“Coming Soon: the Paper-Thin iPad … how you can profit now”

Looking at Louis Navellier's teaser for the next stage of computer miniaturization

By Travis Johnson, Stock Gumshoe, January 25, 2012

It seems a little petty now, with these miraculous little iPad doohickeys, to complain that they’re too heavy, or too thick — seriously? They’re thousands of times more powerful than the Mac that got me through college just fine. Though I will be attending my 20th reunion this summer, and I couldn’t watch TV or even access the internet on that Mac … which is probably why I graduated.

But the push for more, better, faster, thinner never ends — and I can’t claim to be immune, I’ll be buying a new desktop computer for Gumshoe HQ soon, and I am plagued by the terror that the one they introduce in a couple months might be half again as fast as the one I can buy now. Not bad, as far as existential dilemmas go.

Navellier is keying in to this push with his latest tease — and no, I don’t suppose it’s a coincidence that a teaser that uses the iPad as a hook comes out on the same day that Apple (AAPL) is wowing the market because they sold so many of those lovely little tablets (I’m an Apple shareholder, so I did enjoy a brief happy dance last night … though a more mature person would have asked instead for a weaker quarter to give the opportunity buy more of the stock on the cheap — a higher price doesn’t help me until I want to sell, and I don’t).

The pitch is focused on graphene, which brought to mind a teaser he ran back in early November, so I decided to look into it and see if he’s still pitching the same company. At the time he promised it would go from “$16 to $30 with or without you” and that you would “thank him a thousand times on November 31st” if you bought the shares.

What happened? Well, they released good-looking numbers a week or so after his tease, but there wasn’t much chance to “thank him a thousand times” — the stock bounced around a little on earnings, as is common for a sub-$100 million market cap company, but it has generally been trending down ever since, and is about 15% below that $16 number now, you could buy it for just about $13 if you so choose.

And yes, he’s still pitching the same company. If you’re in the Irregulars you can see my original piece about this from November (that teaser writeup came in the Friday File), that’s got a bit more of my blather about the company, but I’ll throw out some quick answers and thoughts based on the new ad here.

First, Navellier’s current pitch:

“… this company’s miniaturization processes aren’t silicon- based but based on a properties of new material, Graphene,
a new discovery that’s not only the thinnest and strongest material on the planet but also conducts electricity 30 times faster than silicon.

“The result will create smaller, faster and more energy-efficient computers and smartphones that we have now.
What puts my newest recommendation in the catbird seat of this breakthrough is the fact that it’s one of only a handful of companies in the world with the customized equipment and process solutions to bring lightening-fast, Graphene-based paper-thin computer chips to market.

“So it’s no wonder the company’s order backlog is growing massively, up 376% year-on-year or that company’s sales jumped 119% last quarter while enjoying 766% earnings growth—all while handing investors 12 months gains of 74%.”

The graphene stuff is real, if early-stage — graphene is widely predicted to be the eventual replacement for silicon, and we’ve seen a number of teasers about graphene miners. I got interested in some of those miners briefly last year, but my current thinking is that the new wave of graphene chips and graphene applications may well be huge eventually — but there’s no reason to think that there will be a shortage of the raw material, which can also be created artificially. So I am interested in the tools and equipment companies who might be able to help advance graphene, but not so much interested in the miners, personally.

More from Louis:

“… my newest recommendation’s share price should rise another 74% in the next 12 months because the company is one of the few in the world that can not only produce large quantities of Graphene film but also produce the discovery and manufacturing tools to develop the next generation of Graphene-based computer chips.

“When you add to that the company’s patent-pending technologies, you’re looking at a company that could easily become the 800-pound gorilla of Graphene-based chips just as Intel held that title in the silicon chip industry for the past 30 years.
That’s what makes this company and its proprietary processes for creating paper-thin Graphene-based computer chips not only a major game changer but also a major wealth builder.”

OK, so yes, this is still the same company — the very small CVD Equipment (CVV)

They are essentially an equipment supplier — they sell customized equipment to semiconductor companies and to researchers, with a specialty in chemical vapor deposition (CVD, thus the name — not to be confused with the ticker CVD, which belongs to Covance).

They have a market cap of around $75 million, they are profitable and growing (they did report 766% earnings growth in the third quarter, as teased, though that was certainly an outlier), and they do have a nice order backlog. Clearly, investors still haven’t gotten all that excited about them, they trade at a fairly tepid 22X trailing earnings, which isn’t what you expect for a small company with great growth. That’s probably because the growth is new, and folks might not trust it to continue, before last year they went through several years of pretty flat and arguably weak performance. There’s also only one analyst following them — for what it’s worth, he (I’m guessing it’s a he, haven’t read the reports) expects 80 cents in earnings next year, which would give a forward PE of around 16 … though that analyst (I assume it’s the same one) has also been way off for the last two quarters, so who knows. About a week ago they announced $36 million in new orders for 2011, which is a nice jump from 2010’s order number, but we don’t really know when that will register in revenues.

Revenues came in at $16 million in 2010 and $28 million over the last four quarters, so the growth has certainly been there, with fairly consistent margins that have allowed profits to climb nicely as well, but they’re so tiny that it’s quite likely that they’re also getting buffetted by the swings between bullishness and bearishness in the overall semiconductor sector — they probably don’t, after all, make any real money from graphene to speak of yet, they’re much more leveraged to advanced silicon semiconductor work, and they’re a small player, no matter how advanced or differentiated they believe themselves to be, in a very big business. They’re seeing growth from their nanomaterial work with carbon nanotubes, graphene and similar stuff, but if chip companies slash spending or production it doesn’t seem, from a quick glance, that graphene is going to make up for it just yet. The founder owns close to 20% of the company, and he and the other insiders have been pretty consistent sellers over the last year, which makes me think they’re not likely to be takeover bait in the next few months, but you’d think that the big equipment companies like Applied Materials (AMAT) would be interested in these smaller players who might have advanced nanomaterials chops.

I have a soft spot in my heart for tiny companies that are growing and making a profit, but they’re not exactly a consistent moneymaking machine just yet. Still, it’s a cool technology and an interesting company — I haven’t looked all that closely at them in the last few months, but have a gander and let us know what you think with a comment below. They won’t report their full year 2011 results until March 5, so there’s probably no need to rush. Unless Navellier is going to tout them every day and drive the shares up, as it appears he did today with a nice 5% pop.


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Skin
Guest
Skin
January 25, 2012 5:35 pm

I’ll thank him a million times on November 31, I’ll even retire the national debt on that date.
—skin

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John Harris
Member
John Harris
January 25, 2012 6:16 pm

I subscribe to Navellier’s Blue Chip Growth newsletter. Navellier’s exuberant optimism and his tendency to buy stocks with lots of upward momentum would work great if the stock market went consistently up – but the reality is he often picks high flyers, even with P/E ratios over 100 that too often return from the stratosphere. He so believes that the market will always rise that he will never sell and rides the major recessions (both in 2001 and 2007) to the bottom. Sure the market has returned from the depths of both of those but how much better to have told us to sell soon into the 2007 collapse (or lord knows even before that) and then buy again once the market turned around after March 2009. He is always a bull and just can’t get past his optimism. Still right now I have some (unrealized) gains on average more than enough to pay for his most inexpensive newsletter but another drop like last August would put us in the red again.

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Jill
Member
January 26, 2012 2:33 am

I do okay with Navellier — as long as I’m contrarian with his picks. He says BUY then I know to SELL. He says SELL then I know to BUY. He rates a stock as pathetic . . . I know it’ll go up. Seems to work for me more often than not. Perhaps 20 years ago Navellier was on the money, but not so much any more.

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blackjack
blackjack
January 26, 2012 2:53 am

thanks for this
1st point there is no such thing as a graphene miner – its graphite – the black stuff that goes into pencils.
You mine graphite, the larger the flakes the better and then simply squash it a dozen times between sticky tape, so that its uniformly 1 atom thick lattice. Thats the basic graphene.
It also goes into large storage capacitors – magic things – read up on them.
Plus EV batteries and of course Samsung is working on a flexible, fold it up and put it in your pocket Ipad thingy. They have a working model now. Star Trek stuff.

a small company in Australia ASX SER has signed up with MEGA from Canada and effective bought the biggest large flake deposit of graphite in the World. I am NOT HAPPY with the deal but it was the only way to get money to refurbish and get the old mine working.
MEGA plans to float on the stock exchange some time soon and so either pick up SER or MEGA.
I am not happy with the deal, although i have and will make more money, because the mine and the graphite is worth 100 times more if you simply value add and if SER make the graphene themselves. Very short sighted of them.
SER is about 11 cents now and so good value – MEGA will convert the SER shares when they float so I think theres a good chance to pick up a premium here
check it out
hope this helps

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