It’s been a little while since I wrote about a Nancy Zambell teaser — she writes the Buried Treasures Under $10 newsletter, and in the short history of that letter she’s apparently had pretty good performance … and, one expects, makes it sound even better than it was (the letter launched two years ago, almost at the very bottom of the market crash doldrums, so returns from then have been pretty remarkable for everyone).

And she says that this year, you can “Pocket five times more profit than even the bulls expect this year, or I’ll pay you back!”

By which I’m sure she means that she’ll refund your newsletter subscription fee — not that she’ll help recoup your losses if she chooses some bad stocks. Here’s how she says her subscribers are doing, and what she means by the “beat the bulls 5-to-1” bit:

“Yes, even the most sober expectations for 2011 are bullish and the bar is set high, but I’ll still make good on my promise to beat those high-powered bulls five times over. Or I’ll pay you.

“Barron’s expects S&P stocks to gain 10% this year, and that — and all the other good news coming our way — will comfort many, but it won’t make them rich.

“Unlike most investors, my subscribers (soon, I hope, including you) would be horrified if their stocks went up a mere 10%.

“That’s because they’re already averaging 50% profits!”

She says that she does this for her subscribers by picking “carefully selected off-radar small caps just before they surge” and selling when the surge “levels off.”

And, of course, she has identified some new “unknown blockbusters” — and she’ll tease us with a few details to entice us to subscribe to her newsletter. I’m going to take a look at the first one of these today, but there are two teased (will get to the other soon if there’s some interest). Here’s how she introduces ’em:

“I’ve just uncovered two new unknown blockbusters getting ready to double.

“These bull beaters make the Internet better, but in vastly different ways.

“One is a pioneer in Internet security. The other makes life much easier for all of us, as my exclusive new report, Double Your Money Twice on the Hidden Internet Pioneers Of 2011 makes clear.”

OK, so whether we get returns of 50% or a double, either way that sounds quite lovely … right? So just in case she’s right about these, let’s check out the clues and see if we can name that stock!

“Bull Beater #1: Profit from a huge threat facing the world: Internet security ….

“Corporations — and governments — worldwide are worried sick over IT security. And they should be. Data breaches are enormously expensive and dangerous.

“So what happens? Budgets for Internet security get beefed up across the board. They’ve already shot up from 3.1% of the total tech budgets in 2001 to a hefty 5% today.

“What was a $60 billion market in 2009 is exploding at a rate of 12% through 2013, making global IT security one smoking red-hot sector.”

Interesting — I’ve been meaning to learn a bit more about some of the tech security firms, they do indeed seem to be in a sector with built-in growth (though that doesn’t, of course, guarantee profits for anyone), and we have seen tech security stocks teased a few times before.

She also throws in the “smart phone” buzzword, noting that this brings in a whole new world of security threats and business.

How about some specific details to help us nail down this particular Zambell favorite?

“Company sales doubled to $6.3 million in 2005. In 2010, sales are estimated to come in at $29.6 million. That’s quite impressive growth!

“The industry is growing at a 21.47% clip, but Bull Beater #1 is growing sales at a 42.79% pace — nearly double industry peers, and nearly five times faster than the 9.04% growth rate of S&P 500 stocks.

“As you read on, you’ll be amazed that this behind-the-scenes IT security pioneer is yours for $4. Talk all you want about super bargains. I’d rather talk about profits!”

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OK, so a $4 stock and sales of only $29.6 million — we can guess that it’s probably quite tiny. Some more details for our tease?

“The company is estimated to make $0.04 per share for 2010, and in 2011 earnings per share estimates are a whopping $0.21 — more than fives time more!

“My technical indicators are screaming BUY NOW too!

“And those proven indicators don’t even take into consideration one of the company’s most valuable assets: The TCG.

“TCG stands for Trusted Computing Group, an industry standards organization made up of leading computer and device manufacturers, software vendors and other computing product manufacturers. Its goal is to make all computers less vulnerable to viruses and malware that can shut down entire networks.

“Bull Beater #1 is a permanent member of this powerful group, meaning this little unknown has a direct line into not only the latest school of thought on IT security but also a very powerful tool to create lucrative relationships with many of the most important and biggest corporations in the IT security sector.”

OK, so that’s what we get by way of clues. Let’s toss ’em into the hopper of the mighty, mighty, Thinkolator, shall we? Just me? OK, I’ll do it for you … there we go, and our answer comes spitting out the other side:

This must be: Wave Systems (WAVX)

The clues are nearly a perfect match, though that sales number that she teases from 2005 is actually from 2007. And the stock has been on a tear for the last couple days, perhaps in part because of her teaser ad, which I started seeing on Tuesday, and in large part, probably, because the company has been on a PR tear — their CEO, Steven Sprague was on CNBC this morning and must have said something awfully optimistic (I didn’t see it, but they pitch him as the man who wants to “change the internet forever,” so he probably wasn’t shy), and they’re speaking at an investment conference this afternoon.

So the buzz has certainly been building for this stock, which has gone from a $4 pick to a $5+ pick in short order, I don’t think I had ever heard of them before today, and though they are of a reasonable size (market cap now closing in on $400 million) they don’t really have any analyst coverage to speak of. There must be at least one analyst, since I have seen enough to confirm that someone predicts four cents in earnings for 2010 and 21 cents for 2011, as Zambell teases, but I think it’s just one analyst, who put a “buy” rating on the shares and a $6 price target back in June.

Here’s how the company describes itself on their website:

“Wave Systems is a leading provider of client and server software for hardware-based digital security, enabling organizations to know who is connecting to their critical IT infrastructure, protect corporate data, and strengthen the boundaries of their networks. Wave’s core products are based around the Trusted Platform Module (TPM), the industry-standard hardware security chip that is included as standard equipment on most enterprise-class PCs shipping today.”

Which, frankly, does not mean all that much to me. If you’d like to see what they’re saying now about the business, their presentation at the Needham Growth Conference at 2:50 this afternoon will probably be online and archived, you can link to it from their presentations page here if you like (or see their older ones, including their last quarterly call). They are an internet security company, and they seem to be focused primarily on hardware security that’s built into, for example, corporate fleets of laptops.

There was an article a couple weeks ago at TheStreet.com about WAVX and a new contract expansion, and in that they speculated about reasons for the stock languishing in recent years, including the need for a lot of capital raising that has diluted shareholders — though not diluted earnings, per se, since if they end up showing a profit for 2010 that will be their first profitable year. You can see their third quarter earnings press release here, which includes some chatter from the CEO about the importance of their participation in the Trusted Computing stuff and about the importance of reinvesting in R&D (which also helps explain why they didn’t turn a profit, despite a pretty nice revenue increase in that quarter).

Since a lot of their revenue comes in from licensing fees when systems are sold with their security solutions built in, that would indicate that there is at least some potential for turning this into a high-margin business if they have some sort of valuable intellectual property that is in demand — but I don’t know anything about who their competitors are in this specific product line (I’m assuming there are some). The shares are certainly really, really expensive compared to the big, established internet security companies like Symantec (SYMC) and Verisign (VRSN), but their business isn’t necessarily directly comparable to those — and they are, of course, far smaller so a bump up in business could more easily turn into growth that delights shareholders.

So, this is a small internet security company focused on hardware solutions and receiving quite a lot of buzz right now — not just from Zambell, but from the more mainstream investment media, too. Do they deserve it? Worth some of your money? That’s your call, but let us know if you’ve got an opinion on the shares — or if you are one of the probably very large group of folks who understand the data security business far better than I do and can share an opinion on Wave Systems’ products or potential. The friendly little comment box below awaits your input!