Business Report
Covering Savannah, Hilton Head, The Low Country and Coastal Georgia
Volume 5, Issue 6
July 15-28, 2002

The stock market is awash in financial scandals. That's bad news for investors -- but potentially good news for an innovative new company, which uses its own computer analysis to spot potential trouble stocks.

Newsgrade Inc. is based in Sarasota, Fla., but has Savannah ties. The brothers who founded it, David and Michael Markowski, have family ties here, and they've rounded up about a fourth of their investors from the Savannah area.

The software has been six years in development, and the company has been working on finding a way to make it accessible and profitable. Its site, www.stockdiagnostics.com, is up and running, with new elements due to be added as they are ready. For the moment, it's free but eventually investors can subscribe to an alerting service that lets them know when StockDiagnotics.com's computer analysis and financial formulas spot a problem.

"We felt all along there were problems in the (financial reporting) system -- we just didn't know how mainstream they would go," said Michael Markowski.

The public financial reports that publicly held companies must release are the basis for StockDiagnostics.com's analysis. Rather than focusing on such measures as earnings per share -- a favorite among traditional financial analysts -- the company's approach calculates cash flow. They've come up with a trademarked designation -- OPS, or operational cashflow per share -- that is among the key factors they track, and they've coined the phrase "The EPS Syndrome" for companies, which are reporting banner earnings but negative cash flow.

"StockDiagnostics.com displays potential problems before the stock price goes down and enables you to avoid catastrophes," said Michael Markowski, who is director of research and development for Newsgrade and its StockDiagnotics.com. " It clearly showed that Kmart had a problem with its stock trading at $12 and its stock subsequently plummeted to less than $1. It also showed problems for Enron, and Adelphia when they were both trading at over $30 per share and were heavily recommended by Wall Street. Today they are both below $1.

"He also touts its ease of use. "StockDiagnostics.com is so simple to understand that even a truck driver can use it. Many people are using it to double check their brokers and investment advisers," he said.

The site has attracted some press attention, which the company happily shares -- not just in its hometown Sarasota paper but also fairly prominent play in a Barron's story on free and pay stock information web sites.

The web site depends on color-coding and graphs to illustrate its points about a stock. It also is aimed at an international market, with availability in several languages and other under development.

The project has appealed to Savannah investors, and Markowski happily reels off names of some of them: attorney Benjamin Eichholz; Eddie and Cynthia DeLoach of Tidewater Landscape; William Mock of Mock Plumbing; Randy Giles of Contractors Depot; Tim Ansley of Ansley Sheppard and Burgess; Gary Cail of Mock Plumbing; Randy Crosby, a Rincon Realtor; Jim Moore of Barrett Oil; Kenneth Meyer of Capital Cargo; Alan Arnsdorff of Arnsdorff Plumbing; and Floyd Smith of Frameworks and Gallery.