“New Texas Oil” from Nick Hodge

Early Advantage says "2016 is The Last Year This Tiny $1 Stock Trades UNDER $10"

By Travis Johnson, Stock Gumshoe, February 4, 2016

The ad we’re looking at today is, of course, a pitch for solar power and for some specific solar technology companies… but we don’t get that info up front. If you look at the transcript of the pitch for Nick Hodge’s Early Advantage newsletter ($799/yr), they don’t “let the cat out of the bag” that it’s actually solar power they’re talking about until page 18. Out of 45 pages.

It’s true, I love you — why else would I sit through all this hyperbole? 45 pages doesn’t make Hodge the worst offender, to be sure, but that’s a lot of building scenarios and spinning tales.

So… shall we find out what these stocks are for you? He teases two, both of them quite small… and this time there’s no overlap with the “Endless Free Power” pitches from Dr. Kent Moors that are still flooding many of your inboxes and driving a lot of questions our way — Moors was pitching SUNE as his favorite and, secondarily, TSLA and WNDW… Hodge’s colleague Jeff Siegel did tout SolarWindow (WNDW) years ago, when it was still called New Energy Technologies, but it’s not in this current ad.

At least one of the stocks is a “rerun”, though — so there’s your hint from me.

Here’s how Hodge gets us interested, after we skip through the first dozen pages of “New Texas Oil” foofaraw:

“… 2016 is The Last Year This Tiny $1 Stock Trades UNDER $10….

“My point is, 2016 is the “tipping point” for the solar market’s energy dominance.

“And that’s exactly when this company’s new technologies will hit the market… dropping the price of solar by 75%.

“Sure, tons of new solar technologies are being mentioned in the news. But few are even close to ready for market. Most have not even left the prototype stage.

“That’s not the case at all with this company’s third-generation solar cell — which is not only ready for production…

“But has proven commercially viable in assembly line tests.”

Sounds impressive, right? Then he goes into the rational-sounding math behind his projections of massive gains:

“How much money are we talking about?

“In the United States alone, the market is $33 billion.

“So let’s be conservative and say this company’s solar technology captures just half of current U.S. sales…

“That’s nearly $16.5 billion in annual revenue.

“Twenty percent of that — this company’s share of royalties — is roughly $3 billion.

“Factoring in the average price-to-sales ratio for similar companies, the share price comes out to $67.

“That’s a 13,400% gain!”

That’s hooey. I’d use stronger language, but Stock Gumshoe is a family operation.

Why? Because this time he’s hinting at a company called Natcore (NXT.V in Canada, NTCXF on the OTCQB in the US)… which, sort of like SolarWindow, has been a solar technology/materials R&D company in search of a viable product for a long time. Nick Hodge also indicated that the stock was on the verge of popping from $1 to $21 back in 2012 when he hinted that this was the “non solar stock to save the solar industry.”

This company was teased by them in a slightly different way just last Fall, too. The company has been public, and tiny, for about 6-1/2 years, and right now it’s about at the lowest price it has traded at since the IPO — at least in US terms, which is what we should pay attention to since it’s not a Canadian business even though their primary listing is in Canada (the only reason for the Canadian listing is that they were too small to list on AMEX back in 2009, and they still are, though they upgraded their US listing to the OTCQB last year and are filing with the SEC… I haven’t seen a quarterly report yet in their US filings).

Promotional chatter about them from Nick Hodge and from other newsletters and pundits and promoters has helped to bring price spikes in the past, particularly when the company has gotten the attention of national news outlets or been singled out by the government, and announcements about R&D accomplishments and possible commercialization have also had a positive impact on the price, but it has always come back down after the attention waned.

Will that happen again this time (either the spike, or the waning)? I have no idea, but I’d urge you to be skeptical about the timing of commercialization for their technology. I don’t know whether we should consider this a “when” or an “if” issue, since I’m certainly not an expert in materials science or in the solar cell or semiconductor industry, but even if you’re optimistic and consider their commercialization to be a “when” question, that date will almost certainly be long after this year. They’ve been saying “this year” or “next year” for a long, long time.

The technology the company was founded on was liquid phase deposition, which is a cheaper and safer way to create panels (instead of gas/vapor deposition), and the two solar cell improvements they’re currently trying to sell are an “absolute black” coating that cuts reflection and reduces costs, and a laser-etching back-contact HIT technology that can cut costs by skipping a manufacturing step or two and also improves efficiency.

And the reason I was tempted to go beyond saying just “hooey” is that while these are technologies on which Natcore hopes to receive royalties (that would have to be preceded by a deal to actually commercialize them, of course, which hasn’t happened), but the royalties, even if they have the good fortune to reach that point, will not be gross sales royalties. Not even close, that would presumably be a complete non-starter for a very cost-sensitive industry. The royalties discussed in their latest president’s message are royalties on the gains that Natcore’s technology can generate. CEO/President Chuck Prozini indicated that 10-20% would be the range of royalties they expect, so that would be, say, 10% of the cost savings that their customers get from using the “absolute black” silicon coating, or 10% of the efficiency gains reached by using the back-contact HIT-type cell design.

Which could still be a big number, of course, IF commercialized on a large scale. Reaching half the U.S. solar market is not a conservative estimate in my opinion, that’s probably an insanely optimistic estimate, so that broad number from Hodge is silly too… but if Natcore could reach, say, 3% of the market, and they end up cutting costs for those customers by 3% and therefore generating a 10% royalty on that 3% savings that would still be a big number for a little company like this. Margins are tight in solar, but if we assumed it was a higher-margin manufacturer like First Solar (FSLR), where cost of goods is about 60% of sales, then that would mean that cutting costs by 3% would mean that margins improve by a little less than two basis points (gross margin goes from about 40% to 42%, roughly speaking).

That’s essentially saying that the benefit that First Solar garners is roughly a 2% cost savings, so if Natcore gets a 10% royalty on that savings you’re looking at effectively something like a 0.2% sales royalty to Natcore. With First Solar having about $3.6 billion in sales over the last year, that would mean the royalty to Natcore would be $7 million (.02% of $3.6 billion). That would be a lot for Natcore, to be sure, since they’ve never posted any meaningful revenue, but even that pretty huge level of commercial sales would really just make this a reasonably valued company right now if you didn’t presume great growth or scalability — they lose about $5 million a year, so if such a deal came without increased costs it might mean they earn $2 million a year in profit on the royalty… which is enough to move the needle for a $20 million company, but maybe not an earthshaking windfall.

This is all just an example and a mental exercise, I remind you, as far as I know those companies have no such relationship and Natcore has never announced an agreement that’s gone as far as actually stating a royalty level — and I think, personally, that the idea of Natcore getting their technology adopted by a major manufacturer and having it applied to all of that manufacturer’s sales is a large leap and that relationship, even if it might someday be possible (I have no idea on the odds, to be clear), would probably take a long time to mature. I’d consider those numbers to be wildly optimistic, but that might just be because I’m a little extra-skeptical after seeing Natcore teased for so many years.

Is that kind of potential big enough to take the chance that they won’t ever commercialize one of their core technologies? Am I being too cautious and skeptical? Well, that’s your call — all I know is that this is a small and promotional company that has to raise a few million dollars every year to keep the lights on, and the commercialization process is apparently long and difficult, particularly because all the big manufacturers (SunPower, Panasonic, et al) are also developing their own new technologies all the time. And the chatter about their designs and technology being more efficient and critical to the next phase of development is quite similar to the chatter that was floating around about this same company back in 2009… I suspect that it’s a lot easier to sell the story to investors than it is to sell Natcore’s technology to solar cell manufacturers.

The other stock that Hodge touts is made to sound similarly exciting, here’s the tease:

“Solar Boom Play #2: Bag 100-Fold Gains on Solar Picks & Shovels

“The next way to play the solar boom is also not really a solar company. It’s never touched a solar cell.

“Instead it produces software that brings standardized quality to solar manufacturing.

“What I consider a ‘picks and shovels’ play for the solar boom.”

“Picks and shovels” is a nice idea, of course — that’s an allusion to the fact that the folks who made money in the California gold rush were the entrepreneurs who sold picks and shovels (and Levis) to the miners, not the prospectors who pursued the dramatically riskier “search for gold” business model. Don’t know if it really applies here, but any company that sells tools or business to business services in any industry has probably been pitched as a “picks and shovels” play.

This one’s really about process controls and efficiency, it appears. More from Hodge:

“The opportunity lies in the old, outdated, and inefficient production process for solar cells.

“The current lines produce a high rate of defective solar cells — as high as 25% in fact…

“A serious loss of time and money for solar makers….

“Solar companies are making cells at a 20% margin loss. And trying to make it up on volume.

“As global demand climbs to unprecedented levels every single quarter, this will cut even deeper into profit margins.

“And that’s why the industry is in desperate need of automated and standardized production….

“Tests show it can yield 99% quality control — an absolutely incredible boost.

“This will bring solar up to the standards of other industries — where the defective rate is 1% or less.

“It can singlehandedly flip a solar maker’s 20% loss to a 20% profit gain.

“So you can imagine why solar makers are lining up to get their hands on this tech.”

OK, so some kind of hardware/software for cutting down on defects in solar cell production… any more details about the company?

“This tiny company’s market cap is only $5 million…

“But it has $10.5 million worth of orders already locked.

“These are orders already set, with the shipments going out.

“That’s double its market cap! But the stock hasn’t even moved. The markets haven’t caught on yet.

“This is a huge under-the-radar opportunity… one that could instantly double your money — and that’s just for starters.

“In total, there are 625 solar production lines worldwide and growing. So this software (at $500,000 a pop) has a market opportunity of $312 million.

“When you add the service costs, it totals up to roughly $500 million.

“That’s 100 times its current market cap — and that’s just on the existing lines.

“All told, early investors could see 10,000% profits in the next few years as the orders roll in.”

So who is it? Well, I suspect this is a re-tease of a company called Aurora Solar Technology (ACU.V in Canada, AACTF OTC in the US), which used to go by the name Aurora Control and was teased by Hodge back in the Fall of 2014. It’s freakishly minuscule, even smaller than it was when he teased it in 2014 (it was a $7 million company then, now it’s about US$4 million — or C$5+ million). The company has made a bit of progress since then, they’ve sold a few of their measurement systems that fit into solar cell furnaces and measure to help identify faults and improve output — now the software that this system uses is called Veritas, and the actual measurement device that gets built into the furnace line is the Decima 3T.

I can’t tell you for sure whether they’ve got $10.5 million in orders “already locked” — they have had at least a half dozen systems ordered over the last year or so, from what I can tell, and each one should represent something like $400,000 in revenue according to the company’s presentation. They seem to see their opportunity as being an “add on” to new next-generation furnaces that are installed, and they have a partner agreement with SEMCO, which is one of the furnace makers. Their investor presentation from last May indicates that they think their system will cost $400,000 per furnace, and reduce costs by over a million dollars per year — which means their customers would get a pretty quick return on investment.

But like I said, it’s absurdly teeny. Investors who are not experts on the industry or technology, or who aren’t company insiders with great insight into operations, are at a huge disadvantage when it comes to nanocap companies with valuations this tiny — there are dozens of companies who specialize in semincoductor testing equipment, which is similar to solar equipment, and there are lots of large solar equipment companies who presumably would have bought this firm by now if it was in possession of uniquely valuable yield-increasing technology (Applied Materials, for example, could user their profit from one week’s work to buy Aurora Control). There may even be companies who sell stuff that’s almost identical to Aurora’s, I have no idea — and most people wouldn’t, because other small companies who are making testing and process control equipment are likely to be hidden inside much larger companies, or just little private operations that investors will never hear about.

That doesn’t mean that tiny companies can’t be valuable, or can’t grow, or even that they can’t fly under the radar and explode into profitability before anyone notices them… but it doesn’t happen very often, and that kind of lottery ticket mentality doesn’t usually serve investors very well. When I’m trying to apply some rationality to my thinking (which doesn’t always work), I might ask myself: If this company’s technology is so great, why are they tiny and independent? If Applied Materials and all the other suppliers haven’t shown any interest in buying this company out, well, do I really know more than they do? That may not be reasonable, but it can at least help to counter whatever lustful jingles these kinds of ads generate in your veins and give you a chance to slow down and think it over.

The company does have some revenue that’s just starting to emerge with their first few sales — and they sell what should be a pretty high-margin product and software package, so there is some possibility that they could become a going concern. If they could sell 10-20 units a year and generate between $4-8 million in revenue (their last four quarters had only $100,000 or so in revenue, so this is assuming a lot), then, assuming gross margins stay pretty high, they could absorb their $2 million+ of overhead and selling costs and begin to post a profit. I’m assuming that’s not how it will go, since they’ll probably have to keep spending more on selling to build up more partnerships, and more on R&D to keep improving their products to keep up with competition (I assume there’s a lot of competition, but don’t know the industry at all), then the business model and the potential gross margins make it at least theoretically interesting.

So whaddya think — have any opinion on these two super-teensy solar(ish) companies? Let us know with a comment below.


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72 Comments on "“New Texas Oil” from Nick Hodge"

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PcolaJoe
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0

Good analysis, I think I will pass for now. You have the straight scoop…. Thanks.

DWS
Guest
0

I think Nick Hodge is a scam artist.

PETER BRAUN
Guest
0

The previous pitch was “Obama’s secret pipe line”, which made solar out as a big joke that will NEVER account for much. How can this guy still look at himselfin a mirror without puking?

James
Guest
0

EXACTLY what I was thinking. According to that scammer, one moment “nuclear” generated electricity is going to dominate the world, then it’s “solar” Who knows what they’re going to pitch in next month!!

Jim Leavenworth
Guest
0

Probably, but if you watch the video long enough you’ll notice Jeff Siegal is among the coauthors of the report. I respect Jeff, though I disagree vehemently with his libertarian politics. In fact I bought Hannon-Armstrong, HASI, a clean tech REIT, on his recommendation
and have enjoyed satisfactory returns from it.

Glynn
Guest
0

How right you are!!!!!!!!!!!!!!!!!!!!!

Norman Bowers
Guest
0

Thanks for saving me tons of time and trouble. I can’t stand those long repetitive boring offers that I get everyday. I don’t even bother to wade through it all like you have done here. Thanks Again!!!!

Max
Guest
0

I don’t get it. How many times will Travis need to prove to all of you that whenever someone hypes some stock as “the next big thing” you should just ignore them? Admittedly sometimes such shysters will present some thought provoking market statistics or a slant on how to interpret them that is new to you. But other than that, what they spew is just a bunch of BS. How can you even remotely begin to take them seriously?

Patricia
Member
688

You get it, but it’s mainly people with no experience at all with stock investing who are the targets of these promotions (like I was when I first found this site). If Travis had a nickel for every dollar he’s saved investing neophytes, he’d probably own his own island in the Bahamas by now.

tucker62
Member
34
Hey Max, I don’t think ignoring them is the right approach either. Although they are over hyped, some do have value. When Travis’s excellent reviews are somewhat neutral on a company it peaks my interest, I dig around a bit and form my own opinion. The 3 I’ve picked up over the last few months are all up 20 to 24%, 1 from this week up 4. There is nothing forcing me to hold at this point. If the stocks crash 30% and I’m still holding, that’s on me, not the fault of any newsletter or review. The combination of… Read more »
Dave
Guest
0

We DON’T take them seriously. We’re just coming here for some affirmation and to be sure that we’re not missing one of the 1-in-50 stocks that are actually worth a careful look, which is what Travis so ably provides.

DBMD
Irregular
1096

If oil and gas drop to much cheaper levels, will any thing with solar have value? I am sure the clean energy, EPA mandates, will keep wind and solar going, but only so long if other energy sources are cheap. Thanks for looking into this Travis.

tucker62
Member
34

Cheap oil is a huge negative for many countries. There should be no doubt as to where the price of oil is going, only when.

jack
Guest
0

You must keep in mind that new projections indicate that 90% of fossil fuels must remain in the ground, and that current share prices are now based on something that no longer has much future value. Those facts are catching up with investors and the market in general. Of course, don’t expect to hear that from XOM.

As to Natcore? Who knows, but at least they’re on the growth side in the energy sector.

Pushpa Amin
Guest
0

Travis, we love you too. We appreciate the work you do in sifting through pages and pages of these crappy ads and then providing an analysis of the stocks uncovered. The analytical part is very informative and for most of us it is educational. Also, I find your style of writing very entertaining. Thank you so much for all this work.

Lynda
Guest
0

Travis, I’d like to hear your comments on Zenect Wealth’s script on the new Swiss “electronic money system without banks.” Offered first to the wealthy for a $36,000 buy-in, but supposedly created for the masses of small investors. I listened, then read it again, but still can’t figure out how the smaller investors get value from the system–if it really exists. L

lsteck
Irregular
27

I can’t believe how many enjoy this site and not pay the inexpensive yearly dues. Its a win win when you can help pay for the hard work that’s put into researching. I have been a member for years but don’t post much. I enjoy Travis and the comments.

LostOkie
Irregular
288

Lsteck, you can’t really know how many people are enjoying the sight without being paying members, as commenting without being logged in doesn’t show you to be a paying member, even though you may be.

otradovec
Member
1

Hodge is now excited about this electrical wireless Co that is using one of Tesla’s patent and is ready to blow the lights out any moment, Any ideas

Gr8Full!
Irregular
11168
Contact – at the top of the home page at stockgumshoe.com We cannot give personal financial advice (or any other kind of personalized advice) but will try to respond to questions that we can answer as quickly as possible. Content of questions may be used in future articles or Q&A, but names or other personal information will not be used. Feel free to use this form to submit links to ads you’d like us to cover (you can also forward them to ILoveStockSpam@gmail.com), requests for membership cancellations, customer service inquiries or questions about our site or service, or anything else.… Read more »
westtexaslawrence
Member
47
Thanks for sitting through the spiel, Travis, and giving us the skinny on the solar stocks Hodge is touting. I recommend Civic Solar to buy solar panels from and Canadian Solar as manufacturer. Their 320 watt solar panels are 92 cents/watt each with a 25 year warranty and are made America (Canada). As for this Tesla derived wireless energy deal…..it works, but not the way they are trying to bring it to market because they still don’t understand what Tesla was doing with his broadcast power system. Edison, J.P. Morgan, and Westinghouse conspired to put Tesla out of the free… Read more »
John M
Guest
0
100 years? Really? 100 years ago, flight was just taking off (so to speak) not many cars yet on the road, computers? years away. Tesla just received 1000 each from 200,000 people reserving a car that won’t be built for 2 years. (no fossil fuel). India with its pollution wants to get rid of ALL fossil fuel vehicles by 2030… 14 years. That might be a bit ambitious. US CAFE standards to be 54 mpg in 2025… I would love one more boom cycle in oil, so I could sell my last losing position at even (fat chance). I did… Read more »
alfie0077
Guest
0

Tesla had hundreds of patents. Tesla was the root of Westinghouse, and did more for electricity than anyone before or sense. Wireless power is possible, but only for very short distances. Gotthave really big air coils to make it work at all. Pipedream by Hodge, and all others….

dmacheath
Member
7

45-pages of Nick Hodge’s crap??? Jeeze Travis…. Your the man buddy!! That is some serious suffering to get the answer… I follow your column daily. Your view on things keeps me sane. Thanks!!

westtexaslawrence
Member
47

I see where the Obama administration wants to slap a $10/barrel tax on domestically
produced oil to penalize our domestic producers. I’d RATHER see them slap a $10/barrel
IMPORT tax on all oil imported into the USA from anywhere else. That would give domestic
producers an edge and bolster their businesses versus foreign producers…and keep more
Americans employed by domestic oil companies in both production and exploration.
We should take care of Americans first, I say.
WestTexasLawrence

frank
Guest
0

your comment sounds like a racist one and you should know better…………………….

GJP
Guest
0

You’re missing the point that US presidents are in the business of protecting international interests and lobbies over US domestic ones. From Nixon to W., there were no exceptions, especially in energy. Won’t even talk about going to war for resources that we hand over to our global competitors for pennies on the dollar…

frahman
Irregular
3
I got excited about NatCore after reading about them in the Mauldin/Cox TransTech newsletter (which I stopped reading after noticing its impact on my net worth – I hate the way these newsletter writers describe it as a ‘risk free trial subscription’ as if they are going to reimburse you after their recommended stock tanks – not!). Anyhooo, the basic premise at NatCore seemed sound (and Brien Lundin seemed to be a good name, like Mauldin), but I was very disappointed to see NatCore printing shares willy nilly and handing out warrants to insiders, which I think of in much… Read more »
Jim O'Connor
Guest
0

Angel Investments is touting a metal oil..Stating that Elon Musk(Tesla) and BMW/Toyota are investing heavily..This will replace oil as we know it for the mfg of new vehicles..
WHAT IS THE NEW METAL OIL?