“This small Virginia firm holds the key to China’s economic future”

By Travis Johnson, Stock Gumshoe, July 23, 2012

The following article covers a teaser ad that has just started to be run again by the Motley Fool. Our article was originally published on February 2, 2011 when the ad first started to run, and the ad is substantially the same but the article below has not been updated or revised so some of the numbers below are quite out of date (the answer to the tease is still the same, of course).

The stock teased is far below where it was when the ad first ran 18 months ago, but has doubled since the lows of this past winter. The company has not posted a profit this year, but analysts believe it will do so next year. We’re including the full text of the original article and the full text of the original comments about the company, since readers posted a great many substantive comments on this one.

Well, whaddya know — this must be “Motley Fool Week” here at Stock Gumshoe. A couple days ago we looked at some of their teaser stocks for their flagship Stock Advisor newsletter … and now they’ve issued a “Special Report” obliquely teasing yet another pick.

And it’s a pretty good tease, too, with relatively few clues — but your friendly neighborhood Gumshoe does love a challenge. So let’s see who this is, shall we?

The “special report” on this stock is being sent to new subscribers to their newsletter — they call this report “One Breakthrough Company with the Key to Global Commerce,” so they’re not exactly being shy.

The stock teased is a pick of David Gardner’s, the more growth-focused and technology-happy of the Fool brothers, and it is, once again, for the Stock Advisor newsletter that he co-writes with his brother Tom. There’s plenty in the ad about his great success with long-term investments in stocks like Marvel and Amazon.com, but I went over some of that earlier in the week. Suffice to say that he likes rapid growth companies that are “top dogs” and “first movers” in their particular market, and he likes them even more when Wall Street is skeptical or when people think they’re overvalued.

Here’s the lead-in to get you excited:

“A small Northern Virginia company (with key patents and a team of bulldog lawyers) has discovered a way to provide a “a bread necessity” in places like Mumbai, Hong Kong, and Mexico City…

“While at the same time, replacing centuries old institutions in cash strapped American states and towns, and even U.S. government agencies.”

Intriguing, no? It continues. This stock is apparently a …

“… ‘first mover’ and already ‘top-dog’ in a $80 billion-a-year industry… with giants like Google now trying desperately to get a piece of the action”

Then we get a littany of clues about this company’s product:

“This company’s remarkable product is nearly 35% faster than existing alternatives ….

“… has achieved 7 times the name recognition of its nearest rival …

“… far superior product costs consumers (individuals, companies, along with both private and public institutions) 20% to 50% less than alternatives … with high gross margins of over 85% …

” … The company makes the vast majority of its revenue through direct sales — its website, call centers, and kiosks — and is expanding that retail presence around the world….”

So that sounds pretty impressive, no? Especially the 85% gross margins part … but nary a clue about exactly what kind of business they’re in (as you’ll see in a moment, any clue along those lines would instantly reveal the “secret” for most investors).

There’s also a connection to the states and their budget crises, which is timely — the teaser notes that …

“… on Wednesday, January 19 a sizable new contract was announced in Evansville, Indiana. The deal shakes up an old-fashioned public institution, saving the state a ton of money, and providing it a product five times better (according to one vital measure) than the existing alternative…

“And then there’s the monumental shakeup in New Jersey. You might have seen it reported on the evening news. In June of last year, this company’s breakthrough product REPLACED a centuries-old process and provided a better product for 80% less cost to the state!

“USA Today noticed, reporting that this breakthrough company “has become wildly successful”… and quoting a bevy of world-renown business experts who state unequivocally that this company’s product plays a “crucial” role in the future of global commerce!”

And Dave Gardner thinks this product might be 10X better than existing alternatives, and could become one of the major stock stories of this decade. So who is he teasing?