC clearly moves with the intervention of a small number of loyal investors, and is in a way protected from irrational fluctuations.

The other attractive thing is that HCHC has a mere 15 million shares outstanding, though we don’t know the free float. Several funds hold small percentages of the HCHC shares, the biggest being Teton Westwood Mighty Mites Fd with 4.47%, and most others holding below one percent. The influx of institutional investors looks encouraging.

HCHC offers various telephony services, including low-cost international calls. In this, the company resembles the model of Voip-Pal.Com, Inc. (OTCMKTS:VPLM), though in that case we had a much more aggressive promotion. VPLM peaked near $0.30, but started to fall at the beginning of the new year, wiping out 50% of its value to $0.014.

Other high-tech climbers had much less luck, especially in the case of Ice Web, Inc. (OTCBB:IWEB), which was overly-promoted, artificially climbed toward almost two cents, only to lose 90% of its value over a few months, crashing toward $0.002.

If you like HCHC for being an alternative to the marijuana hype, keep in mind that this is a niche stock with limited volumes, rarely among the best-traded selections. On the plus side, the current price is not an unusual peak, and has been reached easily before. The highest position for HCHC has been $5.50, so there is room for growth, though the ticker has had significant gaps downward to a lower range in the past years.