Riding The Code Green Apparel (OTCMKTS:CGAC) Train

Code Green Apparel (OTCMKTS:CGAC) has started 2016 with a bang after a flood of promo emails hit our inboxes from several newsletters. CGAC also released some news and issued a corporate update for the New Year. CGAC is engaged in manufacturing, selling, marketing, and outfitting eco-friendly apparel from recycled textiles to various companies and industries worldwide. The company offers caps, t-shirts/shirts, pants/shorts, aprons, jackets, and accessories.The newsletter recommendations touted the potential of the global apparel industry. According to the newsletter PennyPicks:

The global apparel industry - encompassing clothing, textiles, footwear and luxury goods - reached approximately $2.560 trillion in 2010. The apparel, luxury goods and accessories portion of the market, which accounts for over 55% of the overall market, is expected to generate $3.180 billion in 2015, with a yearly growth rate in excess of 4%. Brazil, China, Italy, Japan and the United States represent the largest apparel markets while the strongest annual growth is forecast to occur in Tanzania (17.5%), Bangladesh (14.3%), Ethiopia (13.4%), Cambodia (13.1%) and Yemen (12.6%).

The most important aspect of the corporate update pertains to the company focusing on the switch from being a development stage company to one producing revenues. It said:

CGAC is focused on bringing Sustainable Textile Solutions to the "Corporate Marketplace" through development and marketing of uniforms and corporate logo apparel formulated from Recycled and Regenerated textiles. Code Green Apparel is leading the charge into this very important and emerging market segment.

CGAC is hoping to drive its growth this year via a partnership with Frisco Rivet LLC, to develop and produce Women's and Men's Denim Apparel and related sportswear under the popular Jacob Davis brand. Under this agreement, Code Green will also become the exclusive sourcing partner for all future Jacob Davis branded products. CGAC CEO George Powell said:

"This is both a significant and exciting opportunity for Code Green as this agreement solidifies our relationship with Frisco Rivet and the Jacob Davis brand. We will begin to ship product by the middle of this year and anticipate revenue growth as we move into the fourth quarter of 2016 and first quarter of 2017."

So far, those that followed the newsletter recommendations are ahead of the game. The promo was launched when shares were trading at $.0231 and are holding up. In these types of situations, the key is seeing that the market remains supported and that the dreaded "dump" does not happen. So far with CGAC, that does not seem to be the case.However, CGAC does have many obstacles to overcome. For one, last year the company did a series of financings that will dilute current shareholders. Those shares could hit the market and have an adverse effect on CGAC's stock price. During the first three quarters of 2015, CGAC raised $895k by selling 85.7 million shares at an average price of $.01. The key is determining whether those shareholders are in for the long haul or not. CGAC also raised another $175k by selling 15 million shares last year.

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CGAC has started 2016 strong with some news and newsletter recommendations. Whether this momentum can continue remains to be seen. CGAC does have some major headwinds facing it. The company has no revenues yet and lost $352k in its most recent quarter. The global apparel industry is quite crowded and CGAC will be facing heavy competition from better funded players. Until we see more from CGAC, we recommend sitting this one out and for those that got in at lower prices, they might want to consider booking some profits. Don't miss out on the latest regarding CGAC and all of our other hot stock picks!

Disclosure: We have no position in CGAC either long or short. We have not been compensated for this article.