Stock Gumshoe

This stock has already been uncovered over at the Gumshoe forum by reader asx, but I thought I’d cover it here since only about half of my readers have checked out the forum … and I was doing the other two companies from the special “Three Top Wish-I Picks for 2007″ from Bottarelli Small Cap Research, so it seemed silly to stop there.

So here’s what they say about this third company:

“Mark’s third ‘Wish I’ stock is a $14.98 telecommunications company that’s experiencing exploding growth in China. Based out of Hong Kong (but traded here on U.S. exchanges), this company offers cellular, international, and domestic long distance, data, and Internet services to 131.55 million subscribers in China… and they’re exponentially growing by the day.”

Their price target — for one year out — is $70.

So … what do we have here?

Well, as you know if you’ve been following the forum postings religiously, this company is …

China Unicom (CHU)

They’re one of two big mobile operators in China, and unfortunately they’re the one that’s having trouble growing their subscriber base. China Mobile has been doing much better over the last couple years (and I owned it a couple years back, selling it has been one of many, many mistakes I’ve personally made in investing).

They are growing earnings, about 30% at their last release, I think, but they’re losing subscribers, so there may be some bad news on the horizon at some point … though there are so many potential customers that perhaps that worry is misplaced. The shares have moved up a bit since this ad started circulating sometime in the last few months, it will now cost you about $17 instead of $14, which means that it alone of the three “Wish I” picks has been a short term success.

I don’t have a lot of particular expertise in this area, but CHU is definitely the poor, neglected half of the Chinese wireless duopoly — and perhaps the fact that they generally appeal to the more price-sensitive part of the market means that they’ll do well in the future as the slower adopters in the hinterlands get wireless phones … I don’t know, but that’s certainly part of the argument for buying these shares.

The other part, of course, is the huge transition to 3G mobile services throughout China over the coming years, with a real focus (as in almost everything Chinese) on the 2008 Olympics as a target for rolling out more advanced technologies and services to mobile subscribers. This is a big company, with a nice duopoly position, but it doesn’t look cheap enough to interest me at the moment (though I probably hold shares through some of my closed end China funds). If it goes to $70 in a year it’ll certainly make you rich from here, but that kind of short term 400% return looks like a pretty wild stretch to me. I’d love to hear if you feel differently.

This is the second of Bottarelli’s three “Wish I” stocks — for more info, see the first one here.

This second stock that exhibited a “pre emptive moving average” buy signal for Bottarelli’s analyst is a drug company of some sort.

“$15.06 healthcare outfit out of Seattle, Washington that’s quietly developing one of the most promising prostate cancer treatments in the country.”

They’ve already completed Phase III trials.

This drug was granted priority review status by the FDA.

“If all goes well,” (famous last words) “this $15 stock could be trading for $28, $35, or even $50 in the blink of an eye.” (or $7, as we’ll see in a moment)

Their pipeline includes “potential drug candidates for breast, ovarian, kidney, and cervical cancers, making this $15 stock far from a ‘one-trick pony.’”

So, we put all that into the Cognitationizer, and we see that this company must be …

Dendreon (DNDN), the poster child for biotech volatility.

For anyone who wants the full story of Dendreon’s crazy Spring, this Business Week article summarizes it pretty well. The prostate cancer drug is Provenge, which is essentiallly a vaccine (not a preventive one, but an active one) for prostate cancer.

Because of the timeliness of this ad, I can’t be absolutely certain this is correct (I know this is at least a couple months old, but don’t know exactly when it started). DNDN did trade at around $15 for much of April, they are based in Seattle, and they do have a lead prostate cancer drug that has completed a phase III trial, and that got priority review from the FDA back in January (though they have many more trials planned for this one, too), and they do have pipeline compounds that target all of the other specific cancers mentioned.

As many of you probably know, the fact that this is a new kind of drug has meant lots of conflicting and surprising FDA decisions — which is why it has gone from $5 to $20 and back down to $7 or so where it stands today. It seems to me to bre crazy to buy using technical analysis (whether it’s pre emptive moving averages or something else) when the stock moves erratically based solely on unknowable government decisions and scientific results. But that’s just me — there may be good reasons to buy Dendreon, and I know a lot of people who really believe in this stock and their drug, but I can’t imagine Bottarelli’s reasons are better than anyone else’s. The analysts for this one think the market might be smaller than many investors believe, even assuming it does get the expected FDA approval, and at least one of them has a price target of $5 — not so promising from today’s $7.29.

Then again, if you think the wild ride will continue you could always by DNDN options — the premiums seem relatively low for a stock with this much historical volatility. You could, but not me, I’ll sit this dance out.

This was part of a long and somewhat tiresome ad for Bottarelli Research Small Cap, which we’ve sleuthed out one or two teaser companies from before. This time, it was all about the way Bottarelli talked his friend Mark Blattert into publishing his stock tips with the service, so they could charge $1,750 a year for it.

OK, so that’s simplifying things a bit. But the general idea was that this Mark dude has a proprietary system that gives accurate buy signals just before stocks shoot to the moon — they gave a bunch of examples, including Flamel Technologies, Mother’s Work, Uranerz, and others. Something about a “pre-emptive moving averages.”

I’ve got about as much chance of figuring out pre-emptive moving averages and the other technical analysis mumbo jumbo as I do of being on the next moon flight … and about an equal interest in both.

But they did tease about a few stocks that are right now good picks in this system, and that’s something the Gumshoe can get his head around.

There were three stocks — three that they characterized as being stocks you could look back at at the end of the year and say “I ‘Wish I’ bought that one last summer.”

Hokey, huh? Well, maybe the ideas are useful. Let’s check it out.

The first one “is a $2.84 fluid redistribution outfit that’s based out of Gillette, Wyoming.”

OK, so we already know the answer, thanks to a previous sleuth job (and the Gumshoe’s innate brilliance, of course) … but let’s continue:

This is the technology that lets you get the methane gas out of coal beds without polluting surface water.

And the kicker, according to Bottarelli?

“Mark’s Pre-Emptive Moving Average is now signaling upward momentum, which means shares can blast off at any time. Mark has this $2.84 stock valued at $14.20 in the coming 6-8 months, making it an immediate “buy” at current levels.”

So if you remember hearing Mike Schaeffer teasing about this same little Coal Bed Methane company earlier in the year, you know that this is …

Big Cat Energy (BCTE).

This one hasn’t done much on the positive side lately, appealing moving average or no. Since I last wrote about it it has taken quite a beating in the market and is now lucky to be a $2 company … it dipped below $2 earlier in the week, though it’s now back above that number. On the plus side, if it’s going to $14 I’d rather buy for $2 than for $2.84 any day.

Of course, it was back around $2.60 when I last saw a Schaeffer recommendation for it … and he thought it would go up 10X in value within two years. So that gives us a pie-in-the-sky range of $14 to $26 between 6 and 24 months from now. As long as you’re comfortable with just making up those numbers.

P.S. As is clear from the PS of the ad, which congratulates Mark for picking Go Fish at $3 and watching it “just” go to $6 “as I was preparing this letter”, this ad is a little long in the tooth, though they’re still sending it out — Go Fish last hit $6 back in late February or March, and has plummeted ever since (remember, Brian Hicks at Quantum Investor tried to sell us on this one as the “next YouTube” at around $5.25 as it was on the way down). Today, you can pick it up for about $1. I think I’ve said it before, but if you’re counting on an “exclusive deal” with Taylor Hicks as your big content winner, there might be trouble in paradise.

And come to think of it, the other pick we sniffed out from this service was also at the same time being recommended by a few other newsletters … I know they’ve got a technical system, but so far this Bottarelli stuff has a lot of overlap with other advisers, more than I’ve seen from anyone else in the last few months so far, at least as far as the teased stocks go. Of the other examples cited in this ad: Polymet, World Water and Power (a reader noted that he saw it in another publication at the same time), Uranerz and Flamel seem to have all been picks cited by other newsletters during roughly the same times that this guy picked them (the ones that I’ve actually written up are linked, Flamel was a Motley Fool Hidden Gems pick for a long time). Not that there’s anything wrong with that, and I haven’t looked at the timing in detail, but it did jump right out at me.

So … that’s pick number one that uses the “Pre-emptive Moving Average.” I’m starting to form an opinion about this $1,750 service and the value of that average already, but I’ll be fair and look at the other two teased companies soon to see if they’re any more promising.