“The Ultimate ‘Pirate Fighting’ Stock”

This is a situation perfect for Christian DeHaemer’s Crisis Trader newsletter — a hostile environment, an unmet need, lots of shooting and fighting, just the kind of stuff his copywriters eat up.

But this time, it’s not about extracting nickel or oil from a politically sensitive area or building a copper mine during a shootout, it’s about piracy — specifically, the Somali pirates who seem to leap on every available ship in the Gulf of Aden and off the eastern coast of Africa.

He says he’s got a way to fight them … but that this stock is too tiny for his Crisis Trader mailing list, he’s afraid that the shares would shoot up if he told all of his subscribers. So he’s only telling the people who opt to renew and extend their subscription right now — talk about holding hostages!

The Gumshoe doesn’t like ultimatums of any kind, of course, so we’re going to see if we can identify this little stock for you — and yes, that probably means it’s got a chance of spiking a bit just from the potential interest of the great Stock Gumshoe readership … but we’re all smart enough to avoid spikes like that, right?

So what is it?

First, the promise — DeHaemer tells us that we’ll make …

A Potential 583% on the Ultimate ‘Pirate Fighting’ Stock ….

“I’ve discovered the ultimate stock surging off the fight against pirate attacks. Whenever pirates are in the news, like right now, this underground micro-cap company soars.

“The technology it’s producing enables Navy fleets to send out high-powered warning messages to pirates from huge distances.

“This device is roughly four to six times louder than the best megaphone you can find.

“And why it may not seem like much, you’d be shocked how many of these pirates will turn tail and run the moment a naval vessel identifies itself and tells them to turn around.

“This tiny stock, currently trading for only around $1.50, is already up 300% since the beginning of the year.”

One more clue:

“Its biggest customer is already the U.S. military, as this company has the only acoustic hailing and warning device that meets Defense Department standards.”

So, DeHaemer thinks that this pick will go from $1.50 to $10 in the long term.

“With the crisis brewing on the seas off Somalia, I truly believe we’re looking at a real opportunity for a major triple-digit gain.

“This tiny stock, only trading for around $1.50, is in my mind, the best chance for us to exploit this situation to our most lucrative benefit.

“But the ONLY way you’ll be able to get in on this play is if you decide to take me up on this special discount I’m offering today.”

And what is the Stock Gumshoe offering today? Well, we toss all that info into the Thinkolator, throw on an eyepatch and a bandana, and Avast, Ye Swabs, this must be …

American Technology Corp (ATCO)

There are a few companies that sell what they call LRADs — Long Range Acoustic Devices — that are used for crowd control and for hailing, and ATCO is one of the few publicly traded ones that really focuses on this business.

These LRADs essentially are fancy megaphones — they try to target sound wavelengths more precisely than plain ‘ol loudspeakers and offer more volume and clarity, but they just transmit sound. Apparently the sound is close enough to do significant damage to human ears at very near range if the pirates are close enough to the ship, but it sounds like they’re more often used to transmit clear messages across larger distances up to a few hundred meters, and that’s the big selling point from the company. In some cases it seems like companies have tried to claim these as “nonlethal weapons,” but that appears to be only at pretty close range as far as I can tell.

ATCO is also the company behind some of the other targeted sound products you might have heard of in past investor hype jobs — they make the point of sale sign thingies that provide an audio component that can only be heard in a small space in front of the sign, to avoid noise pollution, which some folks were convinced would be big business by now when I first heard this technology chattered about a few years back. I think they’re still waiting on that particular revolution.

But perhaps this hailing system will work in thwarting some pirate attacks — and the Navy certainly does have some of them, as do some other shipowners. I can picture this being effective at delivering terse instructions from a naval warship, but it’s hard to imagine that a warning from an oil tanker would scare the pirates off very much. And of course, the pirates probably adapt much more quickly than do the shipowners, so it wouldn’t be too long before they started wearing headphones or ignoring the LRADs.

That’s probably a simplification — the device is explained by the company on their website here, there are several versions of it. If you’re like me you read that “4 to 6 times louder than the best megaphone” in the teaser and thought “really, that’s not that impressive.” That might be because that language is taken from the description of one of their smaller LRADs, the 100X.

There have been several instances where these LRADs were involved with pirate attacks — a cruise ship used their LRAD and some other maneuvers to fight off Somali pirates back in 2005 (and here’s a second more detailed article about that same event), but the device is certainly no “scare away pirates free” card — there was a tanker just last fall that used the LRAD, water cannons, and had private security guards aboard that got taken by the pirates anyway.

One of the security firms that’s making a mint from selling protection to ships in the pirate shipping lanes commented that this event made it unclear that the LRAD was a good investment or a great tool to fight pirates (his security firm provides unarmed security guards for ships, which is a tough way to match up with AK-47s and rocket launchers, even if you have an LRAD and a water hose) — the article is here but it’s restricted to subscribers, one of the key quotes was: “As far as I’m concerned, it’s not an essential part of the equipment to deter an attack. There just needs to be a better system in place.”

The shares of ATCO have certainly already reacted to the pirate attacks and increasing press, and probably to DeHaemer’s ministering — they’re no longer at $1.50, though they were at that level two or three weeks ago, you’d pay $2.75 to buy shares today.

And the company itself? Well, revenues are growing on the back of increased demand for the LRAD product line — which is also used for wildlife control, including clearing birds from airports, regular mobile land-based security by police and military, and perimeter security at fixed locations, etc … they even sell it to drilling rigs and platforms to help them warn off boats from their controlled area, so it’s not necessarily just a one-trick pony.

The firm just had its first profitable quarter, earnings three cents a share for the first quarter of this year thanks to increased sales and cost cutting. You can see that latest ATCO earnings release here. So perhaps the company is at an inflection point if they’re going to see dramatic sales increases in the future, since they appear to be reaching a sales level that at least makes profitability possible — gross profits are pretty decent and have been for a while, it’s just that they didn’t have enough in sales to pay for their selling, general and administrative costs and their (sometimes considerable) R&D expenses.

So … seems to me that the jury’s still out on this one — they’ve had one profitable quarter and some big sales to the US Navy, but I don’t have a clear idea on how profitable they might be, or whether their LRAD products will be in consistent demand. That makes me nervous about the fact that the shares have already run from 75 cents in March to $2.75 as of this morning, but the shares are going for just about 5X sales, so it’s not absolutely preposterous to imagine them being successful, or even going to $10 someday as DeHaemer predicts … probably depends on the pirates, some more good stories of LRADs working to deter them, and some more big orders, but that’s just a guess on my part.

Oh, and while they have patents and such, ATCO is not the only company capable of making “sound weapons” or super-loud megaphones. One fairly close competitor is the Hyperspike from USSI, a unit of UK conglomerate Ultra Electronics (ticker is ULE in London, just FYI).

Whaddya think? Ready to fight off some pirates with your LRADs, or would you rather sit on the sidelines? Let us know with a comment below. And if you’ve been on any of these exciting rides with Christian DeHaemer before, please share your opinion by clicking here to submit a review of Crisis Trader now (you might be the first!) Thanks for reading, and Happy Investing to you.

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7 Comments on "“The Ultimate ‘Pirate Fighting’ Stock”"

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Tom T
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Tom T
May 12, 2009 10:44 am

This market can not be to big. And when the a shipping company buys a unit I assume it will last for years without any further costs. Sounds like just a flash in the pan stock to me.

allen
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allen
May 13, 2009 12:37 am

What is wrong with a powerful Laser? To go along with the LRAD, That way you can Warn the Boys and then just blind them… I can hear it now ” Just Look at the Pretty RED Light”
After a few attempts they can fight over their corners to sell pencils in Mogadisha…

Ponce
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Ponce
May 13, 2009 1:46 am

Our Navy and NATO are acting like a bunch of pussycats. What is up with catching and releasing pirates? Now the pirates are getting bolder because we pamper them. Western world is naive. I admire the Indian NAVY for blasting out of the water the pirates. That’s the way to treat these lawless bums. When NATO and our Navy will finally wise up and destroy piracy, LRAD will just be a waste of money and ATCO has nowhere to go. As TOM above said, It is a flash in the pan.

dave
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dave
May 13, 2009 7:31 am

While this is being pushed as a pirate deterent in this newsletter, the real source of revenue will come from police departments buying at least one unit for crowd control use. So while there is the possiblity for market saturation, that shouldn’t happen for years. There are lots of police departments around the country and world who will love this thing.

joost
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joost
May 13, 2009 11:44 am

Although not 100% certain, i remember to have seen an article on De Haemer some time ago. He might have served/worked in the army which explains his interest for stockpicks related to violent environments.

sequential
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sequential
May 13, 2009 3:06 pm

LOUDSPEAKERS WHAT A WASTE OF TIME JUST SHOOT THE FUCKERS AND BE DONE WITH IT,

ponce
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ponce
May 16, 2009 7:44 pm

There you go sequential! I like that. Loudspeakers? HA HA HA HA HA!

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