“A few of this small company’s lucrative patents could turn into kingmakers.” (Patrick Cox’s Quantum Computers)

Deciphering teaser picks from Technology Profits Confidential

By Travis Johnson, Stock Gumshoe, January 6, 2011

When I saw the recent ads for Technology Profits Confidential, edited by Patrick Cox, I almost passed them by — after all, the language and hype is quite similar to the several ads of his (for the more expensive Breakthrough Technology Report) that I wrote about in recent years, most of which touted stem cell companies, including several iterations that focused on BioTime (new ticker BTX) … and, well, I didn’t want to bore everyone by writing about the same thing yet again.

But after taking a quick look, it appears that this pitch is quite different — he’s still talking about huge, breakthrough scientific advances that will shake the foundations of the economy and change almost everything, and in the process make early investors rich, but the target tech companies this time are not mostly stem cell firms, they’re involved with nanotech and energy.

Here’s how the pitch starts, in case you haven’t seen it:

“Expert researcher breaks silence with amazing new report…

“REVEALED: The FULL Power and Promise of Science’s Next Decade…

“Could Give Your Family Five Generations of Huge Wealth

“Inside — The most powerful, promising, and potentially lucrative roundup of science breakthroughs EVER PUBLISHED…

“Inside — One easy move you could make NOW to turn science’s next decade into five generations of wealth for your family. Wealth is ALREADY piling up!”

Probably sounds kind of familiar, no? Well, it goes on for quite a few pages in this same vein — all about how Cox has “connected the dots” to identify the key trends and breakthrough technology companies that will lead those trends — leading to several predictions, the key of which seems to be:

“Wealth Prediction

“The next 10 years will change everything. And YOUR family will become richer than you ever dreamed. If you act right now.”

Much more fun that the good ‘ol teasers that just showed a picture of a Lamborghini and a waterfront palazzo and intimated that these are the spoils you’ll be enjoying, eh? This is a whole different kettle o’ fish — this time, it’s not just riches but “five generations” of wealth that will set your family up like, one imagines, the Rockefellers or the Rothschilds.

Sounds pretty OK, right? Not that we’d scoff at the beachfront mansion or the Italian sports car, but really, it seems so much more mature to dream about enduring riches for our great-grandchildren. And we are ever so mature.

Cox teases a couple of ideas in this ad, but I’m going to concentrate on the “quantum computer” one for you — this is all about harnessing the “spin” of electrons (instead of their charge) to make smaller, lighter, faster, smarter computers, a promise that has been discussed for at least decades but seems to grow ever closer on the horizon.

Here’s how he gets us excited in this idea:

“You see, it’s the HOW computers are changing that could make your family rich for generations…

“Wealth Prediction: You must take action right away… because a new advance in computer technology makes the 1s and 0s binary model look like a Conestoga wagon compared to a Ferrari.

“What you’re about to see could some day turn even the cheapest computers into machines more powerful than the best Jet Propulsion Laboratories, the Pentagon, or even Google has access to today.

“Only a handful of hooked-in folks in the entire world know and understand what I’m about to reveal to you…

“The wealth-building potential is astronomical. It’s off the charts…

“Your First Chance at Epic, Generational Wealth”

He goes on to spiel about spintronics and what it means, and how spintronics added to nanotechnology makes quantum computers possibe, and then he gets into the meat of a specific company he’s pitching, slowly teasing out a few details:

“Now imagine having just a tiny position in a company that has PIONEERED spintronics research — and is already generating profits from the technology.

“My research leads me to believe that I have FOUND that company.

“But for right now, it’s pretty much a secret.

“What interests me even more than its “hidden” status, however, are the crucial patents this tiny company controls.

“These potentially lucrative patents equal a special layer of protection — in fact, they basically mean this company has NO competition for its best ideas.”

Then we get slightly more specific about the patents picture:

“This tiny company working on tons of spintronics breakthroughs has 50 U.S. patents locked up.

“Some will probably prove worthless.

“Others could generate worry-free royalties for generations — in fact a few are generating cash right now!”

And, finally, we get a few numbers that allow me to be sure I’m right in identifying the company:

“The breakthrough spintronics company I want to tell you all about in Converging Profits: Fast Gains on Everything From Quantum Computers to Revolutionary Energy is a U.S. government contractor RIGHT NOW.

“How’s this possible? Isn’t this a tiny, cutting-edge company that’s years away from actually producing anything important?

“NO. This company is important now. It’s profitable and growing now.

“Here’s the proof…

“Revenue is up 20% in the past year. This with a recession on.

“Net income is up 23%. The company TODAY sports a 70% gross margin, 58% operating margin, and 43% net margin.”

So that’s plenty of info to feed into the mighty Thinkolator — and the answer comes out quite clearly, this is NVE Corporation (NVEC).

NVEC is indeed quite small, with a market cap of just under $300 million, and it is profitable and growing in profitability with a forward estimated PE ratio of about 17 and a Price/Earnings/Growth number of .84 (anything under 1 is often considered a flag for an undervalued stock, or for an underpriced grower). Keep in mind that’s only one or two analysts, so the estimates should probably be given limited weight (though the past few quarters have come in pretty close to analyst targets).

The copywriter’s favorite source, I’m forced to conclude, is the company investor factsheet — their spiel often focuses on the key points on those one-page company PR presentations, and this time is no different. You can see NVEC’s fact sheet here, matching up perfectly with all those lovely clues (50 US patents, 23% income growth, 70% gross margin, etc.) — note that all those numbers are for the last fiscal year, so they’re a couple quarters stale but still relatively in line with recent numbers.

And yes, they’re all about spintronics — this is how they describe themselves:

“NVE Corporation develops and sells devices that use spintronics, a nanotechnology that relies on electron spin rather than electron charge to acquire, store and transmit information. The company make spintronics practical by manufacturing high-performance products including sensors and couplers that are used to acquire and transmit data in industrial, scientific, and medical applications. NVE has also licensed its spintronic magnetoresistive random access memory technology, commonly known as MRAM.”

They are a US government contractor, and that’s one of their few major clients (others include Phonak, the hearing aid company, and St. Jude, the medical device co., so they are apparently making some inroads in health care). They seem to make money both from contract research (I assume that’s a lot of the gummint stuff, though I don’t really know) and from product sales, with the “lumpiness” of the contract research pipeline being a bit more pronounced (ie, it doesn’t move in a steady upward trajectory — some recent numbers in that segment have dipped from previous years).

The company has been around for a long time, and public for more than a decade, but it’s just in the last four years or so that they’ve really started to ramp up revenue and income, taking advantage of what looks like a nicely scalable business as margins have climbed as revenue rose. I don’t know what the future holds for NVEC, but I do like that they have been able to grow revenue and contain costs — R&D expense has tailed off a bit compared to several years ago, I don’t know if that’s because they’ve already got the core intellectual property they need, or are becoming more efficient, or, (hopefully not), are underinvesting in the next stage of innovation.

I’m sure Patrick Cox knows far more about NVEC than I do, but I can tell you that this must be the match for his “quantum computer” spintronics stock, and that it does look pretty appealing on the surface if it has even a sliver of the potential that Cox intimates — after all, it’s always nice to make a profit while you wait to change the world. I bet there are others in the vast and powerful Gumshoe nation who also know lots more about spintronics (that wouldn’t be hard) or NVEC than I, so please feel free to share that wisdom with the rest of us with a comment below.

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15 Comments on "“A few of this small company’s lucrative patents could turn into kingmakers.” (Patrick Cox’s Quantum Computers)"

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mIke
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mIke
January 6, 2011 2:36 pm

Hey Gumshoe, Spintronics is the changing of a 45rpm to a 78 on an old turntable. Thatd all I know about it.

Ira
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Ira
January 6, 2011 3:08 pm

The chart for the last 3 months sure looks impressive!

Stuart
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Stuart
January 6, 2011 3:33 pm

"is an emerging technology that exploits both the intrinsic spin of the electron and its associated magnetic moment, in addition to its fundamental electronic charge, in solid-state devices" or the selector switch on a Philco phonograph with 33, 45 and 78 rpm settings. Stock is trading at $58 and has been on a tear this year. currently its only $3 or $4 off of its 5 year high in 2009. a little rich for my portfolio, Thanks Mr. G.

Alan S.
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Alan S.
January 6, 2011 4:21 pm
I used to work with NVE devices about 11 years ago. They built quality stuff, but I would be a little concerned that if they didn't make a fortune off GMR devices back then (you can thank GMR technology for the tiny, dense hard drive in your computer, so it's not like there wasn't any profitable application for it), they won't make a fortune off their technology now. MRAM sounds familiar, too, and again, if they haven't achieved a significant industrial foothold with it after a decade, I think they probably never will. OTOH, that they're still around after all… Read more »
Guest
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Guest
January 6, 2011 6:46 pm
MRAM's been around in concept since 1995 at least, as a potential uber-memory, but principally as a potential flash memory replacement. Flash memory is a $50B+ market, which should make you go all googly-eyed at the prospect of disrupting it. However, virtually everyone who has tried their hand at getting MRAM to work has failed at it and exited the market, leaving only NVEC, Everspin (a 2009 spin-out of Freescale Semiconductor, which was itself spun out of Motorola in 2004) and a couple of others whose name slips my mind now (including a company that is owned by TDK). At… Read more »
tomt
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tomt
January 7, 2011 12:32 am

Recently an IBM scientist published an article explaining how they have a breakthrough implementation of spintronics they call "Racetrack", and it had some spectacular benefits.
I have no idea if they are using any of NVEC's technology, but for what its worth, the technology could be a game changer.

Steve
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Steve
January 7, 2011 6:22 pm

Interesting that Zach's says NVE has the highest operating margin in the semiconductor industry. But sales growth is 20% which is less than 40% of the sales growth of others in the top five list of operating margin.

lester
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lester
January 8, 2011 12:16 pm

Is this a competing technology to locust storage?

Paul
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January 9, 2011 10:00 am
For what it's worth, from Motley Fool (10/8/10): Spintronics is an emerging facet of memory nanotechnology, and it's likely that ultimately it won't amount to anything. NVE, a leading player in its development, is still trying to get it into more mainstream applications and has MRAM license agreements with both Honeywell and Motorola (NYSE: MOT). Spintronics relies on the spin of electrons rather than an electron charge to acquire, store, and transmit data, which could be used in cell phones, PDAs, and the like, but only if the technology proves itself. As exciting as it might be, one Motley Fool… Read more »
Shoeless
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Shoeless
January 10, 2011 4:04 pm

There is an analyst, Manual Asenio, who has some very negative things to say about the NVEC miracle since 04. Worth a look at his many posts. link below: http://www.asensio.com/SearchResults2.aspx?Search

Gunther Doerfert
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Gunther Doerfert
January 10, 2011 5:28 pm

I subscribed to Breakthrough Tecnology, read first paid for issue on website, decided this info not of interest. Requested cancel and refund. No reply. received further issue on email and by postal. Send several more emails requesting cancel and refund. No reply, no rrefund, just more issues which I sent to SPAM. . Have no quarel with the newsletter tech info, just with Pat Cox's business ethics. Reflects VERY POORLY on the sponsor organization which is a top quality group (except for COX)..

dani
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January 22, 2011 10:06 pm

Excellent info. I agree with you that he (Cox) gives away just enough info for us to figure out which company he is talking about. I just got a (buy my newsletter) newsletter with this info. The main problem I have with it is that is was printed in Sept. 2010 and he is still using it as if it was Brand New news.

keithpiccirillo
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keithpiccirillo
April 10, 2011 9:52 am

Read up on Ray Kurzweil and you can see the promise in this area of technology.

Will
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May 21, 2011 12:17 pm
Rather than using the rpm of a vinyl record, I suspect it's more akin to the difference made when VALVE technology, gave way to Integrated circuits (IC's) or better yet solid state circuitry, or thousands of circuits on the world'sfirst 4bit CPU the Intel 4004 back in 1974, which paved the way for the 4040, 8008,8080, and finally the 8088 from which the IBM PC was first madeoperating at 4.77MHz Spintronics operates at the nano level meaning more, faster, smaller. Your smartphone will do everything in 10 years, that a room full of Blade servers does today. THAT's how big… Read more »
STEPHEN HAMILTON
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STEPHEN HAMILTON
November 8, 2012 1:54 pm

Why did it take so long and so many teasers to discover GUMSHOE THANKS FOR YOUR SERVICE

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