Louis Basenese and the folks at White Cap Research are launching a new advisory service that looks for “game changers” in tiny stocks that they think will have hugely disruptive success — the newsletter is called MicroCap Tech Trader and will run you about a thousand bucks a year … but if that sounds a bit steep, how about if we start off by trying to identify their first “game changer” for you?
Ok, we’ll even do it for free. Sound worthwhile? Well, you will have to sit through a few moments of blather from your friendly neighborhood Stock Gumshoe, but that seems a small price to pay.
Identifying early stage tech companies is obviously not a new idea — there are scores of newsletters that try to do this, from Patrick Cox and his love affair with biotech to David Gardner and his Rule Breakers, you can find all sorts of folks that aim to identify the next big growth stock winner that will change the game (or change the rules), with some folks looking for “breakout” stocks and some for the really tiny micro cap innovators that provide even more excitement (and risk).
So Basenese and his copywriters had to make it sound a bit sexier to stand out, of course — here’s part of the pitch, which comes in under a shadowy picture of the men who could “zero out YOUR bank account in seconds”:
“You could call them incubators, test labs, or start-ups.
“I call them sleeper cells.
“They’re hidden in plain sight all across America, gaining traction every day…
“…hatching new ideas, new plans and new missions to change the world, even if they’re at your expense.
“If you think I’m being overly dramatic, I understand.
“The world is filled with financial analysts trying to scare you to death with threats about rioting in the streets and the fall of the government.
“What I’m writing to tell you about today isn’t likely to do any of that. But it could damage you and your family’s financial future beyond repair.
“You see, these men aren’t criminals or warlords. They’re not terrorists or even computer hackers.
“No, they’re visionaries. Innovators. Geniuses.
“They’re a lot like the names you read about these days in the pages of Time, Newsweek, or even Rolling Stone…
“They’re part of a new breed of what I call ‘Game Changers.’”
So I guess the folks at InvestorPlace don’t own that “game changers” term … much to their chagrin, I’m sure (that’s the current name of one of Hilary Kramer’s letters)– so which “game changer” is Basenese teasing us with this time as his first “call to action?”
Well, first he runs through a pretty standard littany of past stocks that he might have picked years ago, had he been running such a service and/or had a time machine — disruptive picks like Netflix and Redbox beating Blockbuster, Amazon beating Borders, Apple beating everybody, and implies that he’s going to be able to sniff out that next Reed Hastings, Jeff Bezos or Steve Jobs while they’re still unknown … AND help you to avoid being on the wrong side of the trade by owning the losers who will fall to those next-stage “game changers.”
How will he do this? Well, there’s a picture of his “control center” (desk, to you and me) in the ad so we at least know he has three monitors — which is making your friendly neighborhood Gumshoe feel a bit inadequate. And he says he travels to a lot of trade shows and talks to CEOs. He says he looks for “mega trends,” patents, and “perfect timing” — which he says means buying into a tiny company two or three quarters before they become profitable.
So yes, like most newsletter ads he’s throwing out a pretty bold premise (not least because pretty much every unprofitable company on earth tells us that it’s a few quarters from reaching profitability), and he’s launching a service so it has no track record to brag about (or hide from). In his favor, at least, he wisely doesn’t promise that his first pick will go up by 10,000% (after getting us all hot and bothered with charts of Apple and Netflix, he doesn’t have to).
Here’s how he gets us excited about his inaugural pick for this new service:
“What was once confined to ATM and credit card machines is now becoming the norm for almost any cutting-edge piece of technology.
“Touchscreen technology makes for a sleek, easy-to-use product that doesn’t require a bulky keyboard.
“And almost all touchscreens use a rare earth metal known as indium tin oxide (ITO) as their conductor.
“And as the name implies… rare earth metals, like ITO, are very hard to find. And thus – very expensive….
“Add to that the fact that China has a monopoly on most of the world’s ITO supplies and you can safely guess that prices aren’t going to be leveling off any time soon.
“Another issue with ITO is its inflexible nature, which puts a limit on the size a touchscreen can be.
“So it’s safe to say that anyone who could develop a cheaper, more flexible alternative to ITO for touchscreens could easily have a hot product on its hands.”
And yes, Louis thinks he has found this company with a cheaper, more flexible alternative …
“The New Face of Touchscreens…
“That’s where this under-the-radar American company that currently trades for under $9 comes in.
“It’s swimming in $11 million in cash and has ZERO debt on its books.
“Even better, it’s just steps away from releasing a game-changing product – one that could be used in almost every consumer electronic device in the world.
“You see, this small firm has developed a touchscreen system that uses copper instead of ITO as its conductor.
“And copper is far more plentiful and easy to buy than ITO.
“It’s also more transparent, thinner and 75% more energy efficient than ITO, which means it could extend the battery life for phones and computers, too.”
And the story is pretty early in development, per the tease:
“…this company is still at least six months away from releasing its new touchscreen system to the public.
“So unless you’re already familiar with the company, you’ve likely heard nothing about it. “
He also says he met with the CEO, and that he’s had lots of meetings with hardware manufacturers — and that the company is so small any announcement of even one deal for getting their technology into a new product would send the stock price on a “major move upward.”
So who is it?
Well, Basenese might be aiming a bit lower than most, at the stocks that are really pretty far under the radar if this first pitch of his is any idea — or maybe he’s just starting out by picking an unusually tiny stock in hopes that it will give him a boost, since any newsletter can drive up the price of a stock with a small market cap.
Because this stock is ridiculously tiny — which should, as usual, serve as a warning … even the fact that yours truly is writing about it here, regardless of what I say about it, is likely to move the stock price, so be careful. The company is, so sez the mighty Thinkolator, UniPixel (or sometimes Uni-Pixel), ticker UNXL.
And by tiny I do mean TINY — market cap just over $50 million, which is about as small as you can find in a stock with a real business and a “real” ticker (ie, not over the counter or pink sheets). And they do have $11 million in cash, in case you’re checking those teaser tidbits to verify the work of the Thinkolator — though that’s because they raised $13 million earlier this year, not because they’ve been making money just yet. The one analyst who covers the company does think they’ll be profitable in 2012, giving them a forward PE of 25 … but it’s one analyst and he (or she) must be basing that estimate largely on a product that doesn’t yet have any customers, so let’s call that more of a guess than a forecast. If they do get a substantial deal for their touchscreen technology later this year, as they’re certainly hoping to announce, then they may well be at a turning point financially — but for now, they carry a stock market valuation of $55 million but reported just $230,000 (that’s thousand) in sales over the last 12 months. That same analyst sees that revenue number climbing dramatically this year to $5.5 million, and dramatically again in 2012 to about $18 million.
Why? Well, they do have a few products — the one you’re most likely to see sometime soon is a fingerprint-resistant film for touchscreens, somewhat similar to the kind of commodity screen-saver products that saw Dan Amoss predicting that ZAGG would be a “headed for a body bag” back in March (he’s been wrong so far, but I haven’t been following the details on why). They’re trying to get deals done to get their product into “major retailers,” so if they have sales this year that will probably be why — and you can, for what it’s worth, buy their fingerprint-resistant screen covers from Amazon for your iPhone (or whatever).
But they do have this touchscreen substrate/copper conductivity technology too — they’re a company whose technology is built around high-tech films of various types that apparently share some commonality in the manufacturing process, so their process is for some reason superior. The technology that enables this copper touch screen conductivity film they’re developing is called UniBoss (it also has other potential uses), and they do say that it is more efficient and effective than ITO in touchscreen devices — you can see their basic description here, including the obligatory pictures if iPads even though their technology is not used in the iPad.
So … that’s about all I know about the company. I haven’t met with the CEO — though it’s a tiny firm, so you could probably get him on the phone if you wanted to. And I haven’t analyzed their competitive position or the strength of their patent portfolio … nor am I an expert on film or screen technologies at all, in case that isn’t clear. They are optimistic that they’ll have big news this year, as per this quote from their Chief Technology Officer in the first quarter “earnings” release:
“We have continued to work closely with major OEMs to develop pull-through demand for our UniBoss-produced touch screen product, as well as working directly with touch panel component manufacturers to produce specific types of touch panels. We expect to report some very good news on this front as the year progresses.”
They also do, for what it’s worth, have some interesting institutional investors on board — two of their larger holders are Raptor and Tudor Investment, run by former colleagues and super rich guys James Pallotta and Paul Tudor Jones, respectively. The company is too small to have any real mutual fund interest, but there are some big hedge fund owners — what surprises me a bit is that there isn’t more insider buying if they’re supposedly 6-12 months from some transformational deals … that’s not to say the company won’t succeed, of course, and insiders aren’t necessarily great investors, but seeing insiders buy in heavily in anticipation of success would be more encouraging. From the summaries in Yahoo Finance it appears that there’s effectively no ownership in the C-suite, though that could be inaccurate and I haven’t dug deeper.
It’s certainly possible that if they report “very good news” then UNXL stock will jump — no surprise there. There are certainly also lots of other folks out there trying to develop the next generation of touchscreen technologies, including many varieties of carbon nanotube and graphene films that are keeping researchers busy (though that technology seems further away from commercialization than this UniBoss stuff so far), so it’s an early stage bet on a firm that hasn’t yet proven itself by getting their technology into a commercial product and which also, like many early stage tech “breakthroughs,” has to fight it out in the marketplace against competing ideas or technologies and could itself be superseded by the next next big thing… which is, of course, why they’re pretty cheap.
It’s encouraging that they were able to raise enough money to get through perhaps to a commercialization deal, but as to whether they’ll really be the next “game changer” and bring you untold riches by investing in them relatively early? Well, it’s your money … so you’ll have to make that call. Let us know what you think with a comment below.