What is this “Christmas Internet Outage” that Louis Navellier is teasing us about?
Well, the short answer is that so many folks will get online goodies from Santa that they’ll swamp the Internet. Which is sort of possible, I guess — like most holidays, Christmas web traffic as a general rule is down substantially from peak work days, but it’s “nontraditional” web traffic from home, stuff like apps and games and videos and video chatting with relatives. And lots of facebook. So I guess it puts different pressures on different parts of the internet.
So how does Navellier think this will impact you? Well, the important thing for us is that he apparently believes it will make us filthy stinkin’ rich. Or at least, “” rich … which is certainly a lot better than I do most of the time. Here’s how he describes it in the beginning of his ad:
“There’s a good chance your Internet connection could go offline Christmas morning, and there’s no stopping it.
“And it’s all because hundreds of thousands of new iPhone, BlackBerry, Xbox and gaming applications will begin to stream too much data and video for the networks to handle.
The result will be similar to the Internet outage that knocked millions of BlackBerry users offline in October of 2011 when a few backbone systems failed to keep Internet traffic flowing smoothly.
“The same thing is about to take place again, my friend, come Christmas morning as thousands—if not millions—of Americans, Europeans, Latin Americans and Chinese wake up Christmas morning to a shiny new iPhone, iPad, game station or laptop and they all begin to download songs, stream video or play online games.
“The inevitable traffic bottleneck could make BlackBerry’s October outage look like child’s play as the surge in bandwidth usage reaches epic proportions and the chain reaction throws millions of Internet users off line….
“My newest recommendation that I will be releasing TONIGHT could make another 407% profit from preventing it.”
OK, this ad actually came in on Wednesday — so that would have been last night that he released it. Will the stock have already taken that 20%, 30% even 50% leap that he seems to expect momentarily? I know, the suspense is killing you … so let’s sniff out any clues he provides and Thinkolate the heck out of this one, shall we?
We get but a few specific clues — some customers:
“That’s why virtually every big ISP and telecommunications company on the planet—including Vodafone, Orange, AT&T and Verizon—are racing to keep their network resources up and running in advance of the surge.
“That’s why also why virtually all of them are choosing our solution provider over dozens of global competitors to prevent the same kind of bandwidth bottleneck and outage that brought BlackBerry networks to its knees.”
And a vague description of their busienss, along with a few numbers:
“And it’s all because our company’s software and hardware traffic solution can, metaphorically speaking, get a fire hose’s worth of high-speed data out of an existing garden hose wire line connection and without bottlenecks or outages.
“The result not only ensures the smooth deliver of broadband services to customers but—perhaps most important—ensures that network management costs do not outpace revenue growth and without spending billion on wire line upgrades.
“That’s what puts my newest recommendation in the catbird seat of the bandwidth bottleneck solutions that all ISPs and telecommunication companies must acquire to prevent hundreds of thousands of new bandwidth-hogging smartphone applications (and millions of new users) that can slow the Internet down and result in outages.
So it’s no wonder the company’s sales jumped 37% last quarter while enjoying 175% earnings growth—all while handing investors 407% gains since June 29, 2009.”
I know what you’re thinking — “wait, Mr. Gumshoe, that’s not enough clues!” But no, the mighty, mighty Thinkolator is, like always (as far as you know), up to the challenge. And our answer comes out, as metaphorically as water from Navellier’s firehose: This is Allot Communications (ALLT)
Allot, which happens to be an Israeli company, is one of a legion of tech firms that are trying to declog, rejigger, reroute, enhance or otherwise speed up global networks — and I have no idea which ones are best. In simpler times I was a big fan of Akamai, as an innovator in the development of edge servers that closed the physical wire gap between you and your iTunes account (or whatever) and sped up the internet experience … but in the last couple years this business seems to have gotten much more complicated and specialized and, to some degree, commoditized (and brought down Akamai’s margins and share price). That’s not exactly the same thing Allot does, but it’s aiming at the same general problem: too many large files and streaming video and audio streams, too little bandwidth. Some companies compress the files, some companies change the way they’re transmitted, and I understand almost none of it.
But Allot did report 175% earnings growth (175.9%, actually, Navellier is being uncharacteristically modest) last quarter, and 37% revenue growth — so that’s an exact match for you. They’re a small company, roughly $500 million in market cap, and they are profitable and priced for growth (trailing PE around 60, forward estimated PE around 30), with the kind of consistent earnings “beats” and analyst upgrades that often trigger buys in Navellier’s quantitative system.
The company describes themselves thusly:
“We are a leading provider of intelligent IP service optimization solutions for fixed and mobile broadband operators and large enterprises. Allot’s rich portfolio of solutions leverages dynamic actionable recognition technology (DART) to transform broadband pipes into smart networks that can rapidly and efficiently deploy value added Internet services. Allot’s scalable, carrier-grade solutions provide the visibility, topology awareness, security, application control and subscriber management that are vital to managing Internet service delivery, enhancing user experience, containing operating costs, and maximizing revenue in broadband networks.”
Which is about as many jargon-words as I can stand. And no, I don’t know if they’re better at this than anyone else — I just know that Navellier’s teasing them, and they have had a good couple of years, stock price-wise, since the collapse in early 2009 (the shares were down around $3 at the end of June, 2009, which Navellier gives as his “407% gain” point because it was an iPhone intro date, and they’re around $18 now.
And don’t worry, the stock is more or less flat today so presumably it has not yet reacted crazily to Navellier’s recommendation. And I hope I won’t hurt his feelings, but the market doesn’t always follow his words all that slavishly — his boilerplate to urge you to subscribe right this second to a short-term deal offer is this:
“You see, once we release this recommendation tonight, hedge fund and institutional investors could drive up the price 20%, 30%, even 50%, as they often do—especially when they see my in-depth analysis and complete profit projection for this little-known and thinly traded stock.
“That’s why this offer ends in 24 hours.”
And what’s that “special price,” you ask? Well, that’s even a bit sneakier — the headline numbers on the order page say that Emerging Growth is going for “$295 Today Only (Price reverts to the $995 annual price at midnight)”
Which would make you think, hey, that’s about a 70% discount! Right?
Actually, no — it’s a 20% premium. That’s because the “$295 Today Only” price is for the quarterly subscription that autorenews at that price every three months. So that means you’ve got a special, limited-time offer to pay only $1,180 for a subscription that normally costs $995! Yay!
OK, to be fair, the Stock Gumshoe Irregulars quarterly option is also a “reverse discount” — that’ll run you $52/year instead of the annual rate of $49. Monthly subscriptions are even worse, totaling $54 a year. There, I feel better getting that off of my chest.
And actually, the price for Navellier’s Emerging Growth sounds awfully familiar — I think those “Today only” prices are the same as the standard retail prices. So don’t feel sad to have missed out, or that the 24 hours of the offer might have passed by the time you read this … not only can we tell you the name of the stock for free, but we can also reassure you that, should you wish to pay $1,000 for this newsletter, you’ll have plenty of opportunities to do so in the future.
Oh, and for what it’s worth, the “beating the market $3-to-$1 since 1985” stuff Navellier claims in these Emerging Growth ads is not representative of recent performance — at least according to the tracking they do at Hulbert Interactive.
To be fair, Hulbert doesn’t track all of Navellier’s data back to 1985 — but over the last ten years, which is a pretty good sampling, Navellier’s much cheaper Blue Chip Growth has almost doubled the annualized return of the broad market (7.2% versus 3.8%/year), which is very good and puts it in the top 20 of the 200 or so letters tracked by Hulbert … so I’ll buy it when he says he can beat the market $2-to-$1 with that cheaper letter.
But the letter teased here, Emerging Growth, has done substantially worse than the market (0.2% annualized return over that time), and with slightly more risk. And of course, that’s nowhere near three times better than the performance of the index over the last decade — I presume there’s some data point he can use to justify that claim in his advertising, or maybe he really trounced the market during much of the 1980s and 90s with this letter or its predecessors, but it’s not recent performance. And no, I have no idea what the long-term performance of his really expensive letters (Quantum Growth and Global Growth, each $5,000) has been, Hulbert doesn’t track ’em.
So I can’t tell you a lot about Allot, but I have been dying to type those words all morning. How about you? Interested in another fast grower that doesn’t seem to have been clobbered as much as some of the other “speed up the internet” growth stock darlings like Akamai (AKAM) or Acme Packet (APKT) this year? Let us know with a comment below.