“One Phone. Three Numbers…. Second Chance to Lock Up My Next 10-Bagger”

By Travis Johnson, Stock Gumshoe, January 25, 2011

Here’s how Louis Navellier pitches his next uber-hot idea for a stock that gives you three phone numbers on one phone and 10-bagger profits:

“Last May I told you about a new wireless juggernaut whose 3-in-one proprietary technology and earnings growth matched Envirodyne, which handed us a monster 1,700% gain a few years back.

“Since then, this company has not only handed my readers 205% profits on 2,999% earnings growth but is now on track to break out again come February 28.

“If you missed the first wave of profits, you’re getting a valuable second chance to grab the next 205% gain before it declares earnings again—but only if you act now.”

Navellier is teasing this idea in order to get you to subscribe to his Emerging Growth newsletter, which generally looks at smaller stocks (and costs more — it’ll run you almost $1,000 even on the “family plan discount”). He also says that he’s been “beating the market by $3-to-$1 since 1985” — I don’t know if that’s true, but I have my doubts if their claim means what it seems to mean, which is that Emerging Growth’s portfolio has returned 3X more money over 25 years than has the broader market.

Hulbert, which tracks actual portfolios of newsletters, lists the annual return of this newsletter since 1985 and there are only a few years in which the performance has doubled the market’s returns, and a couple in which it has done substantially better than that — with the very best years being mostly in the late 1980s and early 1990s. Hulbert’s data says that over the past 15 years Emerging Growth has trailed the market (roughly 6% annualized returns versus 7% for the broad market). I don’t cite this data just to poke Navellier, I would do this with everyone if I could but most of the more heavily hyped newsletters are not tracked by Hulbert (or, as far as I know, by anyone else who actually monitors the specific portfolio performance). So Navellier gets some extra scrutiny since there’s an observer who’s been tracking him for 25 years.

But anyway, whether he’s beaten the market or not over time he certainly comes up with high-growth stocks for our consideration, and his picks often outperform, particularly in a bull market. So let’s find out which stock he’s touting today, shall we?

He again makes a promise, as he always seems to in his high-pitched teaseriffic emails, that it the stock doesn’t jump another 50% shortly after it releases earnings (which are coming out in about a month, on February 28), then “you won’t pay a dime” (meaning, you can get a refund for your subscription — not that they’ll make good if it turns out the CEO of this teased firm stole the company’s checkbook and is hiding out in the Cayman Islands … so in practice quite similar to the refund guarantees of most big newsletter publishers, though thankfully without the “10% refund fee” that many have imposed recently).

So it’s some kind of tech stock that’s releasing earnings on February 28, which is a lovely hint, and Navellier tells us that it must be a chip company of some kind, because their technology allows for cell phones to carry three different phone numbers … here’s how he describes that:

“Unlike the cell phone in your pocket that limits you to one carrier and one number, this company’s chips will allow YOU three phone numbers from three potentially different carriers.

“The result will allow you to quickly change phone carriers to grab cheaper call prices and better network coverage when you’re on the move—all while retaining your contacts and without your having to buy a new cell phone!

“Talk about a dream come true!

“This is why this company’s chips are selling like hotcakes all over the world and particularly in China where this 3-in-1 feature is hugely popular.”

So … that’s two hints. Do we learn any more about them?

I’m so glad you asked! Indeed:

“the company’s earnings jumped 2,999% last quarter…. the stock’s price jumped 205% profits in eight months… “

And we also get a bit of a hint about the stock price — he says that this is a “$19 wireless juggernaut” and, naturally, that since he thinks it “could have already hit $27” if you wait to buy after earnings, and after Navellier’s “buy rating becomes public.”

So that ought to be enough, right? We’ll try it out and see — let me just feed all that data into the mighty, mighty Thinkolator and yes, we learn that this stock is:

Spreadtrum Communications (SPRD)

No, I hadn’t ever heard of them before, either.

This is a Chinese company, a decent size (market cap just under a billion dollars) fabless semiconductor shop (“fabless” just means they don’t have a factory of their own, they just design and sell the chips and outsource fabrication to one of the big foundries).

And yes, they have designed a product that could allow a phone to use any of three different SIM cards, which would mean that you could shuttle back and forth between carriers or, for jetsetters, have a SIM in the phone for each country you work or live in. This innovation was announced last Fall, here’s the press release, and Spreadtrum was also, according the themselves, the company that came out with the dual-SIM chip. They also develop 3G dual band chips to enable phones to run on both CDMA and GSM.

Despite my not having heard of them before, they have been public for several years and have seen remarkable stock performance for the last two years (don’t ask about the two years before that) — the stock is up from about a dollar to the current $19ish since the lows in January of 2009. As with many Louis Navellier picks, it’s tickling all-time highs.

And yes, they did report absolutely ridiculous earnings growth last quarter, though the analysts don’t seem to think that will continue. Revenue growth was 150% year over year, and earnings were up 2,999.5% (I would have rounded up to 3,000% myself, but that’s just me). Analysts think they’ll earn more than 50 cents per share in the fourth quarter (that’s what gets reported on February 28), which would indeed be another quarter of massive year over year growth (a year ago the earnings number was three cents).

As the quarters go by, of course, the growth numbers are expected to be far less dramatic — they’ll still grow, and very nicely if the analysts are right, but they’re not going to bump up earnings by several thousand percent again. The estimate — and there are a half dozen analysts covering this one, so their estimates have generally been reasonably close on average — is for $1.63 in earnings for 2011 for a forward PE of about 11 (which represents about 30% growth over 2010), so that’s a reasonable valuation if you expect the growth to continue at any kind of double-digit rate over the next several years. It’s also quite clear why Navellier likes this one: not only has the stock developed crazy momentum over the past year, which triggers some of his indicators, but it also is seeing analysts raising estimates in recent months, another good trigger (though the stock hasn’t provided much by way of earnings “surprises,” which tend to be the what shocks a stock upward at earnings season).

As to the fundamentals of the company? Well, I can’t tell you anything about the uniqueness or lack thereof of their products, I suspect that the tri-SIM GSM in developed markets will remain a niche product for global travelers, if only because most Americans don’t even know that there’s a SIM inside their iPhone, but that’s just my opinion (and not an expert one) — it may be the next great thing and I can certainly see how it could be popular in Asia and Africa, particularly. In fact, though I assume that this particular chip offers some new development, triple-SIM phones have been available in China for at least three years. Navellier says in the tease that this is one of three chipmakers who can provide the basic communication chips for these “three phone number” handsets, I can’t verify that but if so, that may be enough competition to keep prices down — particularly in such a fast-moving market.

I can tell you that the stock has had some huge swings, not particularly unusual for small semiconductor companies — over the last eight years or so about half of the years were profitable and half unprofitable, with margins all over the map, so I assume that’s largely product cycle stuff related to getting their designs into new phones. 2008 and 2009 were pretty tepid with steady revenue and margins, but 2010 really perked up with more than doubled revenue and a return to operating margins in the mid-40% range, a place they hadn’t seen since 2006… so the key, I suppose, is whether their designs and uptake from customers is strong enough (and their competitive position solid enough) to let them keep the revenue numbers up at these levels and maintain margins.

And since that’s the key, of course, I have no idea which way it turns — so I’ll toss it out to the great Gumshoe Faithful, many of whom know their way around a semiconductor foundry. Maybe someone can tell us if this tri-SIM chip is really a big deal, or whether we should trust that the rapid ascent of SPRD will continue. Feel free to share any thoughts along those lines with a comment below — that’s why we’ve got such a friendly little comment box, it ain’t just there for looks.

We’d also like to know, naturally, whether Navellier’s Emerging Growth subscribers feel like he’s beating the market $3-to-$1 for them — so if you’ve ever subscribed, just click here to submit a quick review over at Stock Gumshoe Reviews and share your experience. Thanks!

Related Gumshoe Articles

Navellier’s “Tech Doubler: breakthrough technology that turns 50-year old coaxial cable into a 1-gigabit home networking solution”

What's being teased as a "Double in a year" stock by Navellier's Emerging Growth?

14 Comments Read More

What the heck is the “Tesla of Medical Devices?”

Sleuthifying a "secret" Louis Navellier teaser stock

18 Comments Read More

Leave a Reply

28 Comments on "“One Phone. Three Numbers…. Second Chance to Lock Up My Next 10-Bagger”"

avatar

J. J.
Guest
0
J. J.
January 25, 2011 1:18 pm

The only thing I can say about Navallier is that his TIMING, is very weak.

hedy1234
Guest
0
hedy1234
January 25, 2011 1:21 pm

Sounds like a great stock to short………

Tim
Guest
0
Tim
January 25, 2011 1:23 pm

This technology begs the question " So,,I have 3 numbers from 3 different carriers,,now I have 3 contracts/subscriptions to pay for? hmmm,,,,

FRiepen
Guest
0
FRiepen
January 25, 2011 1:40 pm
Travis, Good comment, today! You say "and his picks often outperform, particularly in a bull market." I might have said it "and often, a few of his picks outperform, . . .". Or at least that's my experience, and appears Hulburt doesn't disagree. Problem following Louie, IMO, is he, even using his very thorough Portfolio Grade,r" seems a much better history professor than fortune teller. And, when history doesn't repeat, as my experience has taught it seldom does with 3000% earnings growth, well, the results are usually history of a different kind – than 205% stock price gains.. E.G. –… Read more »
streek53
Guest
0
streek53
January 25, 2011 1:42 pm
I think these guys are divorced from reality. I'm getting hammered out here. The rule of thumb seems to be, "Hey, you need to get these $20-$50 stocks in your portfolio…" and, fool that I am, I did this… and I'm getting hammered out here. E tu, Cisco? On the other hand, on the advice of fiscal counsel, I did dump Citi at $5.25 (hey, I just picked a number that I didn't think it would hit… but it did) in advance of THEIR implosion. See the great egress! (Yeah, one born every mome…) Not familiar? Bing it up. (I… Read more »
goingloco
Guest
0
goingloco
January 25, 2011 2:07 pm
" if only because most Americans don’t even know that there’s a SIM inside their iPhone" Travis – sorry but that is an irrelevant comment. I will make a prediction based on multiple visits to most parts of the USA over nearly 50 years, last one in 2010. IMHO it will not matter so much in the next 50 years what happens or does not happen in the USA. Your country will survive, it does not face Armageddon. But growth? No chance. Too many fat lazy ignorant people at the bottom people and a corrupt elite at the top. What… Read more »
David
Guest
0
David
January 25, 2011 2:56 pm

Why not just buy an unlocked cell phone, then you can use any number of SIM Cards!

advantedges
Guest
0
advantedges
January 25, 2011 3:18 pm
Since females are supposed to be the "level headed" investors among us, I will defer to Jennifer. In other words, this stock will go up because it is being marketed and people believe the story. Navellier does an excellent job of pushing "his" stocks, which are usually momentum plays. If you look at his lists, SPRD is his #12 stock on the Global Growth Buy List, so he is featuring the stock in more than one newsletter. Further, a lot of market watchers use the Portfolio Grader and listings like the IBD to review their potential purchases. This market has… Read more »
Marco P
Guest
0
Marco P
January 25, 2011 4:02 pm
I have had my eye on a microcap that has a more elegant solution to the problem; one sim card that allows for unlimited roaming without the huge fees. The company is Polar Wireless (BCDI:OTCBB) and you can read about the technology here: http://www.stockhouse.com/tools/?page=/financialt… The daily volume on it tiny, so any sizeable Gumshoe purchase could move the price. I have a small position and will add to it once they get the chip into wide circulation. There has recently been some press that indicates a newly appointed CEO in December with a very good track record. I don't know… Read more »
mike spenser
Guest
0
mike spenser
January 25, 2011 6:07 pm

I suppose the nearest we come to SPRD is our own ukcompany Cyan.

Brion
Guest
0
Brion
January 25, 2011 6:31 pm

I have owned some of Navallier's funds over the years, he has underperformed the market overall so I find a hard time believing these picks are any better. One of the funds merged since it lost so much money he had to close it down

Jim
Guest
0
January 25, 2011 8:19 pm

I'm pretty familiar with wireless technology and a 3 SIM phone seems to me like a solution looking for a problem. At RuggedCom we are implementing a two sim line module in one of our products that will be used to provide redundant communication paths in utility and industrial applications. However compared to consumer hand set sales the volume is tiny. I agree with one of the first comments, three sims are only going to do you any good if you pay for service on three different carriers. Ugh!

Rene-Francois
Guest
0
Rene-Francois
January 25, 2011 9:33 pm

I live in Asia and an unlocked phone does the work for travelling from country to country. But the cost of a subscription to a regular cell phone can be as low as $2 month so you can easily afford three sim card although the most common choice is to buy a $10 rechargeable sim and pay as you go

earnest
Guest
0
earnest
January 26, 2011 12:47 am

A 3 sim card chip will sell well in small countries where you have to change cards everytime you cross the border. I would have liked one of these when I was going thru Belgium, Holland and Luxembourg in 1 day. This will be good for parts of africa as well.

J. Withrow
Guest
0
J. Withrow
January 26, 2011 10:50 am

Probably a good product for some business people but I doubt much for the average user. I would love to know what ever happened to the technology of multiple phones on one number. Back when cell phones were virgin territory I had this technology from a company back east. Then it just disappeared when the supplier lost the ability to use the software necessary to make it work. This makes more sense to me then this so=called new stuff.

stock collector
Guest
0
stock collector
January 26, 2011 12:44 pm

This stock was covered in Vardy's Global Bull Market alert on Dec 6 (around $17.40) with a 15-20% move since then. Used to suscribe to Navallier….got my subscription money back.

advantedges
Guest
0
advantedges
January 26, 2011 4:25 pm

Jennifer must have bought more stock this morning! It is up nicely today. Starting to get on a few traders radar screens. If Cramer mentions it, watch out! lol

dlst
Guest
0
dlst
January 31, 2011 10:59 pm

Not to mention Robert Hsu's China letter…

Gravity Switch
Admin
11
February 1, 2011 1:10 pm

Have never heard of the Phoenix Letter as far as I can remember, but if you're trying to multiply your money 100X in three years you're not investing, you're playing roulette. Not that there's anything wrong with roulette, but there's a reason why junkets to Vegas aren't generally an option when you're allocating your 401k portfolio.

Bob
Guest
0
Bob
February 9, 2011 10:22 am

It appears to me that the "Phoenix Letter" is the same as the "Adam Mesh Trifecta Trading" product. Got solicitations from both. If you look at the TOS for Adam Mesh Trifecta Trading, it actually brings up the Phoenix Letter terms. Ooops !! Both nearly identical prices and terms. So is Adam Mesh "Trifecta Trading" worthy of mention ? He does have a track record of successful trading. Looks like maybe buys breakouts of 52 week highs and maybe resistance points, then gets out quick.

Jason
Guest
0
Jason
February 28, 2011 4:47 pm

This company has a lot of potential in emerging markets. only in the US, we pay a monthly subsciption fees. In emerging markets, you pay as you go, no minimums, no minutes expiring, minutes dont get used for incoming calls, incoming SMS are free. You can have 3 SIMS of different carriers for a total of $10 per month.

CS
Guest
0
CS
January 26, 2012 7:17 am

I joined Navellier Platinum Club invitation at $5,000/ annum. And I got hit big time and cancel it immediately after 2nd weeks. Does not receive full refund (one month subscription) deduction but it’s worth still than rather continue bleeding

Gravity Switch
Admin
11
January 25, 2011 2:24 pm
I don't disagree with you about from whence growth will come in general, but Navellier (or his copywriters) apparently see potential in the US market — I don't think I included this quote from his ad, but FYI: "Mark my words—it’s only a matter of time before cell phone makers place this breakthrough technology in U.S. phones and the company’s sales soar to the next level and beyond." So that's why I noted that I wouldn't personally expect this technology to hit the developed world with much gusto, though as I said I don't really know the tech trends in… Read more »
montrose
Guest
0
montrose
January 25, 2011 6:38 pm

Great story and in no way trying to be influencial…yea or nay..but slope seems slippery so proceed with CAUTION!!! Curiously browsed YahooFinance and read two disturbing facts .. (1) Polar Wireless' 10-Q form which it filed with the SEC on Dec.13,2010 for quarterly period ended Oct. 31, 2010..Cash / TOTAL ASSTES = $86 (that's 80+6)
and (2) on Jan. 20 & 21 stock traded 674,500 & 452,000 shares resp…humungous volume to that point for this stock and it closed as it opened .80c…my antenna went Up.

Jim
Guest
0
Jim
January 28, 2011 12:32 am

What about two numbers from the same carrier, one plan. One # for close friends one for the GP. One to answer one to leave for the answering service and drop the home phone then.?

Lora
Guest
0
February 1, 2011 12:42 pm

What do you think of the Phoenix Letter? Does it truly have you on the road to turning $10,000 inot $1M in 3 years or less? I just got another email about it I am intersted to hear your thoughts on it. Thank you.

Jason
Guest
0
Jason
February 28, 2011 4:49 pm

Earnings get released 3rd March.. good price to get in

Sally G
Guest
0
Sally G
June 7, 2011 7:06 am

I think that you are right; it is not Mr. N. alone—I find that most recommendations come after the major gains have been made. Of course, success is much easier to identify then!

wpDiscuz