Speculative Buy in ZP

Zap is a company that has been gaining a lot of attention recently as they have successfully imported the European “Smart Car”. Smart cars are manufactured by Mercedes Benz and have been sold for years in Europe and are very popular for their high (60 MPG) fuel efficiency. Now that Zap has imported them here, each car must go through an approximate 20 hour process to convert them to American standards (read more here from USA Today article http://biz.yahoo.com/iw/060228/0111420.html . After this process, the cars are sent to local dealerships spread througout the US. The company has recently received attention for delivering cars to dealers in Florida, Arizona and Washington state. I spoke to a rep at Zap and asked why there was no mention of a local Colorado dealership http://www.elizabethrvauto.com/smart_car.htm and she stated the company “is trying to stagger the news of new dealerships” which leads me to believe there will be more anouncements coming in the short term, all of which become potential catalysts for the stock to move. Additionally, the company is now driving a fleet of cars across the country to increase awareness of the vehicles. They left the Santa Clara, CA headquarters April 4 and will arrive in NYC in time for the NY International Auto Show which begins on April 14 and ends April 23 http://www.zapworld.com/blog/default.asp . The company has set up a media day in NYC for April 18th, this could lead to some good press… Immediately following the NYC show the company will also begin a road show to gather institutional interest in the stock.

All of this information has not gone un noticed as the stock (symbol ZP) has had a great run, but I believe there is further upside. Notice the large volume coming into the stock, there are only 15.7 million shares in the float http://finance.yahoo.com/q/ks?s=ZP and the 20 day average volume has increased from less than 100,000 shares/ day to over 690,000/ day. The company also got lucky by being listed on the Pacific Stock Exhange because with the Arca merger, the stock is now listed on the NYSE by default. The stock has just pulled back to its rising 10 day MA on light volume and while I am long some here I would also like to add to the position if there is a chance to buy under 2.

As I write this I hear the CNBC debate about hybrid cars being bad for the environment, this car is not a hybrid, it is a small, fuel efficient vehicle that makes sense to a growing demographic as oil hovers above 65/ barrel.

This stock has been higher in the past and I think it can make it back up towards $5 over the next few months. It is not a stock to rush out and buy a full position in at these levels, but if it can get back under $2, it is worth nibbling on. There are a lot of short term potential catalysts for the stock and the public is just starting to become aware of this company.