“A Rare Situation Could Trigger Triple-Digit Gains for This $7 Stock…in the Next 90 Days.”

Uncovering the "Pennies to Millions" stock teased by Lombardi

By xiexgp@gmail.com, September 13, 2011

That headline comes straight from the top of the latest teaser ad I’m looking at now — from George Leong of the Profit Confidential/Lombardi gang, in a pitch for his Pennies to Millions newsletter. I can’t say that I’ve heard of this letter, which might be new (like most publishers, they trot out new letter ideas every few months, and rename or discard older letters that aren’t working well), but he edits a bunch of letters for Lombardi and we’ve looked at a few of his interesting ideas over the years.

And what caught my eye was the comparison to Apple — not the comparison to Apple the greatest growth stock around, or the most dynamic retailer and consumer hardware stock, but the comparison to Apple when it was a bust in the 1990s, with weak products and tiny market share and on the verge of bankruptcy … before Steve Jobs returned, the iPod took off, and the story was rewritten. Leong is implying, at least, that the big tech stock he’s teasing here might be a similar story, with a coming rebound that could couble your money in the next couple months.

So yes, I wanna know what it is — and since you’re here with us, I imagine you’d like the answer too … right? At least we know it’s not a tiny little mining stock or fly-by-night penny stock this time around, so maybe we’ll even find something interesting.

Leong says this is …

“An opportunity so rare, we’ve only seen it happen three times before.

“Now opportunity number four is getting ready to hand investors a potentially huge windfall…”

The “rare opportunity” is that he thinks we’re catching a large tech stock on the verge of a rebound — comparable to Apple’s recovery that started in the years after Steve Jobs came back in 1996. The second example of this kind of rebound trade that Leong gives is IBM in the early 1990s, when it was floundering after missing out on the PC business … before they reinvented themselves as an IT services company and charted a new path to spectacular success in surprisingly short order.

The third rebound example he gives, in case you’re looking for more reason to do a little drooling, is Priceline.com (PCLN) thanks to their recovery from the dot-com crash — a recovery that he says was fueled by management changes, layoffs, and refocusing on core operations.

And in Leong’s words …

“… now we are seeing the same opportunity being set up again with another BIG company.”

Who? Well, they’re not so free with the clues at Lombardi, but we do get some slightly wishy-washy ones to toss into the ol’ Thinkolator — here’s what I sniffed out of the ad:

“This company has been quietly testing the temperature of the markets with a new product idea that cannot be ignored….

“I have discovered that a well-known company is on the verge of releasing a new product that will have instant appeal to millions of consumers. It literally could be the best rebound opportunity we have seen in a decade—and the timing couldn’t be better.

“This new product is scheduled for release prior to the end of the year. It is so secretive that the company has actually given it a code name until they are ready for the unveiling….

“Apple, IBM and priceline.com all had strategies and plans in place to reinvent themselves, making their stock attractive for a rebound play.

“The stock I’ve been watching also has big plans. Plans to reassert itself in its market in the months ahead.

“In addition to installing a new CEO, in the past few days, I have learned that our rebound trade has formed a new partnership with a huge Chinese firm…has plans for a cutting-edge new trade show display in Barcelona that is virtually guaranteed to attract new business…and made a recent publishing deal that will expand its revenue opportunities.

“According to one source from our rebound trade, the company is planning on putting more effort into operator partnerships—rather than direct sales—in its strategy to regain its position as a major player in its niche within the U.S.”

So … not the kind of specific clues I’d prefer, but nevertheless that’s enough to feed into the Thinkolator — along with his hint that the share price is now right around $7.

Before we fire up the Thinkolator though, what are the general criteria that Leong is looking for in his “grueling screening process?”

“Each stock I recommend must:

“Have great financial ratios—they must have low debt, plenty of working capital, and a strong cash flow.

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“Have strong earnings momentum—the best companies show increasing profits quarter after quarter.

“Have top-notch management that has a vision and a commitment to the future….

“I also want to point out that some of my recommendations have quick profit potential, while others are more of a long-term play.”

OK, so the Thinkolator has been fed and fueled — and out the other end come our answers, tied up in a neat bow … this is:

Nokia (NOK)

Really.

Yes, if you’re looking for rebound potential you want to find a stock that has seen the highs and has been beaten down … and that’s certainly the case with Nokia, which is still the world’s largest mobile phone handset manufacturer but which has also become an also-ran in the mobile phone business thanks to the competition in low-end phones and a failure to compete effectively in high-end smart phones over the last four years.

Nokia can be thought of in some ways as the Motorola of Europe, a radio pioneer that jumped on the new cell phone world in the 1980s and broke new ground and had a spectacular global business — but was caught admiring its market share in the mirror when Apple changed the cell phone world with the iPhone four years ago.

And while Motorola rescued itself, you can argue, by embracing Google’s open-source Android system for its new Droid smart phones (and later, agreeing to a takeover by Google), Nokia didn’t have the strength to get any leverage over Google, and they were too late to Android to jump in without any kind of head start … so Nokia’s new management, hired about a year ago, made a deal with the far weaker (in mobile) Microsoft to be the (both companies hope) pillar of the Windows Mobile world with a new Nokia Windows smartphone that’s expected later this year.

And it’s that new smartphone that has a codename — they’re calling it “Sea Ray,” and it’s apparently based on their newest N9 phone but is tweaked to run presumably the newest version of Windows Mobile, which is itself codenamed “Mango.” Of course, almost all the tech companies use top-secret codenames from time to time, and Nokia has “codenamed” lots of phones that certainly didn’t shake the world.

The global smartphone market is obviously huge and fragmented and extremely volatile — you can tell that just by thinking about the fact that five years ago the only smartphone of consequence was the Blackberry (with the possible exception of the Palm Treo, and now Palm’s new owner, HP, has effectively scrapped their mobile business), and now some folks are speculating that Blackberry is going to see their market share continue to erode, with the smartphone market in a few years likely being split three ways by Microsoft, Apple and Google’s Android. Of course, the one thing we can say about a “in a few years” prediction about a crazy market like this is that it will almost certainly be wrong.

Nokia’s chart makes them look like a straight casualty of the iPhone, with the stock hitting it’s post-dot-com peak at around $40 in 2007, the year the first iPhone came out, and pretty much going straight down ever since (with some brief rebounds). They have beaten earnings estimates for four quarters in a row, and they do have a strategic turnaround plan both to maintain their market share in simple cell phones and to focus on building out their Windows smartphone models in partnership with Microsoft (even as they try to wring a couple more years out of their homegrown Symbian operating system, which is losing market share like crazy but saw some new phone introductions just this Summer), but those earnings estimates were already very beaten down by weak performance and dwindling revenues.

The latest bad news from the company came in their guidance cut/abandonment in May and their downp