by Travis Johnson, Stock Gumshoe | October 27, 2008 10:29 am
Your friendly neighborhood Stock Gumshoe tends to focus on US-based investment newsletters and the hype they generate, but that’s not because this phenomenon is restricted to our fair shores. Newsletters and advisories proliferate around the world, even if the center of newsletter land continues to be the area within 100 miles or so of my home here in Washington, DC, where most of the larger publishers are located.
And sometimes, the newsletters from across the various ponds come up with something worthy of attention, too — the ones I’ve looked at most are Dan Denning’s publications from Down Under, partly because he is the indirect offspring of US investment newsletters and uses similar marketing, and the Fleet Street Letter from the UK, which is just as aggressive and colorful as our lovely advisory services on this side of the Atlantic.
Today, it’s Fleet Street that catches our attention again, though it’s not their flagship publication but Tom Bulford’s Red-Hot Penny Shares that graces the inbox on this chilly and gray Monday morning.
The stocks I’ve looked at from their stable in the past include Begbies Traynor, which has actually been a pretty decent pick for the last six months or so (this “corporate gravedigger” went up nicely in the few months after they teased it in April, but has fallen back down recently — and fallen further still if you’re looking at it in dollars, thanks to the Pound’s long-predicted fall). Bulford in particular has also gotten some Gumshoe coverage before, including two energy-related names, one for a Falklands oil driller and another for a “torpedo techique” natural gas service provider. Corac, the “torpedo technique” firm, has actually done quite well this year, though with oil cratering the Falkland Oil & Gas pick has clearly had its troubles.
But still, we’ve seen some decent picks from this crowd in a year when there have been precious few of those, so why not give them another look?
Today’s stock being teased by the Bulford for the Red-Hot Penny Shares is another energy-related name, and like Corac it’s a company with a technology that might help the oil & gas industry to boost their reserves. Even with oil falling to near $60, all the big multinationals need more reserves, and they’re harder to get with national oil companies increasingly dominating the market … so what are we looking for here?
It’s a company that apparently has a patent on a NASA-related technology that improves seismic data by cutting out the noise — and someone is actually drilling using this data, right now.
Here’s how Bulford puts it:
“One small firm is revolutionizing oil exploration…
“This NASA-developed technology offers a proven and accurate method of locating all that trapped wealth…
“A way to pinpoint the estimated 1.3 trillion barrels of untapped global oil is now a reality.
“It works like this…
“This company’s sensational software has cracked one of the great barriers to scientific progress – background noise.
“When applied to oil and gas, this company’s amazing breakthrough enables explorers to interpret seismic signals with unprecedented accuracy… signals that have until now been undetectable because of background noise.
“And to make it even better, this groundbreaking technology can be applied to existing seismic data… so oil companies can “plug it in” right away.
“The technical term is ‘Quantum Resonance Interferometry’ (QRI) and it is changing the face of discovering ‘oil traps.’
“It’s a process that’s utterly unique… totally, radically, profitably different to anything ever done in this field before. ”
This is a tech company, though — so it has a particular technology that can be applied to oil exploration, and they’re apparently testing it now, but it also does some other fun stuff.
In that fun stuff are some of our clues — here’s a bit of an excerpt:
- Excitingly, this company has signed a deal with security giant CISCO for its new surveillance and alert service.
- It has also signed a contract with Los Angeles County… for a biological terrorism warning system.
- It has been selected by the U.S. Department of Defense to provide a command and control platform that integrates data to protect over 600 military bases.
- This new software can be applied to make a major impact on medicine – enhancing the performance of drug discovery and development instruments.
- NASA is interested in using the technology for asteroid detection systems for spacecraft.
Well, that’s a full plate, no? So who is this little company with the “Quantum Resonance Interferometry” that will help discover new oil fields?
As you might expect, it’s a British firm …
Vialogy (VIY in London, VILGF on the pink sheets in the U.S.)
Be careful, the pink sheet ticker here is really on the “grey market” and almost never trades, so the pink sheets price is often (including today) going to be way off. The shares had a big spike up in London this morning on huge volume, thanks in part, no doubt, to the newsletter pumping, and now trade at about 3.80 pence — so a fair price for a pink sheet order, should you decide you must own this one, would be about 6 cents a share (a hair under at the moment). You’re unlikely to get a fair pink sheet order filled on this one unless London is open, would be my guess, and it also seems likely that today’s 25%+ spike won’t last forever, so if this is anything like past penny stock touts there’s plenty of time for patience.
Is it like penny stock promises of time past that crashed and burned? Or does this one have real promise? I know very little about the company, so I can’t be particularly definitive, but let me give you a bit of a head start on your research:
They’ve been losing buckets of money for years. And the operating profits have been sinking even further down the negative scale of late, even as the share count has climbed with new fund raising. Buying this stock is a bet on future growth based on adoption of their technologies, you’re not going to see any promising current earnings or cash flow for quite a while even in an optimistic scenario.
As befits a “red hot penny share”, the company is tiny. Really tiny — right around $25 million in market cap.
They are really testing their seismic data technology — the software (or whatever it is) is called Quantum RD, and it’s being used by a company called Atascoa that just last week started drilling the first of several planned wells in Texas. They’re expected to reach the planned depth of 6,000 feet probably this week sometime, so perhaps they’ll announce something fairly soon. That near term optimism is probably a big part of what’s helping the newsletter drive shares higher today, there really will be important results from those drilling sites by the end of the month, according to the company, and one would have to assume that they’ll announce those results in short order.
And the other teased work that they’re doing is relatively fairly described in the ad — they seem to be a subcontractor in most of this work, since their little specialty is extremely focused, but they are working on all of those projects to one degree or another. Vialogy essentially works to develop interoperability for big sensor networks, and to help crunch the data from those networks and make it accessible for public safety officials and others, which seems like a good niche — if you consider the wide array of sensors from video cameras to radar to chemical sniffers to radiation detection, it would make sense that someone with products that can integrate and make useful all that data would be in demand.
The critical question for investors is whether there are lots of other companies developing the same kind of stuff — and I certainly have no idea, though the guess would be “of course.” I don’t know if they’re going to become profitable on that back of this sensor system work, but it does seem like investors are treating the oil drilling that’s going on as a critical point in proving their technology’s application to the potentially very large seismic data business.
You can get plenty of details from the company’s website if you like — it is, unsurprisingly, www.vialogy.com. The update on their larger projects, prior to the announcement that they actual began drilling in Texas, is in a press release here from last month.
So what do you think? Want to dig in deep enough to actually understand all the stuff this company does, or do you want to take a flier on the possibility that their seismic data technology will be a genuine breakthrough that’s proven in the coming weeks? Or is this all too much hot air?
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