A Game-Changer for SPKL, A Key Detail for CGYV

If you were a patient owner of Spicy Pickle (SPKL), then you found a lot of happiness last week. If you were a patient owner of China Energy Recovery (CGYV), then you're patience is wearing thin. Let's take a better look at both.

Last Wednesday, SPKL surged from $0.155 to $0.19, and ended up closing at $0.22 yesterday. All told, that's a 42% gain in about a week. Not bad. The reason for the bullishness, however, may merit even more upside once the dust settles.

What prompted the move? In simplest terms, a truckload of convertible preferred shares were taken off the table, thus wiping out a major dilution liability.

It was a win-win for everybody, as it took the ceiling away for stock. It was a much bigger win for the common shareholders though, as the owners of the convertible equity ended up selling their stakes back to the company at a deep, deep discount. Still, the former convertible owners' bottom lines may benefit more without the overhang.

All too often, this kind of recapitalization effort is ballyhooed as the maneuver that will save the company, only for investors to find out later there were several other factors also dragging the stock down. In Spicy Pickle's case though, there aren't any other hidden tripwires we could find.

Oh, the franchising business is still tough, but that's already baked into the share price. Moreover, the company's Canadian 'Bread Garden' division is actually growing quite briskly.

At the very least we feel SPKL should be back on your radar, if not back in your portfolio.

As for China Energy Recovery (CGYV), despite a much-improved second quarter, the stock's not gotten a lot of traction. Instead, CGYV drifted from just under $2.00 in May to just above $1.00 in recent weeks.

The slide lower was largely the result of Q1's results. The company - which had pulled in revenues of $23 million last year (and earned $1.5 million) - only generated sales of $1.5 million in the first quarter. Normally it would be a cause for alarm, but in China Energy's case there's something else investors should know but probably don't... the company books revenue when the hardware ships out.

A few days after Q1 ended, the company reported a $4.8 million piece of equipment had been shipped. Had that been booked in Q1, nobody would have batted an eye.

Now fast forward to Q2. Yes, that $4.8 million project was booked then. In fact, the company generated $7.5 million in revenues during the second quarter, putting them on an annual sales pace of $30 million. Those were the kinds of numbers we were talking about a year ago when the idea was first posted through our site.

So what's different now that makes the stock worth so much less than it was then? Perception. Mood. Fear. Call it whatever you want - all of those burdens on the share price are temporary though.

As always, decide for yourself whether a stock is 'worth it' or not. Just make sure you have the facts right. CGYV's numbers may be erratic, but they've grown exactly as they said they would a year ago despite an economic implosion.

And by the way, China Energy Recovery is one of the industrial companies that's likely to benefit from the scenario we described in the September 18th edition "A Tale of Two Chinas... Consumers Versus Industry". .