This was originally published as part of the Friday File on June 28, 2019. It has not been updated or revised (my position and disclosures remain the same).
The ad under scrutiny today is for Jon Markman’s PowerElite service, which he says has a “retail price” of $228 but is “on sale” for $29/year at the moment (presumably it autorenews at full price after a year).
Here’s the top of the ad, which I saw for the first time a couple days ago:
“Massive revolution started in $5 trillion retail sector …
“A rollout even bigger than smartphones — with huge profits of 1,800% possible for investors in one tiny $5 stock”
Anything that pitches a huge opportunity and “one tiny stock” tends to get the attention of Gumshoe readers… so what is this one?
The ad uses the term “Tiny Supercomputers” to describe the world of networked “smart” machines that is being enabled by 5G and “Internet of Things” technologies, and Markman believes there’s one key company that will be the “next Cisco” of this “tiny supercomputers” business.
More from the ad:
“One tiny $5 stock providing crucial technology to this “tiny supercomputer” revolution just doubled in price. And — as you’re about to see — it’s just getting started.”
This is somehow related to the cashier-less Amazon Go stores that have gotten a lot of press, apparently, but it’s not just an Amazon Go story…
“What the media is missing is that this isn’t about Amazon at all.
“What the media has missed so far is that the technology behind these stores — especially a critical element I call “tiny supercomputers” — is already starting a massive revolution across the entire $5-trillion American retail industry (and beyond).”
And the promise is pretty wacky, as usual:
“In fact, I see an opportunity to multiply your money up to 18-times in one little $5 stock. As the world wakes up to what could be the biggest transformation in the history of retail. And then as this revolution spreads to industry after industry.”
He posits this as being like investing in Microsoft in 1986, Cisco in 1990 or Amazon in 2002… which certainly provides for some drool-worthy charts, though survivorship bias kicks into overdrive with these kinds of promises (What’s “survivorship bias?” It’s the fact that we focus on the huge historical winners, which makes it seem easier to pick the next wave of winners… because we no longer think about the companies that lost to those survivors. No one ever promises that a stock could be like investing in Digital Equipment or Circuit City or the many other companies that were also beloved large speculations near those times but failed and rest, long forgotten, in the landfill of history).
So what are these “tiny supercomputers” that Markman thinks will be “the biggest tech revolution of the 2020s?” Apparently they’re somehow enabling the “store of the future”….
“Imagine a shopping experience where every aspect of the store has one main role: serving you.
“This isn’t a store without people. It’s a store where people can focus on treating other people like human beings, rather than receipt totals.
“It’s a store where we know the transaction will be taken care of automatically, so service becomes the priority.
“And at the same time, it’s a store that is able to tap into much of the “smart” retailing strategies that have driven Amazon’s success. The company will know exactly what’s selling, how fast. So they can keep more of the products you’ll want in stock and waste less shelf space with items nobody’s buying.
“You’ll enjoy a brand new shopping experience. Where it’s easy to walk in, grab what you want, get help if you need it, and get out with your goods.”
So what is required for this new shopping experience?
“A few years ago, it would’ve taken a 2,500 square foot data center worth of computers to run these algorithms. We’re talking massive cloud computing capacity.
“But because of the advent of tiny supercomputer technology and superfast networking, nearly all the computing it takes to run one of these futuristic shopping experiences can happen on site.
“In each of America’s 3.8 million retail stores.
“Talk about a lot of upside for our tiny $5 stock.”
So what are those “tiny supercomputers?” I expect that marketing phrase comes out of a combination of faster chips and networking, and, more importantly, cloud processing for artificial intelligence. Markman says that…
“The secret is the ability to run incredibly powerful artificial intelligence algorithms on computers not much bigger or more complex than your cell phone.”
And it’s not really those little “supercomputers” that are running those “powerful algorithms”, I expect, it’s the huge AI installations in the cloud… which means, in combination with the “Cisco” reference, that this is probably more of a networking story than a chip design story. What makes distributed artificial intelligence feasible is dramatically faster networks that allow for “in the cloud” AI processing for real-time interactions, whether that’s self-driving cars or robotic supervision of convenience stores.
This mostly gets referred to as “5G” internet of things stuff, but we also sometimes see references to “fog computing” as all these little devices and sensors work together to become something bigger than the sum of their parts.
Some of the additional clues reinforce that “networking” aspect…
“… a full 40% of businesses surveyed said that they’re increasing their tiny supercomputer investments right now.
“And over the next four years, investments in tiny supercomputer technology is expected to grow by 392%. And that may turn out to be conservative.
“This could mean windfall profits in the right tech stocks — especially the $5 stock I recommend you buy today…. their hardware plays a vital role in making these solutions work.”
“Consider: every camera, sensor, and tiny supercomputer has to send data back and forth. Not only that, they all have to be linked up to the internet, to cloud-based applications, and data centers.
“As of 2018, we passed 10 billion connected devices. That’s more than one connected device per person.
“By 2030, it’s expected we’ll have over 125 billion total connected devices. That’s more than 14 devices connected to the internet, for every person on the planet, according to the latest research published in Forbes….
“No matter the industry … No matter the application … No matter the other tech used …
“No matter the AI algorithms that are being run on the tiny supercomputers …
“They all have to talk to each other.
“And that’s where we could grab profits of up to 18-times our money, if not a lot more.”
And then we get a few more specifics later on…
“‘the next Cisco …’
“That is, the next company that can help every one of these devices communicate back and forth.
“A company that specializes in helping all these devices talk to each other …
… Whether it’s the cameras in the ceiling and the sensors on the shelves of your local retailer …
… Or planes, trains, and automobiles that are moving all those goods around …
… Or even the parking spot tracking systems in smart cities …
As all these tiny supercomputers start to talk to each other, you’ll want to be invested in the company that makes that easy.”
Other clues about this specific stock?
“This company is not a household name — yet.
“And, in fact, I hesitate to even mention them in a presentation like this. Because it’s a smaller company. Their current market value is just north of $350 million, looking at a multi-trillion-dollar market.
“And at just $5, a little investor interest could send share prices up, quick.”
And a hint about their recent performance that we can check for confirmation:
“This stock went from under $2 to around $5 during 2018 and held on to those gains while the rest of the tech market stumbled.”
So who is it?
Believe it or not, I’m pretty sure this is a little stock that has also been aggressively touted by another entry-level newsletter — this is almost certainly Inseego (INSG), (formerly known as Novatel Wireless (MIFI)), which, if you’ll recall, was also touted by Ian King in his strangely-named “Fluorescent Sand” teaser pitch about six weeks ago.
How does the match fit? Well, part of the tease is that a “fortune 500” gas retailer is using its technology… and that’s a match with this (older) story.
And the basic concept of the “tiny supercomputers” sort of fits, if you allow for some hype-y stretching by the copywriters. They are going to mostly be known for selling “fixed wireless” 5G routers for Verizon’s initial rollout of wireless 5G broadband to consumers in their test cities, but this is how they describe themselves:
“Inseego Corp. is an industry pioneer in 5G and intelligent IoT device-to-cloud solutions that enables high performance mobile applications for large enterprise verticals, service providers and small-medium businesses around the globe. Our product portfolio consists of Enterprise SaaS solutions and IoT & Mobile solutions, which together form the backbone of compelling, intelligent, reliable and secure IoT services with deep business intelligence. Inseego powers mission critical applications with a “zero unscheduled downtime” mandate, such as asset tracking, fleet management, industrial IoT, SD WAN failover management and mobile broadband services. Our solutions are powered by our key innovations in purpose-built SaaS cloud platforms, IoT and mobile technologies including the newly emerging 5G technology.”
And though Markman says he can’t reveal such a tiny stock in public, it is, oddly enough, a stock he has also written about (glowingly) for free on TheStreet.com — though that was back in November. Here’s part of what he said in that article:
“Inseego Corp…. is a global internet of things company, in the middle of the 5G revolution.
“Among other products, it makes the 5G routers Verizon and others will use to bring broadband video on demand to U.S. households. The stars have aligned. After years of failed promise, the San Diego company is finally in the right place, at the right time.”
And what does your friendly neighborhood Gumshoe think? Well, it’s still a tiny company, with a long history of being not terribly impressive… I said at the time that I covered that Ian King piece back in May that I wasn’t all that likely to buy this one, but that it wasn’t a crazy speculation given the small size and the large end market.
But I decided, given the drumbeat about this as a hot speculation from two different newsletter publishers now, to put on a small longer-term option speculation… just in case they’re right, or, perhaps as importantly, in case these two teaser campaigns over the past few weeks are a sign of more attention to come to this little 5G story. So I now have a (tiny) speculative position in the INSG December $7.50 calls… and we’ll see how it goes.
That is not a particularly responsible bet, to be clear, Inseego is a reasonably valued stock if their expectations come through… but it’s not one that is clearly “poised” to double in six months, they’re not currently profitable (they expect to be at the end of this year) and they’re only expected to grow revenues by about 10% in 2019… so this is more of a bet that the expected surge to real profitability in 2020, and the revenue bump-up of 20% that analyst see next year (thanks to a broader 5G rollout), might light a little fire under the shares as investors start to think about 2020. Sometimes I use these little speculative options wagers to indulge my temptation to place shorter-term wagers… they often lose 100%, and my portfolio can certainly handle that, but when they do occasionally gain 500-1,000% it’s awfully fun. And, of course, I’ll let you know if my opinion changes.
Disclosures: Of the companies mentioned above, I currently own shares and/or call options on Amazon and Inseego. I will not trade in any covered stock for at least three days, per Stock Gumshoe’s trading rules.