Michael Robinson edits a newsletter that’s now called American Wealth Underground, which looks like it’s the successor to the BreakAway Investor newsletter that he took over last year from Christian DeHaemer and, before him, Andrew Mickey in the game of musical chairs that so often is the newsletter business. As far as I can tell, BreakAway Investor no longer exists, or at least isn’t being promoted any longer (which is more or less the same thing — a letter that stops promoting asphyxiates and dies as quickly as a shark who stops swimming).

Robinson has spun several tales for us in the past about BreakAway Investor teaser picks, and those are also included as “bonus reports” in this latest ad, so if you’re curious about those I wrote about his “Green Mafia” piece back in November and his “government technology jackpot” for cyber security in October, and if publishing patterns hold true those picks are probably the same as they were then (though both stocks are up from those points).

Today, however, it’s something new — today we’ve got a technology teaser, which hopefully will come as a welcome respite from all the touts about oil, gas and gold (especially since commodities are taking a hit this week).

Here’s the bold-face opener that draws you into the teaser ad:

“‘I’m confident that I’ve found my “10-Bagger Dream Stock.” This company’s Touch-Sensitive Screen Technology is
what helped make America’s hottest 2010 consumer product sell like crazy. The lucky few who climb aboard before Wall Street gets its hands on it could turn every $10,000 into $110,000+.’

“Apple’s iPhone became the mega-hit that it is because of its Touch-Sensitive Screen Technology. I’ve found a brilliantly run $470 million enterprise that has practically cornered the market for Touch-Sensitive Technology.

“You just glide your fingers over the surface to make the equipment operate, whether that means turning on a computer monitor or scrolling through a playlist. IT’S THE WAVE OF THE FUTURE. Consider its huge advantages…

“It sells to…

“The $98 billion cell phone industry
“The $245 billion personal computer/laptop market
“The booming $21.5 billion GPS market
“The portable entertainment market — Xbox, Wii, PlayStation
“And it’s all China-proof: They can’t steal this technology”

Finally, another iPhone teaser! We had plenty of fun with the last one of these we looked at, the one about the “secret” chip inside each iPhone and how the penny-stock chipmaker would make us all rich (that ones up pretty nicely). So I’m delighted to be digging into another of these stocks, this time it’s about the capacitive (meaning you don’t have to press down) touch screen technology inside each iPhone (and, as noted above, lots of other products).

Here’s some more from Robinson:

“Apple Popularized Touch-Screen Technology With Its iPhone — And We’re Going to Ride This River of Cash With the Company I Found ….

“They’ve Hit $470 Million in Sales and This Booming Market Is Just Starting to Take Off. Making 10 Times Your Money May Be the Low Side — It’s THAT Big”

And there are dozens of quotes from newspapers and other respected sources about the new wave of touchscreen technology, and how it’s so much better than the old stuff and will revolutionize the electronics industry. I won’t bore you with it all, I imagine you’ve probably seen the ad (unless you’ve got a powerful spam filter).

So let’s just get into some clues about this specific company being teased, if we can excise them from the rubble:

They sell to “a list of blue-chip powerhouses that include Dell, Hewlett-Packard, Sony, Sharp and Motorola….”

“… growth rate over 10 years of 16% in earnings per share and sales increasing in excess of 20% a year, selling over 600 million touch screens.”

and…

Steve Jobs calls their technology “the wave of the future.”

and …

“This enterprise was founded in the late ’80s by a team of technology experts with an international reputation for innovation and building successful companies. In their first year, they did a few million dollars in sales. Today that figure hit in excess of $470 million….

“… at the time of this writing, it has a stunningly low forward multiple of about 14….

Are you getting our free Daily Update
"reveal" emails? If not,
just click here...

“Cash in the bank for my enterprise, something I call my security blanket in today’s economy, is almost $200 million. That’s close to triple their modest debt….

“This remarkable enterprise produced over $115 million in operating income over the last two full fiscal years. And it grew over 40% during this period. I’m convinced that there is much more to come.

“Remember, it had a growth rate over 10 years of 16% in earnings per share with sales rising in excess of 20% a year, selling 640 million touch screens. And it’s just starting….

“has developed approximately 1,597 unique designs for its technology, all guarded by 191 patents pending or actual patents….”

“They Don’t Tie Up Their Money in Plants and Equipment. They Invest It in Making a Better, Smarter Solution…

“Making their touch screens is a complex, detailed process. You’d think that they’d have plants across the country to do this, but they don’t. Shrewdly, they contract out this function to some of the most skilled manufacturing foundries in the world.”

Phew! That’s a lot of clues.

So … Robinson will send you his report on this, Touch-Screen Tech: The Next Big Thing That Could Make You a Millionaire … but you’d have to subscribe to his newsletter, of course. Your friendly neighborhood Gumshoe should be able to help, though, we just toss those clues into the mighty, mighty Thinkolator and click on “ice crush” … and we get our answer:

This must be Synaptics (SYNA)

Synaptics has been an Apple story for a long time — they primarily made the little touch pads for laptops for many years, but then they designed the click wheel for the original iPods, and their business really got investor attention and the stock took off in the mid-2000s, though there have been a bunch of patent fights over touch screen technology over the past several years, and lots of design wins and losses, so the stock has been very volatile.

It’s not fair to say that Synaptics has a “lock” on touch screen technology, but they are certainly one of the major “touch interface” companies — they do have the lion’s share of laptop touch pads still, from what I read, and they certainly are still innovating and coming up with new touch designs … but so are lots of other folks, from Immersion (IMMR) to Cypress Semiconductor (CY) to Apple (AAPL) itself (and also including most of the other big phone and device makers, folks like HTC, etc). This is an industry where you take a lot of patent risk, but I have no idea who has the strongest portfolio or who will develop the next breakthrough — Cypress has a cool laser-based touch screen doohickey, and someone (Apple, maybe?) has been trying to patent a “near touch” sensor, but my knowledge of all this stops at “hey, that’s really cool.”

So why do I think Synaptics is Robinson’s tease here? Fiscal 2009 revenue was $473 million, and operating income over the last two fiscal years was $118 million, both of which match the clues nicely (though we’re 3/4 of the way through FY2010 right now). Forward PE is in the 12.5-14 range, depending on which analyst estimate average you look at, and the stock is down a little bit over the last week or two after a nice bounce on a good earnings release, so that’s a fine match for the 14 teased. Cash on the books was $169 million at the end of the last fiscal year, and short term debt was $65 million (they have no long term debt), so that’s a decent match as well … and for what it’s worth, they also report a nice backlog of about $90 million, and project very good growth in the next quarter with the midrange projection for their revenue at $142 million. (Most numbers here are from Morningstar, just FYI — for the basics you can see the press release for the last quarter here, from April 22_.

So is it a great pick? I’ll tell you for sure in 20 years, but they are certainly an interesting company — risks are high, they have a great position in TouchPads for laptops and netbooks, but they also compete with many aggressive companies and face cost pressures as a supplier to products that become relentlessly less expensive every year. They got a lot of attention for winning the touchscreen business for the BlackBerry Storm smartphone and the first Google phone (the G1, from HTC), but there are only a few real hit phones that can drive volume and there’s no guarantee that their products will be in any of them in the future. Still, they’re pretty inexpensive at this point, and their end market is certainly growing — there are more devices, more laptops and netbooks, more smartphones and ereaders and tablets that could potentially use their technology, so they do enjoy a broad tailwind … but so do their competitors, of course.

Analysts are expecting this fiscal year, which ends with the current June quarter, to result in earnings per share of $2.18, growing to $2.37 next year … and it looks like they may be lowballing the revenue numbers a little bit, the analyst average estimate of $140 million is below the midpoint of the company’s guidance. The shares are right around $30 right now, and the analysts have a lot of room to upgrade if they want to in the future — the average recommendation is a hold, and the latest moves have mostly been downgrades this Spring. Morningstar, which often tends to caution, pegs a fair value at $23.

So what do you think? Willing to pay something in the neighborhood of 14X current earnings for a good grower in a sometimes hit-or-miss business? Let us know with a comment below.

And if you’ve subscribed to Michael Robinson’s BreakAway Investor in the past, let us know what you thought by clicking here to review it for your fellow investors (if it turns out that this new American Wealth Underground is just a name change, we’ll update it at Stock Gumshoe Reviews). Thanks!