Stock Gumshoe

Tim Fields and Eric Dickson over at Trinity Research have been selling subscriptions on the back of geothermal investing for a little while, and they’ve got a new brief “teaser” out about their pick for this sector.

Geothermal energy is nothing new to the Gumshoe Faithful, of course, and those of us who’ve been paying any attention at all have noted a significant raise in profile for geothermal stocks, notably US Geothermal,Western GeoPower and Ormat. Geothermal is perhaps the most appealing of the big Read the rest of this entry »

That’s the intriguing subject line of a forwarded email a reader sent in, advertising the Untapped Wealth Newsletter that can come your way for $99 a year. It’s a nanotechnology and defense teaser, which is where that idea comes from — they’re building, or at least envisioning, little drones that are the size of bumblebees.

But this particularly nanotechnology company has nothing to do with that specific product or mission, it appears to me.

Much of the email is a long-winded tease for nanotechnology in general — the fabulous things it will make possible, and in particular the massive ramifications for the defense industry. Nanotechnology, for those unfamiliar with the term, is the science of making insanely small things — a nanometer is a billionth of a meter. The most commonly used reference to this in investing, probably, is the semiconductor business — Intel and their competitors are currently working on a 65-nanometer scale in creating microchips, and it gets a bit smaller every few years. So, really, really small.

And this email really pulls out all the science fiction-like ideas that nanotechnology might bring to defense — bulletproof fabrics, satellites the size of a grain of sand, the aforementioned bee-sized drones, etc. etc.

So what do we learn about this particular nanotech company? What are our clues?

It’s priced at about $2.65 a share, and they have 19.3 million shares outstanding. You can do the math, but it’s something like a $50 million market cap. A very, very small public company.

And the strongest clues? A few notes about some of the conracts they’ve won. Here’s how they describe the company:

“They’re a leading supplier of opto-electronic solutions and Terahertz sensors and instrumentation that are used in the military and private industry.”

OK, so that’s not as sexy as bee-size drones chasing terrorists … but they’ve got some interesting government business:

A way to examine the external fuel tanks on the Space Shuttle

A technology to protect Air Force radar equipment from the elements.

Some of the components of the Tow Missile.

So … what is this little nano company?

According to the vast nanotechnology powered cognitationizing might of the Gumshoe’s Thinkolator, the company we’re being teased with here is ….

Advanced Photonics (API)

This is actually even an exchange listed company — they’re on Amex, which is at least a step up from the OTC market, though it’s still of course looked down upon a bit by the NYSE and Nasdaq guys. They do have all of those teased businesses, and the price is in fact even still at $2.65.

And, if you’re interested, they’re reporting their earnings on Monday and will have a conference call at 5 — which would probably be a good opportunity to bone up on who they are and what they do.

They are, of course, not profitable — sometimes it seems that nanotechnology companies aren’t allowed to be profitable. They’ve got a fair but not excessive amount of debt. And the sales aren’t going up all that quickly, about 8% in the last quarter.

The one thing that does stand out as somewhat interesting is that there may be a reasonable valuation hiding in there somewhere — the price/sales ratio is near 2, and the price/book ratio is likewise quite near 2. I haven’t digged in to see how they’re valuing their assets to get to that book value, or even what their assets are, but those numbers are both shockingly low, in my experience, for a tiny technology company. On the flip side, of course, we note that even though they have a nice low price-sales ratio, they’re not anywhere near to the point where they’re making money from those sales. And that, of course, is the goal of most non-nanotechnology and non-biotechnology companies: selling something for more than it costs to produce. API isn’t there yet, I don’t know when or if they’ll get there.

So … do you know anything about this little company? Any nanotech ideas you’ve been nursing and dying to share? Throw ‘em on the pile!

“Its impact will be greater than the railroad… automobile… personal computer… and the cell phone… turning select investors into millionaires… Ushering in a New Gilded Age “

Hey, that sounds pretty good!

This ad came in on April 18th, from Tim Fields and the Untapped Wealth newsletter over at Trinity Investment Research. You can sign up to receive the free report, “WiMax: Transforming The Economic Landscape… and Forging a New Breed of Millionaires” … all it will take is a $99 subscription payment.

Or, you can come to your friendly Stock Gumshoe and find out the name of this revolutionary WiMax company … for free, of course.

“Now, imagine this: there’s a small company that just came public that controls the second largest percentage of the WiMax market… and has spent the last 5 years laying the framework for this technology to be broadcast across the entire country.”

So this company they’re teasing us about is a WiMax signal company (as opposed to a chip or equipment company like the last WiMax company we teased out). Most of the ad touts the dramatic impact of the wireless revolution instead of specifically teasing this company, but a few specific clues are given.

The ad notes particularly that this is a recent IPO, and tries to hype up the fact that underappreciated IPOs can become barnburners. I don’t know that this hype has been all that useful of late, but it’s good to know this is a new company.

“But what happens when an unknown company goes public touting technology that is still in its early stages? More over, their technology is unbeknownst to the general population? This, my friends, is what we like to call a golden egg. It is rare and extremely valuable.”

So … we’ve got a wireless provider, a recent IPO, and the teases hint that it is not much liked on Wall Street or in the financial press … YET. What specific clues do they provide to help us make sure we get the name of the company right?

More cash on hand than debt (I should hope so, for a recent IPO)

“They are buying up the valuable radio spectrum needed to roll this out in every major city in the world. “

“Currently services cover over 200 municipalities and 27 markets.”

“it’s ready to go in Europe, too.”

And of course, the situation is urgent … “because this company just came public. Wait even just a few days too long and you could pay 40% more for the same stock.” (Actually, you could pay 40% less, too, as you’ll see in a moment when I name the company.)

“Once this company’s profile is raised - it’s going up like nothing you’ve ever seen. If you put $2,000 into it you could walk away $100,000 or more in a very short period of time.”

So what’s the company?

You may have guessed it by now — there aren’t that many WiMax providers out there, certainly not many who serve a large number of cities. So this WiMax golden egg is …

Clearwire (CLWR)

The confirmation comes from the fact that they were in exactly 27 U.S. communities when they filed their IPO papers (more if you count their European markets in Belgium and Ireland), along with the timing of the IPO (they came public last month).

And despite the author’s claim here that this one is undiscovered, I think we all probably saw articles about the anticipation for this pretty high-profile IPO, and the disappointment of investors following said IPO.

Clearwire is Craig McCaw’s new company, and for anyone who doesn’t know McCaw was the founder of the first big wireless phone company in the US, as well as a major investor in Sprint and Nextel in later years, so there were enough folks who were excited enough to get involved in his next project that they scooped up shares at the initial offering … though they didn’t scoop up enough of them to push the price up on the opening day.

And unfortunately, anyone who did invest is probably a little disappointed with their short term results — a bump of 40% at this point would only get it back to right around the $25 IPO offering price. McCaw definitely has made some fortunes — for himself and others — with his previous companies in the cellular space, so maybe he’s worth a bet, but he hasn’t yet worked a miracle here.

Clearwire is in an extremely competitive space, even though they are one of the few WiMax providers … they’ve got giants like Sprint Nextel and Verizon competing for similar wireless broadband offerings, along with the smaller WiMax upstarts.

And Clearwire, though it already covers a seemingly significant number of communities and has some $100 million or so in sales, trades at a whopping 39 times sales … that’s compared to less than 1.5X sales for Verizon or Sprint, so there’s a long way to go there, and an implicit assumption that there’s some possibility for really outsize profits down the road — not something I’d generally want to count on in a very price-competitive space like broadband, even if it is a new, better wireless broadband.

WiMax may well be the wave of the future — Sprint/Nextel is betting pretty heavily on it, too, with a big rollout scheduled for next year, and from what I know (not much) it is a nice technology. But it’s not the only thing out there, and with many years of losing money to go for Clearwire as they build out a nationwide WiMax network I’d guess that you might need to be patient with this one.

But of course, it’s not about what I think — there’s plenty to read out there about Clearwire, now that you know the name of the company. Most of it’s pretty scary (this ad is one of the few optimistic pieces about Clearwire I’ve seen — but hey, you never make money doing what everyone else is doing), so maybe that means now is the best time to buy.

Since people are now mentioning this in the same breath as Vonage among IPO duds of recent months, maybe there’s a bargain hiding in the muck — feel free to share if you think so (or not). The Gumshoe isn’t interested in this one, but if you are I’d be happy to hear your thoughts.