Buy Before GE Does — “Day in the Sun” for Solar Innovator (Tobin Smith)

By Travis Johnson, Stock Gumshoe, August 16, 2008

I haven’t written much about Toby Smith lately, though his ChangeWave rants are always good entertainment and he sometimes pulls a good idea to light for us (or at least pumps up the shares of a microcap stock). Bear markets aren’t usually a good friend to the kinds of microcap technology stocks he often likes to recommend, so many of his past recommendations that we’ve sleuthed out here are in terrible shape … but the heart continues to yearn for a blockbuster, no?

Let’s see if he’s got one for us this time.

In his own words …

“Well, I’ve been patiently waiting for one of the most exciting technology stocks out there to pull back so we could buy it for around $5-$6 and then sell it for $15-$18. For those of you who don’t want to do the math, that’s a 300% move.

“All the stars need to be aligned to get a stock like this at an attractive price, and in the past 60 days, we’ve seen that happen. That’s the beauty of bear markets — you get the chance to buy the best names at a huge discount.”


OK, good start — what does he tell us about the actual company?

“We had this company in our ChangeWave Investing portfolio two years ago, but we were a little early. After it sold one of its businesses to General Electric (GE), we decided to sell the stock and wait for the company to come up with its next big thing.

“Well, the next big thing was a solar technology that is twice as effective as existing technologies that lowers the cost of delivering electric power to 4 cents per kilowatt hour.”

“And I want to tell you that GE is already on the prowl. The company currently holds more than 600,000 shares, and I wouldn’t be surprised to see it buying more. You want to own this stock now to stay ahead of GE — because when it makes its move, the shares are going to explode.”

OK, so not a boatload of clues, exactly … but probably enough to feed the Thinkolator on a quiet Summer day.

We get another tidbit, however:

“The company also has a deal in the works with a major international manufacturing conglomerate to take its technology to China, India and across Asia in a big way.

“Including these catalysts, the company has up to six big announcements with utility companies …. If this company announces just three of these deals, its backlog should exceed $200 million.”

He compares the stock to Cypress Semiconductor, which enjoyed a nice run even as its own business faltered, largely because it owned SunPower and spun those shares off very slowly to reap some nice rewards (they still own a piece). Toby sees a spinoff or sale of this solar business, it sounds like, and we all know that GE has pretty deep pockets for technology that fits into their needs.

So what is it? A quick spin of the Thinkolator’s new Cognifuge attachment, and we’re able to determine that this is …

Emcore (EMKR)

Here’s an article from Tobin Smith about what he thought about Emcore last time he recommended it, in 2006 when the shares were somewhere in the neighborhood of $10. They’re just shy of $6 at the moment, and moving up (thanks, I’m sure, to the attention from Smith).

This is not as tiny as some of the companies he likes to tout in ChangeWave and his microcap newsletter, but it is a small cap to be certain — market cap is about $450 million, and they don’t have any debt. Or profit, to be fair, though analysts do see them making a small profit in the current quarter and in the next fiscal year (their year ends in September).

I don’t know much about Emcore’s technology and haven’t formed an opinion on the company yet, but it’s true that GE did buy one of their businesses back in 2006 (a LED lighting business called GELCore that had been a joint venture between the two companies), and that they do have a developing solar business — they developed some technologies to increase efficiency in space-based solar arrays, and have used that and another technology for concentrating solar power for use on the ground. The company does plan to spin off its solar business in an IPO next year, though of course there are no guarantees on that front (either that it will happen, or that it will be profitable for shareholders). Their last earnings call transcript provides a good idea of where the business stands at this point, I’d recommend reading it if you’re interested in investing.

Their leading solar technology is called concentrated photovoltaics (CPV), and there has been quite a bit of coverage of them over at SeekingAlpha if you’d like another opinion. The claims seem pretty impressive — something in the range of 50%+ more efficient than the leading panels that are available right now (which are from SunPower). Some of those folks seem to understand the technology much better than I do, so it might be worth a read.

And yes, GE does own some shares of Emcore, though many fewer than some other institutional investors (they’re not in the top ten holders). As of their last 13F filing GE owned 230,020 shares of EMKR, but that was on June 30 so it’s possible they’ve added more to get to Toby’s 600,000+ shares, I didn’t look very carefully for that. Emcore is also in the Powershares Winderhill Clean Energy ETF — and on the flip side, Emcore owns shares of World Water and Solar Technologies (formerly World Water and Power), an old Gumshoe stock from last year that has been beaten with the ugly stick of late (Emcore recently sold at least a big chunk of their WWAT shares, and insiders at WWAT also appear to have been selling with both fists).

And Emcore insiders have done a fair amount of buying of EMKR stock, back in March at prices similar to what you’ll see today — they also did quite a bit of selling earlier in the year, when the shares were near $12, so that sets up an interesting range of $6-12. At the bottom insiders want to buy, at the top they appear to be tempted to sell — just something to keep an eye on if you end up buying shares of this one. Generally insider buying, especially from executives, is a promising indicator for the following 6-18 months or so, so that’s one other positive for the stock (though insiders can be just as wrong as you or I in any given situation, and are often guilty of being overly optimistic).

I do not currently own shares of any company mentioned or of any other solar power company, though I do think that not buying GE when the yield briefly got to almost 5% was probably my biggest mistake so far this year (not that I haven’t made many others). GE at these prices still interests me more than any of those other stocks mentioned above at the moment, though Emcore is intriguing and maybe worthy of some more research.

Related Gumshoe Articles

Make Your Millions with “The Next Wireless Billionaires” — Tobin Smith

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17 Comments on "Buy Before GE Does — “Day in the Sun” for Solar Innovator (Tobin Smith)"

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A.Nony Mouse
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A.Nony Mouse
August 16, 2008 6:03 am
I’ve found Smith’s natural resource picks to be better investments (specifically the ones in the energy sector) than his tecnology picks. Too often he seems to be entralled by early adapters or the “promise” of a tecnological break-thru. Wi-max comes to mind. A couple years ago he recommened alvarion, when that did nothing, said to close the position (at a loss), and said to buy air-span (which turned out to be even more of a dog) I could name several others that were big time flop-a-roos, but will end by saying his free stock picks on the Fox News Channel’s… Read more »
Ray Porter
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Ray Porter
August 16, 2008 10:50 am

I rode EMKR to a nice profit last time Tobin recommended to buy and to sell and have bought again. in solar and LED he has done well (LDK and SPWR and CY) so this is probably worth some trading money.
good luck
ray

farley 5
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farley 5
August 16, 2008 10:55 am

While I do not like EMKR from a technical basis, (awful chart and 0 for 5 technicals), I do know newsletter writers can pump a stock. If you want to play this one, why not do a bull spread, mar 09 5’s – 7.50’s for a $0.75 dr plus commissions. Upside is $2.50. As always, be sure to read the options disclosure and understand the risks.

mole
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mole
August 16, 2008 2:11 pm

Technicals don’t look so bad to me. !0 day MA crossed over the 20; closed over the 50; MACD looks good; RSI not bad; strong support @ 5; strong resistance @ 8!

asafp
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asafp
August 16, 2008 3:05 pm

Toby recommended EMKR Aug 13 to “alliance” members and it jumped from $5.12 to $5.70 that day and currently $5.87. These picks usually fall back a whole bunch from the initial “changewave effect” before resuming up. Of course, many of them never do resume up.

You can expect to get a few months worth of “lower buy under to $4”, “lower buy under to $3”, “lower buy under to $2” before you get the sell recommendation.

Then, 2 to 3 days later, the process begins all over again with a new “changewave” pick.

gone fish'n
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August 16, 2008 6:23 pm

i think he may be hinting at Silex. SILXY.PK
they have a deal with GE regarding uranium enrichment using lasers and there wholly owned company Translucents are on the cutting edge of a major solar deployment. good luck

Ortho
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August 17, 2008 1:05 am

Interesting! I took out the small cap investlet
in 2006.He heavily pushed that company that
invented kind of rubber sheet that would pass electric current. What was the name, and did
it finally do as well as he predicted.
Then there was that other tech stock,cant remember
the name either but it had invented computer
switches that the military were looking at.
Selling then under a dollar, went to 2 dollars and
fell back to 80 cents again.Has that “blossomed”??

Big Mo
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Big Mo
August 17, 2008 9:12 pm

EMKR had a +DMI crossover on 8/12 when it opened at $5.15. Current ADX is 19. Not bad.

farley 5
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farley 5
August 18, 2008 8:30 am

I use 55 & 14. What periods do you like for your ADX? ADX is more for day trading I think and I seldom use it. Thanks for the update. Still think the bull spread above is worth looking at for those that like the story.

ftgambit
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ftgambit
August 16, 2008 4:29 pm

farley5, I reviewed EMKR chart and I can’t see where your getting your AWFUL Chart outlook from on both the daily and weekly the stock has put in a base around $5 I would like to see it close around $7.50 to confirm a trend change but entering here witha hard stop at $5 is very good risk/reward setup. Also you not liking the technicals seems incorrect as well, among other indicators MACD starting to turn up on longer timeframes as well as momentum. Please explain your opinion because I just dont see it:-)

A.Nony Mouse
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A.Nony Mouse
August 16, 2008 6:51 pm

Yes How well I rember Toby’s Xethanol pick. Even after his pal Mark Cuban did a hit piece on it with his so-called “news-site” Toby advised his subscribers to hold or even buy more..and..hold and uh, move to the speculative portion of their portfolio..and ooops.

A.Nony Mouse
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A.Nony Mouse
August 16, 2008 7:20 pm

I wasn’t going to mention it…but does anyone here remember Toby’s Puda Coal pick with a target price at changewave that started at $15 was later reduced to $7.50? Any Changewave subscribers remember if he ever gave a sell on that stock??? I think Toby may be one of the few newsletter hacks that recommends pink sheet stocks

farley 5
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farley 5
August 17, 2008 9:07 am
Good Morning! My main tool is Point & Figure charting. I compare stocks with the equal weighted S&P 500, (RSP). I compare the stock to their peers in the sector. Finally, I see if the stock is trading above the bullish support line. EMKR is worse than rsp and getting worse, worse than the semiconductor stocks and getting worse, and trading under the Bearish Resistance line. Other stocks look better. I also an an old Telechart guy. While the time segmented value (i used 27),just peeked over the zero line, it looks to be curling back down. Money stream just… Read more »
farley 5
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farley 5
August 17, 2008 9:16 am

A print at 7.625 AU for SLX-AU sends this higher.

coal burnerzzzz
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August 17, 2008 5:10 pm

Symbol RPTN.OB aka. Raptornetworks close to .40 cents a share and the future might be good or bad ,depending on how u look at the future,not clear …

Big Mo
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Big Mo
August 18, 2008 8:42 pm

I prefer an ADX over 25 going in, not so much as a primary indicator in itself, but as a secondary indicator to a pending reversal, whether your going short or long.

farley 5
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farley 5
August 19, 2008 9:52 am

Thanks – I’ll play with that this weekend and see what happens. Never to old to learn.

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