Stock Gumshoe

Hello out there, happy investors of Gumshoe Land! For your pleasure this weekend I thought I’d revisit a couple old teasers that have been making the rounds again, since the emails about them have been piling up and, in some cases, the companies may have gotten more or less interesting.

The first one is the “Starbucks of China”, from Green Read the rest of this entry »

Hi folks — got an interesting one today that came in connected to the “Taipan chart of the day” — the chart itself was actually for Millicom, the fast-growing Latin American cell phone company, and they also talked about Vimpelcom, the phenomenally successful Russian cell phone company.

But the meat of the ad was focused on cell phone GPS — and a company that we’ve seen before. I decided to share a few words about it because this one seems to be getting a lot of attention from the business pundits of late.

There’s a good quote in the ad:

“According to The New York Times, “For now the market for [mobile GPS] services is tiny. But wireless carriers, mobile phone makers and others are salivating over the potential revenue.” That’s right; they said salivating.”

And that’s more or less what I’ve been seeing lately, too — Andrew Mickey at Breakaway Investor first started touting this one a few months ago, and was quite early to the party, but it looks like the shares are getting a fair amount of attention again.

So, curious?

The other clues:

Upgraded by Lehman brothers within the last week, and by Credit Suisse a few weeks ago, both to “overweight.”

Shares up 46% in the last five weeks.

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We get a link to the old ad, and to the tout for Mickey’s Breakaway Investor newsletter service — remember, this is the ad that said this technology would be the next cell phone, the next personal computer, yada yada yada? The breakthrough technology from the defense department? Send us $49 now and we’ll tell you what it is?

That’s right, we’re talking about our old friend …

SiRF Technology Holdings (SIRF)

So this isn’t a new stock idea — it was Andrew Mickey’s bread and butter advertising push all summer, it seems, and he consistently refers to it his favorite theme and long term idea. They essentially make and sell the chip that provides cell phones with GPS capabilities, and they have a very strong position in the market.

And it was nip and tuck for a while there — the shares are up 46% partially because they first fell by about 30%, in August when investors got worried about their competition (they have a huge market share — 80 or 90% in cell phone GPS chips, but there are other companies with competing products, like Broadcom, that are making a push). So it’s not like this is a constant momentum driver that’s going straight to the moon … or if it is, it’s not immune to the occasional detour.

Mickey first recommended it, or I saw his ad for the first time, back in mid-June, so for a while this was under water on the Gumshoe Spreadsheet, but now it’s back up by close to 20% thanks to the recent run (the shares were trading at about $22 when I first saw this one touted). The initial writeup of the teaser is here if you’re interested.

But now, there are lots of fans.

They signed a collaboration deal with Intel right around the time the shares started falling in July, which some folks think have promise, and a more recent deal to provide chips for Motorola. They got nice coverage from the two brokerages noted above. And in general, handset technology providers and GPS-related companies have had a decent run (though not quite all of them) over the past month, partially due, I’m sure, to the Navteq/Nokia deal. I even heard them on the XM Radio this evening, being touted by one of the yappers on CNBC’s Fast Money — Pete Najarian, I think — because the call option volume has picked up significantly, which in their system means good things ahead.

So, I don’t know if this is really going to be a winner or not, but it’s getting a lot more attention so I thought I’d mention it again. I do own some speculative call options on this one myself that I picked up on a bit of a contrarian gamble when the shares were tumbling back in August, but I’m not particularly expert in this technology and I certainly don’t know if the stock will continue this recent climb.

This one has already been solved several times over at the forum, but I thought I’d write it up here for those of you who don’t like to keep up with all those discussions.

The latest teaser for this company comes in from Andrew Mickey at Breakaway Investor — though it appears that various other Taipan letters have been pushing this one for at least several months. Maybe that’s why Breakaway Investor is having a fire sale at the moment, just $49 for a year — I assume it’s cheaper to rehash stale ideas than to come up with your own new ones.

But, being stale doesn’t mean it’s no good for us. So … what are we dealing with here?

Mickey talks about this as the next cell phone, next computer and next cable TV in terms of the potential long term growth. They’re predicting that a billion cell phones will ship with this technology, and that this company will continue to dominate the niche.

The big deal is a version of GPS technology (initially a defense dept. innovation) for cell phones — and since we all know that there are more than a billion cell phones sold every year now, that’s obviously a huge market.

He notes that the use of cell towers (instead of just satellites) will enable the real expansion of GPS, since he says GPS is now limited by the small number of transponders on the satellites (96,000, according to him — I have no idea whether or not this is true, there are obviously many more GPS-enabled devices than that in the world already).

He also compares this technology to the camera phone — which many people, including me, thought was an idiotic idea.

They dominate this narrow niche, and they supply nearly all the handset manufacturers.

So … what clues were provided for this GPS in cell phones/using cell towers company?

It’s a semiconductor firm, pretty clearly — they make the chipsets for this technology.

They went … “From $15 Million in Revenue to a Stunning $247 Million in Just Six Years”

“With a 60% market share that’s growing 50 -100% a year, you know that management has wisely targeted the right fields. Can you think of any faster-growing markets in the world than these fields?”

And the final clue — some specific data about patents:

“Thinking way ahead, this remarkable company is wisely protected by a small Army of patents. Specifically, as of December 31, 2006, it had 193 patents granted worldwide with 152 patents granted in the U nited S tates and 41 in foreign countries.”

Well, I can’t take credit for sleuthing this one out, but several folks in the forum have gone through all the clues and concluded that this company is definitely ..

Sirf Technologies (SIRF)

And it’s pretty clear that they’re right. It’s less clear that this is a winner, of course.

This is an interesting company, and it is certainly the right part of the trend for GPS-related stocks (I’ve seen others teased and recommended a lot lately, including Garmin). But do keep in mind that Taipan folks have been recommending this one since it was up in the high 20s earlier this year (at least), and it’s at just about $21 right now.

And while they do have a strong market share in the chips for this version of location technology for cell phones and similar devices, they are far from being the only company in the market. Broadcom, for one, has a similar product, and I’m sure Texas Instruments and the other biggies do as well, or are working on similar products. As one poster on the forum, mgpf, noted, the barriers to entry might not be as significant as Mickey implies.

So … will they keep the lead in market share for what I do agree is going to be a big market? That’s a pretty big question. If you’ve got the answer, let us know — there are a bunch of analysts on this one, and they’re guessing at a forward PE of 16, so if it is going to grow as touted that’s not bad at all. If it’s not going to grow like that, the trailing PE in the 70s looks a lot less impressive.