If they’re not going to pass out a lot of clues, we might have to call this “guessing.”
But that’s OK — we’re pretty good guessers.
And enough folks have asked about this Unconventional Wealth teaser pitch that I thought we should cover it … even if I might not be able to give you the usual definitive answer.
(That’s “definitive about what stock is being teased,” of course — not “definitive about whether or not it’s a good stock for you to buy” … we’re talking about your friendly neighborhood Ggumshoe doing just a wee bit of research to give you the lowdown on a company most of the time … and occasionally, if I get a sense of it at all, a quick personal opinion. The “whether it’s right for me” part is always your call, as it should be.)
Sometimes I forget that not all of our fabulous readers have been reading my commentary every day for ten years, I should probably repeat myself more often by saying something like: Don’t buy individual stocks unless you like researching them! Most people, probably myself included, would do better most of the time by spending their time thinking about how to save more money and put it in low-cost indexed investments … but if you think that’s boring, as I do, and want to try to do better by researching and sniffing out individual stocks or sectors or speculations to spice up your portfolio, well, bring it on!
But that’s enough time wasted in blather … shall we see if this latest teased pick is worthwhile?
We’ll put the cart before the horse a bit and share this little excerpt before we talk about what this “secret” stock does:
“Double or Triple Your Money on This Contrarian Play
“At $3.50 per share, our California company has plenty of room to grow. I fully expect the share price to continue climbing the next few years.
“A target price range of $7-10 per share by 2017 (or earlier) is not unreasonble to expect, given that some of the company’s competitors already trade for as much as $1,350 per share.
“So you can see this is a lucrative market to be in, and there is HUGE opportunity to grow.
“I’d like to tell you more about this obscure California company and how you can position yourself to profit from its rapid growth.
“That’s why I’ve written a brand-new report called Healthy Profits From Junk Food: How an Obscure California ‘Junk Food’ Company Could End Obesity by 2017.”
Sounds pretty impressive, right? Even if the comparison of share prices is stupid.
(One more soapbox moment: price per share is a meaningless number out of context — I’m sure this company does have competitors who trade for $1,350 per share, but unless you know the scope and valuation of the business and the number of shares outstanding just the share price alone tells you nothing … the value of a company is the market capitalization (total number of shares times share price) or enterprise value (market capitalization plus or minus net debt/cash, roughly what it would cost to buy out all the shareholders and debtholders), not just the price per share number you see flitting by next to the ticker symbol.)
So what does this “obscure California company” do?
“This company’s revolutionary innovations could quickly turn it into a $100 million food technology giant….
“It’s Making Junk Food Healthier!
“Without compromising the flavors and textures that people love.
“And the best part is many consumers don’t know that our California company is doing this!
“So in products made with these innovations, people are eating less sugar, less salt and even less MSG… automatically… without even trying.
“Of course, big food manufacturers have taken notice. They’re actively working with our California company to make their junk foods ‘less bad’ while maintaining their great taste.
“And it’s working.
“The company already has solid relationships with major food manufacturers such as:
- Nestle – The Swiss company that makes Nesquik, Kit Kat, Nescafé, DiGiorno, Lean Cuisine, Dreyer’s ice cream, PowerBar, Jenny Craig and dozens of other nationally recognized food brands
- Ajinomoto – A large Japanese food company that specializes in seasonings, sauces, cooking oils, drinks and other food products
- Firmenich – The largest privately owned perfume and flavor business in the world.
“What’s more, the company is actively developing new business relationships through a newly implemented direct sales strategy.”
Huh … OK, I take it back, we don’t have to guess on this one. There were a few more clues hidden in that hype-fest that I didn’t notice on first reading … Thinkolator sez this is almost certainly Senomyx (SNMX)
Senomyx is sort of like a “flavor additive biotech” stock — they’ve been around forever, it seems, trying to develop and market additives that change the way your body interprets flavors. They do have relationships with many of the big food and beverage companies, and they have also inspired some controversy over the years (some folks don’t like them, either because their chemical additives are so minute that they aren’t individually listed on food labels, or because their research used human embryonic kidney cells, the long-known HEK-293 line … one example of an opponent is here if you’re curious … I have no idea whether the criticism is morally or scientifically valid, but in quickly researching the company they seem, from my unscientific scan, to have almost as many critics as Monsanto)/
And they are trying to build both a royalty business and a direct sales business — they earn royalties as the products with their flavor enhancers are sold, and they also did recently start direct sales of some of their more developed products, presumably to encourage more folks, including small companies, to try them out and experiment without having to set up joint venture deals or research projects with Senomyx.
Their current flavor programs are in the categories of sweet, savory, bitter, and cooling — the sweet stuff is supposed to allow makers to cut sugar without losing flavor, the savory allows new savory enhancement without or in place of MSG, the bitter-blocker is used to cut the bitterness of stuff like caffeine and cocoa, which would reduce sugar or fat requirements in some recipes, and I’m not sure what the “cooling agent” does.
And they don’t really create consumer products — they just create flavor compounds and provide them to partners who figure out how that compound can be used in a recipe either to create new appealing tastes, or to maintain a taste profile while reducing unwanted ingredients like sugar or MSG. Some of their products are currently in production around the world, but not nearly in high enough volume to produce a profitable operation — SNMX has never been profitable on an operating basis in ten years as a public company, and it seems likely that it would take some high-volume products and significantly broader acceptance to get them to profitability.
There are three analysts following the company, which is a little surprising for such a small stock (market cap is around $150 million), and they see the firm growing by 70% next year, which would be a nice leap — but still, according to those analysts, not quite enough to get them to profitability.
And … that’s about all I know about Senomyx. It’s fascinating science for an “almost failed chemistry” guy like me, and I like the business model of getting your flavors into mass market products and collecting an ongoing royalty (until the patent dies) and their high-throughput R&D that should, one presumes, help them come up with more flavor additives, even if I’m not particularly thrilled about food with all these new additives being thrown in. I kind of want to know that sweet things are treats because they’re not good for you in huge quantities, and I like my coffee to be bitter — after all these years of massive increases in prepackaged foods it’s hard to believe that tweaking the additive profiles of those foods is going to solve our obesity epidemic, but I suppose it’s possible that this kind of thing might help.
Oh, and I also don’t know if there’s anyone else doing this same basic kind of ingredient science — I would assume there is, because there are massive chemical companies all around the world who are also trying to come up with new ingredients that let you have your cake, eat it too, and also look like a supermodel. Whether Senomyx is on to something better than giants like ConAgra (CAG) or International Flavors and Fragrances (IFF) or AkzoNobel or Givaudan or probably dozens of others who don’t immediately come to mind, well, I dunno.
So what do you think? Will Senomyx (SNMX) cure obesity and “become a $100 million company” as teased by Ryan Coles? Think it will double to the $7-10 range as he expects over the next two or three years? Want a piece of it, or want nothing to do with it? Let us know with a comment below.
P.S. $100 million in revenue might be enough to make them profitable, but again the tease that they’ll become a “$100 million giant” is, well, silly. They’re at roughly $30 million in sales now though they are, of course, already a “$100 million company” in market capitalization … in the global food business, $100 million wouldn’t likely make you a “giant” even if you’re talking about $100 million in profit. The $6 billion “mid cap” flavorings company IFF has profits of about $250 million a year.
There are only a few days left in our Charitable Membership drive -- Help Stock Gumshoe, help a great cause! If you've ever thought about joining us, now is a great time... just click here for the details.