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The best 19 cents you’ll ever spend… (Patrick Cox DNA Security Tease)

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The odds will tell you that the stock we’re going to unveil today is probably a terrible stock to buy at the current price, since it’s a penny stock that has already been driven up by Patrick Cox’s subscribers and is getting a lot of attention for recent news … but we’re going to reveal it for you anyway.

That’s our disclaimer up front: Cox tells us that he’s limiting this report to 400 subscribers at $2,000 a pop, though I presume that he has also already told his existing subscribers about it. And I certainly hope he has more than 400 existing subscribers. They’re using this pitch to sell his Breakthrough Technology Alert for $2,000, so that merits attention in itself — I’ve given Agora Financial a hard time in the past for setting a falsely high retail price and always offering a tantalizing “discount” on their newsletters, and I’ve never before seen a promotion for Breakthrough Technology Alert where they charged more than $800, so I can no longer say that they’ve no longer advertised the letter at the full retail price.

Does that mean they’re genuinely more excited about this stock than past ones? That I don’t know. But we can at least name the stock for you, and trust you to be adults and make rational choices with your money.

The ad didn’t catch my eye last last week when it started running, but that’s just because I was traveling — it’s exactly the kind of thing that we usually love to uncover for you, so I’m sorry that we didn’t do so with a bit more time before Cox’s teased “deadline” of … today. Here’s how he puts it in the PS:

“I expect major news about this company’s future – news that may push their share prices 1,000%-3,000% more than what they are now – as soon as December 13th… That’s less than a week from now.”

So yep, that’s a LOT less than a week from now. It’s really quite completely now-ish.

But that said, what’s the stock? We’ll be quick so I can send this to you as fast as I can. More clues:

“Shares of this leading tech firm trade for just 19 cents each. That means you could pick up more than 2,600 shares for as little as just $500….

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“their technology is a scientific breakthrough – its accuracy was just audited by the Department of Defense in late October, 2012.

“The DOD’s findings?

“According to the government’s own report:

“This technology worked 100% of the time….

“The Defense Logistics Agency just mandated that all supplies provided to the Department of Defense use this small firm’s technology.

“Said a different way, this tiny firm… with just 21 employees… has been granted a monopoly by the United States government.

“As an intelligent reader, I think you can imagine what a mandate like that could do for a tiny, 19-cent firm.

“Their share price could triple, and I think it would still be undervalued.

“In fact, in mid-September the company’s share price more than doubled in just a two-week period!

“But the big gains… the life changing gains… should be yet to come.

“On December 13th, my research leads me to believe the next big announcement will be made about this tiny company.

“If I’m right, the announcement will be made during a small conference being held in the posh Waldorf-Astoria, on Park Avenue in downtown NYC.

“Don’t bother trying to look up the conference, or attempting to claim a seat inside – access is invitation only.

“At the event will be approximately 200 insiders from the government, CEOs of leading security firms, and private money managers.

“The news should break sometime between 1:15 – 4:45 PM, EST. If the announcement comes, we should see this tiny firm among the ‘highest intra-day’ gainers list.”

And what does the company actually do? More clues:

“You’re about to discover the smallest, most explosive stock opportunity I’ve found in my 30-year career as an Economist and market analyst.

“Right now, this company has just 21 employees. But the recent Defense Logistics Agency monopoly changes all that – they’re now on a wild hiring spree, trying to keep up with demand for their technology.

“That’s right – in a world full of missed earnings and corporate layoffs – this company is defying all odds.

“Their sales are up more than 88% this year – and that’s BEFORE the Department of Defense’s mandate….

“… technology has been mandated for use in all computer supplies delivered to the Department of Defense…”

Cox goes on to describe the problem with counterfeit chips and parts in military equipment, a problem I’ve never heard of but that is apparently substantial, getting the attention of John McCain and others who are particularly worried about Chinese control over the tech supply chain that goes into many products for the defense department. This company sells some sort of marking technology that they tested and found 100% accurate, something they use to identify “legit” parts and semiconductor chips and prevent counterfeiting. Here’s where he says the company is now:

“18 months ago… the Defense Logistics Agency went on a search to find the technology that ends the problems from counterfeit chips.

“On October 31st of this year, they issued a press release requiring contractors to provide items that have been marked with the anti-counterfeiting technology of the 19-cent per share company I’ve been telling you about.

“See, during their 18-month study they marked 20,000 circuits with this small company’s anti-counterfeiting technology.

“Blind samples were taken, and marked versus unmarked chips were distinguishable with 100% accuracy.

“Not a single mistake.

“That’s why the Defense Logistics Agency didn’t say that items need to be marked by any technology… they said this specific company’s technology.

“For you and me… that means for the time being, the government has granted this small company a monopoly over all the supplies being bought by the Department of Defense.”

He says the company has a total worth of just $110 million, and could “control” a portion of the parts and supplies that are under Defense purview, a total amount he puts at $94 billion. The numbers jump out at you, though note that we’re talking about just the anti-counterfeit marking that’s used to identify new products being delivered, and presumably the cost per item is going to be low and shrinking as volumes increase. Not that this can’t be substantial for a $110 million company, but the $94 billion means only that it’s a big job, not that $94 billion will have any direct relation to the size of this company’s bank account.

So what’s the stock? This is, the Thinkolator is quite sure, Applied DNA Sciences (APDN), which is indeed a company that uses DNA signatures for anti-counterfeiting and authentication in a variety of industries.

And the conference they’re presenting to is indeed going on today, their presentation will be at 3:15 according to this press release. I don’t know if that presentation will contain substantial news or just be a summary of the big news that APDN has already seen over the last few months.

APDN’s product in question here is called SigNature DNA — it uses plant DNA that can be somehow embedded or applied to paint, fabric, whatever and can be detected with handheld scanners, and it looks like they can use it either to identify a real Hermes bag or a real replacement microchip for night vision goggles.

And the big deal with the government is that SigNature DNA marking will be used to identify new items that are in the class “Electronic Microcircuits” — the announcement was made back in August, and the program expanded a bit in November, and they appear to be on track to build it out, including a third party service and at least once licensee so far (licensing their technology to other companies seems to be their best chance at a fast track to a big profit boost, from what I can tell — let others spend the money to increase production and collect a royalty … but that’s just my impression).

So there you have it, APDN is almost a $150 million company now, thanks to the runup in the shares with Cox’s recommendation and special report over the past few days, and they lose money hand over fist (lost almost $10 million over the last year), and now trade for almost 70X sales and 100X book value so this is clearly all about the technology and whether it will become mainstream in the near future to dramatically ramp up the company’s revenue over the next few years. This year is the first time they’ve ever booked more than a million dollars in revenue in a year, with revenue almost doubling over the past year, but that’s still absolutely teensy — driving revenues high enough to reach profitability would mean at least a 1,000% increase in sales. That’s certainly possible in these kinds of tiny companies, especially if their deal with the Defense Logistics Agency leads to adoption by the prime contractors (as opposed to just the direct sale of microcircuits to DLA, which is what the rule seems to be now), or even to the (much more price sensitive) consumer electronics companies to weed out counterfeit chips … but it’s a big deal.

And yes, the big news has been out on this company for several months and the share price has appreciated considerably, though I have no idea what they might say at the Conference this afternoon. The stock is entirely driven by news and guesses about what the Defense deal will end up meaning to their bottom line, as far as I can tell, and the stock is extremely illiquidi so it’s easy to see the stock moving 30-50% … not the kind of stock you’d want to buy if you had any notion that you would be able to sell it with a 10% stop loss if things go South, it seems to move a lot harder and faster than that and the stock is inflated by attention right now, so please do use some caution if it tickles your fancy. Unless, of course, you think they really are going to see a huge impact from upcoming deals and fulfillment and see their technology become mainstream and drive the shares to $2, $3 or $10 as Cox speculates in his ad.

Fun story, interesting speculation, and wild moves in the stock already … but I have spent very little time looking at the stock and their financials, just enough to confirm that this is Cox’s pick so I could write about it quickly for you, so you can check it out on your own and let us know what you think. Give ‘em a gander if you’re so inclined, and use the friendly little comment box below to share … thanks!

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59 Responses to The best 19 cents you’ll ever spend… (Patrick Cox DNA Security Tease)

      • Share price means almost nothing, other than that very low-priced “penny” shares are often (but not always) very small and volatile companies — not every company has the same number of shares, so what matters is the market capitalization and the fundamentals that support that market capitalization.

        If I called them expensive it’s because it costs a lot to buy the company relative to the size and quality of their underlying business. They trade at a huge multiple of sales (market cap is 50-100X sales) and don’t make a profit. That means the value is in either their proprietary technology or their other assets, their potential future growth, or in investors’ imaginations. Or some combination of the above.

        Doesn’t mean a small company can’t quickly grow into a reasonable valuation from a low base like this, and sometimes they do, but it does mean they’re expensive by almost any conventional valuation metric.

        • After spending 45min listening to the email video. I just took some clues from the presentation and found APDN to be the company. Brought a 1000 shares. I can’t afford the cost of his info. If I could pay that much for a subscription I wouldn’t need to invest in penny stocks. Cause that’s all I can afford.

  1. I had already researched some past Gumshoe articles and figured it was APDN. Much cheapter than buying the Breakthrough Tech Alert!

  2. How bout that, The Daily Reckoning, Agora, just sent out the same exact tease even saying how today the big announcement will come from the meeting in NY.
    Maybe Agora reads your site Travis and picked up on it!!!

    This sounds like a classic P&D, pass.

  3. I found and bought this stock a couple of years ago. Their technology just amazed me. I’ve been through the prices changes and was glad to see that they finally rebounded earlier this Fall. I am ahead of the game for the first time in a while. The idea behind this company is pure genius!

  4. Aside from the pumped price, and taking a look toward the future, a possible caveat appears to be trade secrets security. IF they do license out the technology it would not be long before Chinese industrial spies would penetrate one of the licensees, or just buy that company, and capture the technology. So unless they keep close control over the techniques themselves, I am guessing their effectiveness will be short-lived, or create a false sense of security.

  5. I was wondering yesterday about Gumshoe writing something about this teaser. I don’t even read these teasers anymore, no time. Thanks anyway, great post. I’ll watch this stock but wouldn’t enter now. All this crowd has put price out of range for the moment.

  6. I was hoping this would be teased. I have a long term position from a year or two ago and have twice been able to make a quick 30-40% gain following the price/volume action. Now that it’s on so many radar screens, I think I’ll sit on the sidelines and let the big kids play.
    It sounds like an exciting long-term play, but possibly starting from a lower price.

    Travis, does the recent financing (restricted stock and warrants) affect your view on APDN?

  7. This one reminds me of one named comparator systems some years ago. Does anyone remember the ups and downs of that one? Dave

    • Big M. I’m not sure what you’re getting at when you say APDN’s botanical DNA tracers are not unique and linking to DataDot’s “DataTraceDNA” page. Sure, they are both ant-counterfeiting technology, but DataTrace DNA is NOT made of DNA. It’s a mixture of rare earth metals that gives a unique fluorescence signature depending on the ratio of different RE’s. From the patent:

      “A method for determining the degree of mixing between components in a mixing process, the method including the steps of: a) mixing at least two components and at least two luminescent materials to form a mixture, wherein the luminescent materials are added to the mixture separately from each other, and wherein each luminescent material has a uniquely detectable luminescence emission wavelength; b) detecting emitted luminescence from a sample of the mixture, wherein the emitted luminescence includes different luminescence intensities at the uniquely detectable luminescence emission wavelengths of the luminescent materials; c) wherein the ratio of luminescence intensities and/or the absolute or relative intensities of luminescence at the uniquely detectable luminescence emission wavelengths is indicative of the degree of mixing between the components.”

      Both methods probably have advantages, but as far as novelty goes there are other similar RE tagging products like DDT’s , but no DNA-based products similar to APDN’s.

        • eddie,
          A classic video, thank you!
          The rare earth elements (REE) taggant method isn’t difficult to understand in concept. REEs are a group of elements that are chemically very similar and difficult to separate from each other. Chemical compounds can be made with REEs that fluoresce (emit a very specific color of light) when illuminated with a specific (but different) color of light. When you mix varying proportions of different REE compounds you have a taggant with a specific signature that is very difficult to duplicate without knowing the recipe.

      • How does the material used have a consequential effect on the customer?

        While the source material may be different, the actual target market and product purpose is the same.

        • It’s a big business with room for a lot of small companies to profit handsomely. Questions I would ask about the REE-based system are:
          1) How many different readily distinguishable markers can be made (with APDN’s tech it’s millions, I believe.
          2) How expensive is it to detect?
          3)How hard is it to copy?

          I think APDN does well on all three counts. That’s not to say there aren’t viable competitors.

  8. SmartWater’s IP lawsuit against APDN and the impact on potential Defense contracts now that Communist China’s CCG (Terren Peizer) has just dumped 7.5M into APDN concern me. No thanks, pass.

    • Oops … well, I know I get jumbled when I return from traveling and the holidays are making everything crazy … but rarely do I actually forget what day it is! Sorry, yes, the conference is today, Thursday the 13th. And yes, unless there really is a shocking announcement the conference presentation is very unlikely to move the stock as much as Patrick Cox’s email campaign (and the attention of the merry Stock Gumshoe readers, perhaps).

  9. I actually got this agora email and I was surprised in that I was able to figure out that it was APDN as well. I looked up the stock on msn money and they have had several years of losses. I think that their auditor is not sure if the company will survive. I do not see anything that would make me buy it unless that defense contract sends them money fast and a lot of it. I wish that tthese newsletters would give good advice that we could use.

  10. The stock is APDN and we recommended it earlier this year a 12 cents a share in our monthly newsletter “How To Find Big Stocks”. We have since issued a sale alert when it was at the zenith of its run several weeks ago. The stock has gotten ahead of the fundamentals!

    • A stock with a lot better share structure and vastly greater potential has also been written up in the latest HTFBSN. It is VSUL and the CEO used to sit on the board of APDN and has had past success with with arguably one of the greatest “angel investment” returns ever–$1-$2M into $500M–Ron Erickson

    • Larry – This is EXACTLY the same market as Smartwater sells to – protection of metal from theft. I nearly bought the Smartwater system for my business to protect stocks of second-hand steel so I did learn a bit about it. Anyway, it seems to me that the value of APDN could depend very much on the outcome of a patent war, which means I cannot possibly judge the value of the company.

  11. Well, looks like the Agora (and Gumshoe naturally! ;o) excitement is making this baby fly! Closed at $0.29 on Thursday and as mentioned; with lots of volume.

    Today might be the test – as traders might want their profit of the table for the weekend.

    Now I regret I did not jump on the wagon at the $0.22 level it was at when I read about this “wonder” stock! Darn it!

    Cheers!

  12. Yes – Quite a bit of selling! In fact a 20% drop in a day! I think the newsletters drove this pump and dump more that anything else. It is now back at the level it was when I read Travis’s piece on it. Cheers!

  13. It looks like Cox is again touting APDN as his security pick for the military supply chain as part of that series of ridiculous “solve this crime” videos that got attention over the last week … and the stock did spike on Monday morning, as is almost inevitable when there’s a massive marketing pitch for a tiny ($100 million market cap) company … but it is, of course, still well below where it was when Cox teased it in December per the article above.

    There’s always plenty of volatility potential when you’re trading for more than 50X annual revenues, so it won’t shock you to see that the stock has traded for both less than a nickel and more than a quarter in the last year, and your expectation for how and when the business might potentially develop and grow will determine where on that spectrum you think she shares should trade.

    Their last quarterly report helped to bring the shares down from the Cox-inspired elevated prices of December and January, you can find it here. One key quote from the CEO sums up why this may well end up being a substantial business, but also why it’s not going to spike revenues right this minute (the emphasis is mine, not his):

    “Earnings for this quarter were not as robust as hoped for, but I believe we have spent the time and resources to lay the foundation on which to properly build our business. New technology breakthroughs during the quarter strengthen the company’s position in verticals such as textiles and in optical reading (scanning). Meanwhile, our military electronics offering continues to have strong momentum, although the sales cycle in a government-driven business may be somewhat longer than is commonly perceived.”

    So, expect a continued wild ride as long as the company is growing and investing and trying to build up this DLA security business — there’s still no real way to guess at how long it will take for the DLA business to become a meaningful revenue growth driver (assuming that it does). Cox’s attention (and the attention of folks who like to trade jumpy penny stocks) causes big moves, but he usually says that his hopes for these companies are very long-term in nature and there are always traders around who don’t wait, their churning of these kinds of little stocks means that once an ad campaign like Agora/Cox’s dries up, if there’s no big news from the company then there’s no new buying to drive the shares higher.

  14. i got the mailings a little guessing game i didnt open them as i have more things to do that play games i wish people would just tell the facts and stop the b.s. that seems to be the only way people can tell the store wasting time is not in my plan

  15. Seems like stink bids are the only way to buy, if indeed one determines that he/she SHOULD buy.

    I’m not a big fan of people who hype, so despite Mauldin’s love for Patrick Cox (BioTime), I am less enthused.

    Roger.
    InvestLetters.com

  16. Wow – Patrick Cox sure has a fertile immagination – now he comes up with a teaser for another teaser. He must think his reders are complete morons; oh, wait….. the stock is up 25% this morning – maybe his readers are a little daffy.

  17. Looks like my concerns were confirmed when China bought in. Goodbye trade secrets, hello impossible to detect counterfeits coming out of China?

  18. Thanks Travis!
    Much appreciated
    Patrick Cox went into this tease in three parts last week as a “guess what its all about” tease with the fourth part at 6 PM last night (Sunday) with a discounted 700 dollar price for his newsletter. I have to admit he is entirely correct. We do have a real problem ever since we shifted from US/Japan to China, satellite provinces and countries. Component failure rates have dramatically increased. I’ll leave it at that. Plant DNA signature implementation is one of the best methods to track authenticity including a whole spectrum of products including medicine. I can envision all kinds of markers in a persons body coming to you soon from the corner of happy and healthy street. If you pay with cash it may also be impregnated in the currency. Be happy!

  19. 3/20/2013
    IF CHINA BOUGHT INTO THE COMPANY , I WILL SAY GOODBYE TO APDN. THE CHINA PEOPLE WILL SEE TO IT THAT SIGNATURE IMPLEMENTATION IS COMPROMISED. GOODBYE
    APDN
    MAM

  20. Are you serious??? Why would the US DEFENCE have anything to do with a company that has a China influence, when it’s Chinese Cyber attacks and defective security products (chips and who knows what else), are causing untold ill effects nationwide. It doesn’t make sense and patrick cox certainly OMITTED the chinese connection in his news letter. Comments anyone and suggestions on a safer defence investment?

  21. Patrick Cox lost all credibility with me when he demonstrated that he doesn’t know how to pronounce “Thailand” and even worse, “Grumman.” Hint: it’s not “Grooman.”

  22. Today’s version of the teaser for APDN says the current price is $0.15 which hasn’t been correct since the 18 of March or so. That threw me off. He did not even update his pitch to reuse it. I, too, got turned off by his “Grooman” pronunciation of Grumman. By the way, last time I looked they are not Grumman anymore. They’ve been Northrop Grumman for years now. No one calls them Grumman and haven’t in a very long time.

    • I initially bought this stock last year when it was trading at .07 per share. I have since sold off some shares & made a nice little profit. I’m currently up in the 36% range on my remaining shares & plan to sit on them for a while. That’s the beauty of penny stocks if you get in early (before the paid promotions start to run). My philosophy on penny stocks is its Ok to take a few flyers – just don’t put too large a percentage of your total egg into them!

  23. I tracked this stock down on google, using Cox’s info. Bought and sold within 24 hours a few weeks ago, cleared 10% less broker’s costs. Would have made much more if I had held another day or two, but got scared. Watching since, I too realized the whole Agora group is pumping this stock. For their own profits, or because they believe in it? I don’t know. But I realized as above, that if they stop pumping, it could drop like a stone. So I would not buy again unless it dropped way down, only as a speculation. The whole Agora group, but especially Cox, are losing my respect, like air leaking out of a balloon!

  24. To HHH, APDN is a real flyer.
    I do not believe in falling knives, but will double up if I see shares progressing.
    I have made three purchases in APDN. If one is to buy a SPECULATIVE stock, a significant number of shares are justified. The total commitment is a very small portion of my spec bucket. I like the conce[pt and spin by Pat. He is a master .
    Every ones perspective is different. At age 90,and financially secure,(today), I enjoy
    playing the market. Younger investors, with long term goals can take a bite of these specs, but be ready to spit them out if they lose their flavor.
    APDN may be a real bonanza or a bust. Let’s see what happens.
    Bon Chance.

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