The US certainly doesn’t have a monopoly on tech startups, or on breakthrough ideas, or even on dreams of avarice … so I guess it should come as no surprise that we also do not have a monopoly on breathlessly-hyped breakthrough technology newsletters.
This latest one that I first heard about quite recently is from Australia, though from my quick look at the first two profitable ideas they excitedly take credit for they aren’t restricting themselves just to the “Lucky Country” — one of them is a US-listed company, and the other is listed in the Land of Oz but pretty heavily traded on the pink sheets.
So we can sniff around in this latest teaser a while, show some love to our friends on the other side of the globe, and even perhaps come up with some ideas that will pique the interest of North American investors. What could go wrong?
The pitch is from a letter called Revolutionary Tech Investor, from Port Phillip Publishing (that’s the Aussie arm of US financial newsletter behemoth Agora, so the over-the-top marketing should sound quite familiar). The name behind it is analyst/editor Sam Volkering, who doesn’t sound familiar to me, though longtime newsletter pundit Kris Sayce is also apparently involved in this one.
And what are they promising? Moon Shots. The basic pitch is that they’re on the (risky) hunt for the dramatic gains that stocks sometimes achieve at turning points in technological development — as a point of illustration they discuss EMC (EMC), which was a startup about 30 years ago that developed new data storage technology years before it was needed … and went on to grow steadily for several years but then mushroomed into a ridiculous “moon shot” as the shares went up roughly 120,000 percent from 1990-2000 before the tech bubble burst (it has done pretty well since the burst,too, but like many tech stocks it has never gotten back to the bubble prices of 2000 and 2001)
So that’s what Volkering says he’s looking for — and he thinks that technology is advancing so quickly that investors now won’t have to wait a decade or more for these kinds of preposterous returns, they may come far faster. He gives a couple examples of the “secret” stocks he says he has already recommended, and he doesn’t name them and implies that he still likes them, so we can sniff out some answers to those for you (then we’ll see if we can ID some of his new ideas).
Here’s the first “moon shot” that he claims credit for:
“One biotech aiming for the cancer moon-shot is already up — get this — 497.14% since I found and recommended it last July.
“If you’d taken my advice and staked $5,000 on these guys just eight months ago…it would now be worth $29,850.
“And the astounding thing is: the tech this company is perfecting hasn’t even left clinical trials yet!…
“The results so far have been STUNNING….
“These guys are developing a way to ‘SILENCE’ disease-causing cells.
“As I write this the stock is up 497.14% since I recommended it JUST EIGHT MONTHS AGO
“Let me ask you: have you ever made a return that big, that quickly on a share you’ve owned? If you have you’ll know how exceedingly rare they are.
“At one point before I got onto this story, the stock was trading at just 1.7 cents.
“It’s now trading over $2.”
OK, so that’s a little bit of a misleading pitch, because the stock did trade at 1.7 cents but that was before it did a 25:1 share consolidation (“reverse split”) last Summer, so that means that low would have been more like 42 cents (and the stock was lower than that, trading under that price for many months from late 2012 through the Summer of 2013. Who is it? Well, going from those clues and from the chart of the stock’s movement so far in 2014 the Thinkolator confirms for us that he must be hinting about Benitec (BLT in Australia, BNIKF on the pink sheets). Which is not really focused on cancer at the moment, though they do have a few cancer prospects in their pipeline — their major focus right now is on Hepatitis C.
Benitec is a RNAi company, using a technology they call ddRNAi for permanently “silencing” diseases. And they have a long history of discovery and (patented) research in this technology (and investor disappointment, as the stock apparently got well ahead of the science a decade or more ago). There are several RNAi technologies being explored by other biotech companies, including the recent investor darling Alnylam (ALNY) which has been teased since last Summer and covered by your favorite Gumshoe here. You can see Benitec’s own explanation of their technology here.
And I actually own a few shares of Benitec, since I got interested in the stocks discussed by many of our readers and that was a hot-button one over the last several months — but like most biotech stocks, I don’t understand the science very well. I’ll leave that to Dr. KSS, who first came to our attention because he was so active in discussing and explaining biotechs here on the site (we’ve since brought Dr. KSS on as a columnist for the Irregulars) — he first mentioned Benitec here back in January, I believe, and summed up his enthusiasm thusly:
“This month, 14 patients at both UCSD and Duke with genotype 1 HCV that have failed customary antiviral treatment will be dosed with TT-034. If virus burden falls at all by 30 days (and based on work in animal models it will), I see Benitec appreciating like crazy. The company also has a ddRNAsh trial for NSCLC, directed against tumor-expressed tubulin. They have very smart management in place, and decided early last year to do away with their bizarrely Australian capital structure (bajillions of shares priced at 1-2 cents) and do a 1:25 reverse split, so as to make it more appealing to US investors. Nothing good about the company is priced in, and yes, I agree totally that it is a latent gold mine of IP and designable drugs. I have researched it like mad, spoken with management. I have never felt so strongly about a biotech company since Celgene and Intuitive Surgical, which have gone up more than 40-fold since I bought them in their early days. There are others in this space, including Alnylam and Arrowhead, as well as Santaris (not Santarus), but Benitec is in the best intellectual position.”
That got a little subset of Gumshoe readers quite interested in Benitec, and lots of discussion ensued, but the stock has had a very good year so far in 2014 — when he shared that opinion the stock was around 55-60 cents. The dosing that Dr. KSS mentioned above hasn’t happened yet but it is still expected “any day now.” They were continuing patient screening as of two weeks ago and thought the first dosing would happen in a matter of weeks, and they’re in the middle of raising some capital, so the shares have been pretty jumpy recently. Their latest investor presentation is here if you’d like to see the story they’re telling as they try to raise money for their clinical trials. (All those share prices are in Aussie dollars, by the way, and the liquidity in the shares is mostly in the Aussie market — the pink sheets shares often trade at a substantial premium to the Aussie price, so do be careful if you’re a pink sheets buyer to check the Aussie price and do your currency conversion as you decide where to place limit orders, never use market orders on the pink sheets).
And yes, like all tech stock enthusiasts Volkering is careful to remind us that there’s a price to be paid for high potential:
“It goes without saying that these stocks are at the extreme edge of the risk-scale. So as I explain to readers of my monthly investment research report: you shouldn’t stake a cent in these high-risk plays that you’re not prepared to lose.”
Always good advice, even if the lawyers made him put it in the ad.
So that’s one. What’s the other stock that’s being touted as a successful recommendation since he started the service last year?
“Some are already flying.
“One, for instance, is aiming to single-handedly corner the $67 billion-a-year computer security market. How? With a piece of software that completely reinvents how you identify and neutralize cyber-threats.
“It’s already zipped up 91% since I recommended it just five months ago.”
Thankfully he also included a handy dandy little chart for that one, to illustrate his prescience at picking it before the stock went from $40 to $90 in just the first few months of 2014, so the Thinkolator didn’t need much time to tell us that he picked FireEye (FEYE). Which has come back down pretty sharply since it peaked around $97 in early March, so perhaps if you liked the idea you might find it more appealing to buy it at $60 (this was one of those super-hot IPOs last year, in September, it priced at $20 but shot up immediately and hasn’t traded much below $35 since going public).
It’s still not profitable, and is trading at something like 20X revenue, so — as expected from someone touting “moon shots” — it’s not exactly a comfortable, easily valued stock. Analysts see them growing earnings at better than 50% a year for the next five years, which is obviously a wild guess … but is also a huge number. They don’t see the company becoming profitable even in 2015, but they are expecting revenues to grow at 150% this year and investors do love growth above all other things. That doesn’t always make for a comfortable ride, of course, because it’s all about the unknowable future, and all of the popular, momentum-driven growth stocks did get taken down a peg this month… but still, the companies that can really grow that fast will always come to the top of investors’ minds.
I have no idea what sets FEYE apart from other cybersecurity companies, by the way, I only looked at their financials. So if you’d like to comment on that one and let us all in on the excitement, feel free to use the happy little comment box below.
So now what are the secret “moon shot” stocks that are new to readers of his Revolutionary Tech Investor (which, in case I forgot to mention, is being priced at about A$1,400, or roughly US$1,300)?
Here’s how he introduces his new picks, after first letting us know that Google, while it tries to break through in lots of emerging technologies, is not going to benefit from them because it’s too big…
“Google IS onto something. Something monumental…
“And something that COULD land you hundreds of thousands of dollars — from a very small initial investment — starting with four specific stocks…
“See, it’s no accident Google’s decided now is the time to shoot for the stars. It’s because of a new ‘Law’…a law that’s going to govern the technology world for the next 30 years or more.
“Now you’ve probably heard of something called ‘Moore’s Law’.
“It stated that a computer’s processing power would DOUBLE every 18-24 months.
“That happened by jamming more and more transistors onto a computer chip.
“That’s the law that’s governed the computing industry from the late 1960s to the present day.
“It means there is now more computing power in your PHONE than there was in the Apollo spacecraft in 1969….
“… it’s common knowledge that Moore’s Law is about to hit a brick wall.
“Transistors have to be made from atoms. And as you make transistors smaller and smaller to get more of them onto a chip…you eventually get to a point where you run out of atoms.
“Moore’s Law — EVENTUALLY — will come to an end.”
OK, so what’s going to replace Moore’s Law as a backdrop for understanding and anticipating the speed of technological advancement?
“The last 30 years were all about COMPRESSING technology — packing more and more transistors onto a chip.
“The next 30 years will be all about COMPOUNDING technologies”
That’s a nice turn of phrase, but what’s he actually talking about?
“Technology built on technology built on technology.
“This is what I call ‘The Law of Technological Compounding’.
“It’s a world-changing theory that will impact your life in ways you can’t imagine.
“And it’s about to make smart investors millionaires.
“In fact it’s already started…
“Let me give you a really good early example of ‘Tech Compounding’ in action…
“The world’s most powerful computer is actually the human brain.
“This power comes from something called PARALLEL COMPUTING: the ability to solve simultaneous problems with different parts of the brain.
“A company called ARM Holdings is working on a computer chip that does the same thing.
“This is where the COMPOUNDING…rather than COMPRESSING…comes into play.
“Because ARM is doing this by compounding three technologies at the same time:
“Robotics, Computer Science and Neuroscience.
“In doing so ARM Holdings has created a chip that simulates a neural network….
“Forbes calls it: ‘One of the most advanced neuroscience projects in the world’
“Investors who took a gamble on ARM in 2009 could now be up 1,543%.
“Not in ten or twelve years…but in less than four.
“This is the core point of The ‘Law of Technological Compounding’.
“It’s speeding everything up.
“Robotics breakthroughs compound computer physics breakthroughs, which then compound neuroscience breakthroughs….”
That strikes me as a fine way to describe one big accomplishment, but a less convincing way to predict future successes — but we’ll leave it at that, because what we’re really interested in is trying to identify some of the other “Moon Shot” stocks he’s teasing. Let’s get right to the clues, shall we?
“The disadvantage is that these moon-shots can blast off before you can climb aboard.
“That’s why I won’t take any more time getting to your first moon-shot. Because time really is of the essence with this one…
“This project is about to make massive news.
“In fact, this company just went public with its discovery on February 18, 2014, when it announced its ‘new, ground-breaking, and disruptively-priced tech’.
“As often happens right before blast off, the smart money is starting to swirl round this tiny New York-listed stock.
“Just before this report was written, more than 4,900 calls were placed on this stock. This is a first for this company.”
I never thought I’d read an Australian newsletter promotion touting the call option volume on a NY-listed tech stock … but really, it’s getting to be a smaller world every day. So what is this “First Moonshot?”
“Hyperspeed Moon-Shot #1
“Beyond the Touch-Screen…
“Compounding breakthroughs in optics, nanotechnology, and automotive engineering to create a ‘touchless world’…
“The actual physical action of touching something itself will soon be outdated.
“On February 18 this company announced it has perfected a revolutionary technology that requires mere proximity… rather than actual touch….
“This company is taking conventional touch-screen technology and COMPOUNDING it…with recent breakthroughs in optics, nanotechnology, and automotive engineering.
“At the time of recording, it’s days away from unveiling this new breakthrough in a European technology road-show.
“Put simply: it’s a new proximity sensing user interface….
“The stock has been inching higher in recent weeks on no apparent news.
“A tell-tale sign that full-fledged launch is about to occur.”
So what’s the stock that he’s so excited about as “Moon-Shot #1?”
Well, this one is an interesting little company called Neonode (NEON) … but, well, sometimes those big bets and momentum indications are, um, wrong. The article about big new options interest in NEON was actually an early February OptionMonster article reprinted by Yahoo Finance about the “bulls piling into Neonode,” and the quotes are accurate, but the bet was reportedly placed on $8 call options on NEON for March as a play on their earnings report. The earnings came out on March 6, but the stock had already peaked around $7.50 before that and it’s been moving down ever since, which means that if those options were held to expiration (about ten days ago) then they expired worthless.
Which doesn’t mean that NEON is necessarily a bad idea, of course — though timing such “breakthrough” investments by using options just adds to the risk, since being right about a years-long development is a lot different than being right about what the market will do to a particular stock in a period of a month or two.
So is Volkering right about the “Moon shot” potential of Neonode’s new touch technology? What it basically does is expand the touch interface of your phone to other surfaces, so you could tap on the table next to your phone and play a simulated drum kit, for example, or do lots of more practical things — you can browse their “solutions” on their website to get an idea of the potential. They call their technology “Multisensing” and use the name “zforce” for it, there’s also an interesting “history of touch” story on their site here if you’re interested. It looks pretty cool, but I don’t know exactly how (or how well) it is differentiated from other touch technologies.
Neonode says they’re working with a printer company that will be widely selling a printer that incorporates their touch sensor design by late this year, and that they are working with some “tier one” laptop and desktop computer makers and with automotive designers (though automotive design changes are extremely slow compared to consumer electronics), so they seem to be hoping to have more and more licensing income.
Which they need, because this is so far an intellectual property portfolio that costs a lot more to maintain than it brings in — the company is valued at over $200 million right now, which means it’s priced at more than 50X trailing sales. All the analyst reports I can find about the stock are either disinterested (hold ratings) or actively negative (sell), but apparently there are at least a few analysts who rate it a buy and have fairly aggressive projections for earnings next year … including price targets of $13-14 and projected earnings of 70 cents in 2015. So if they’re right — and that would have to be based on some pretty high-volume sales of products that use their touch technology — then it’s a fine buy at this price, that would be less than 10X next year’s earnings.
The stock also has a massive short interest (better than 30% of the float is sold short, which means those investors are betting that the stock will decline), and low institutional ownership (though some big names are major holders, like Wellington Management and Fidelity), and unless there’s a big spurt of business in the next few months they’ll probably have to raise cash by selling more shares sometime later this year (though they do that almost every year). Neonode has been around since at least the early 1990s and I know almost nothing else about them or their history, so perhaps some of you have invested in the shares in the past and can share some perspective — it looks like they’ve been a decent play over the last five years but had several crashes and wild run-ups in the decades before that.
So we’ll leave it to wiser minds than mine to discuss whether or not NEON’s proximity touch/multisense technology will be turning our steering wheels into touchscreens, selling millions of laptops and e-readers, and making us all wealthy. You can start out your research with the latest conference call transcript here, and a couple NEON executives also recently discussed their prospects on a call here.
The company is quite small, and has a relatively small run rate for their SG&A and R&D expenses, so if they DO get large, high volume licensing deals for their technology it’s certainly possible that they could jump from their consistent path of losing money and spurt rapidly into profitability … I just have no idea whether or not that’s likely, and it’s mysterious to see those estimates of huge profits next year lined up next to a dozen or more analyst reports that call the stock a “sell.”
But you can, at least, buy the stock for less than it would have cost two weeks ago, when this ad first started running. Whether or not you want to do that is, of course, your call.
And I’ve run the blatheration tank down to empty again, so I’ll refresh it over the wee hours tonight and try to get some more “moon shot” answers for you while I’m on the road tomorrow. Discuss amongst yourselves, and enjoy!