Stock Gumshoe

Most of us might not have heard of Georges Yared a year ago, but any individual investor with an email address will have a hard time avoiding him now — his is one of the latest investment newsletters launched by InvestorPlace Media, the folks who make sure we all know about newsletter advisers Robert Hsu, Louis Navellier and Tobin Smith, among many others.

I think his service actually launched back at the beginning of the year or thereabouts, and so far he has notably pushed Visa and MELA in email after email — his service actually seems to have some strategies in common with both Tobin Smith’s ChangeWave and the Motley Fool’s Rule Breakers. He’s looking for growth-oriented stocks, mostly small caps, that are dominating new industries, and he seems to focus more on fundamental “story” information like product, management and growth potential than on charts or current financials (I’ve never seen his newsletter, I’m just going by the ads his publisher puts out).

But anyway, a quickie for you here today — he’s touting his “next 15-bagger”, which he says is a stock that he was in on the IPO for many years ago and hit a 1,500% gain then, but it languished for a while and he thinks it’s now poised for another similar performance.

Some clues?

It dominates the world of “RTOS” — Real Time Operating Software, which for the rest of us probably just means embedded device software (like the software that powers your camera, or your car, and is hardwired in).

It has a passionate and dedicated leader:

“Founder and genius-in-residence is Jerry Fiddler, a man who looks like Jerry Garcia and inspires a similar amount of awe in the industry. Core customers are the military and telecommunications clients who don’t forgive system crashes and will not abide delays. In contrast, Microsoft has little credibility in this market.”

Well, OK — so there we go, that’s clearly enough to track down our company with just a few quick spins of the Thinkolator, but let’s see what else he says about them.

They rely on royalties for their products, so earnings are growing and stretch out reliably into the future (which most folks would call “earnings visibility” — Yared calls it an “earnings lighthouse”).

He also has a confusing sentence — saying that a buyout by Intel at a 50% premium is conceivable, and in that case his projections of a 1,500% gain might be conservative. Huh? Do the math — if it’s bought at a 50% premium, you gain 50%. That’s a lot less than 1,500%.

Unless, of course, the stock goes up 1,000% from here and then gets bought for a 50% premium (at which point it would be a $10 billion company, or in that neighborhood, so that’s no small feat). Still, I suppose all things are possible (that is, I believe, the mantra of any good investment newsletter ad copywriter).

So … who is this?

Thinkolator says …

Wind River Systems (WIND)

This is one of those companies that, if you believe the analysts, is at an important inflection point: They’re just getting profitable, and are on the verge of some big earnings growth (as evidenced by the trailing PE of 300+ and the forward PE of 18 or so). That doesn’t mean that those predictions will come through, of course, since analysts are wrong on their estimates as often as they’re right, but if they’re all predicting this kind of growth there’s something behind it.

WIND is run by founder Jerry Fiddler, who still owns (indirectly) well over a million shares. Interestingly enough, one of the major institutional shareholders is George Soros, and it’s always nice to have him on your side.

It is a software designer that works to customize code for all kinds of device makers, and they certainly did enjoy the same 1990s runup as almost every other tech company, though the rise and fall were not quite as dramatic as they were for some of the more well-known names, and the shares have been on an up and down ride of lower magnitude for the past five years.

The shares have jumped around quite a bit recently — they collapsed down to about $6 in March when Wind River cut their guidance for this fiscal year, and they then blew out their earnings estimates in May and the shares shot back up, to right around where they remain now in the $11 range.

I am not an expert on this company and I haven’t had time on this lovely Sunday evening to look into much detail at Wind River, but I’m sure this is the stock Georges Yared believes will gain 1,500% from here (why 1,500% and 15-baggers I don’t know — maybe Peter Lynch’s “10-bagger” phrase has gotten too hackneyed and lost its ability to impress).

Whether he’s right or not, only time will tell. And whether or not WIND is a good match for your portfolio, well, only you can tell that. What do you think?

The author will always disclose any direct long or short equity, debt or option position in any stocks written about as of the day of publication, and will not trade in any stocks mentioned for three days (72 hours) after publication. Full disclaimer is at the bottom of the page.