by Travis Johnson, Stock Gumshoe | November 6, 2013 12:37 pm
If they’re not going to pass out a lot of clues, we might have to call this “guessing.”
But that’s OK — we’re pretty good guessers.
And enough folks have asked about this Unconventional Wealth[1] teaser pitch that I thought we should cover it … even if I might not be able to give you the usual definitive answer.
(That’s “definitive about what stock is being teased,” of course — not “definitive about whether or not it’s a good stock for you to buy” … we’re talking about your friendly neighborhood Ggumshoe doing just a wee bit of research to give you the lowdown on a company most of the time … and occasionally, if I get a sense of it at all, a quick personal opinion. The “whether it’s right for me” part is always your call, as it should be.)
Sometimes I forget that not all of our fabulous readers have been reading my commentary every day for ten years, I should probably repeat myself more often by saying something like: Don’t buy individual stocks unless you like researching them! Most people, probably myself included, would do better most of the time by spending their time thinking about how to save more money and put it in low-cost indexed investments … but if you think that’s boring, as I do, and want to try to do better by researching and sniffing out individual stocks or sectors or speculations to spice up your portfolio, well, bring it on!
But that’s enough time wasted in blather … shall we see if this latest teased pick is worthwhile?
We’ll put the cart before the horse a bit and share this little excerpt before we talk about what this “secret” stock does:
“Double or Triple Your Money on This Contrarian Play
“At $3.50 per share, our California company has plenty of room to grow. I fully expect the share price to continue climbing the next few years.
“A target price range of $7-10 per share by 2017 (or earlier) is not unreasonble to expect, given that some of the company’s competitors already trade for as much as $1,350 per share.
“So you can see this is a lucrative market to be in, and there is HUGE opportunity to grow.
“I’d like to tell you more about this obscure California company and how you can position yourself to profit from its rapid growth.
“That’s why I’ve written a brand-new report called Healthy Profits From Junk Food: How an Obscure California ‘Junk Food’ Company Could End Obesity by 2017.”
Sounds pretty impressive, right? Even if the comparison of share prices is stupid.
(One more soapbox moment: price per share is a meaningless number out of context — I’m sure this company does have competitors who trade for $1,350 per share, but unless you know the scope and valuation of the business and the number of shares outstanding just the share price alone tells you nothing … the value of a company is the market capitalization (total number of shares times share price) or enterprise value (market capitalization plus or minus net debt/cash, roughly what it would cost to buy out all the shareholders and debtholders), not just the price per share number you see flitting by next to the ticker symbol.)
So what does this “obscure California company” do?
“This company’s revolutionary innovations could quickly turn it into a $100 million food technology giant….
“It’s Making Junk Food Healthier!
“Without compromising the flavors and textures that people love.
“And the best part is many consumers don’t know that our California company is doing this!
“So in products made with these innovations, people are eating less sugar[2], less salt and even less MSG… automatically… without even trying.
“Of course, big food manufacturers have taken notice. They’re actively working with our California company to make their junk foods ‘less bad’ while maintaining their great taste.
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“The company already has solid relationships with major food manufacturers such as:
- Nestle – The Swiss company that makes Nesquik, Kit Kat, Nescafé, DiGiorno, Lean Cuisine, Dreyer’s ice cream, PowerBar, Jenny Craig and dozens of other nationally recognized food brands
- Ajinomoto – A large Japanese food company that specializes in seasonings, sauces, cooking oils, drinks and other food products
- Firmenich – The largest privately owned perfume and flavor business in the world.
“What’s more, the company is actively developing new business relationships through a newly implemented direct sales strategy.”
Huh … OK, I take it back, we don’t have to guess on this one. There were a few more clues hidden in that hype-fest that I didn’t notice on first reading … Thinkolator sez this is almost certainly Senomyx (SNMX)
Senomyx is sort of like a “flavor additive biotech” stock — they’ve been around forever, it seems, trying to develop and market additives that change the way your body interprets flavors. They do have relationships with many of the big food and beverage companies, and they have also inspired some controversy over the years (some folks don’t like them, either because their chemical additives are so minute that they aren’t individually listed on food labels, or because their research used human embryonic kidney cells, the long-known HEK-293 line … one example of an opponent is here if you’re curious[3] … I have no idea whether the criticism is morally or scientifically valid, but in quickly researching the company they seem, from my unscientific scan, to have almost as many critics as Monsanto)/
And they are trying to build both a royalty business and a direct sales business — they earn royalties as the products with their flavor enhancers are sold, and they also did recently start direct sales of some of their more developed products, presumably to encourage more folks, including small companies, to try them out and experiment without having to set up joint venture deals or research projects with Senomyx.
Their current flavor programs are in the categories of sweet, savory, bitter, and cooling — the sweet stuff is supposed to allow makers to cut sugar without losing flavor, the savory allows new savory enhancement without or in place of MSG, the bitter-blocker is used to cut the bitterness of stuff like caffeine[4] and cocoa, which would reduce sugar or fat requirements in some recipes, and I’m not sure what the “cooling agent” does.
And they don’t really create consumer products — they just create flavor compounds and provide them to partners who figure out how that compound can be used in a recipe either to create new appealing tastes, or to maintain a taste profile while reducing unwanted ingredients like sugar or MSG. Some of their products are currently in production around the world, but not nearly in high enough volume to produce a profitable operation — SNMX has never been profitable on an operating basis in ten years as a public company, and it seems likely that it would take some high-volume products and significantly broader acceptance to get them to profitability.
There are three analysts following the company, which is a little surprising for such a small stock (market cap is around $150 million), and they see the firm growing by 70% next year, which would be a nice leap — but still, according to those analysts, not quite enough to get them to profitability.
And … that’s about all I know about Senomyx. It’s fascinating science[5] for an “almost failed chemistry” guy like me, and I like the business model of getting your flavors into mass market products and collecting an ongoing royalty (until the patent dies) and their high-throughput R&D that should, one presumes, help them come up with more flavor additives, even if I’m not particularly thrilled about food with all these new additives being thrown in. I kind of want to know that sweet things are treats because they’re not good for you in huge quantities, and I like my coffee[6] to be bitter — after all these years of massive increases in prepackaged foods it’s hard to believe that tweaking the additive profiles of those foods is going to solve our obesity[7] epidemic, but I suppose it’s possible that this kind of thing might help.
Oh, and I also don’t know if there’s anyone else doing this same basic kind of ingredient science — I would assume there is, because there are massive chemical companies all around the world who are also trying to come up with new ingredients that let you have your cake, eat it too, and also look like a supermodel. Whether Senomyx is on to something better than giants like ConAgra (CAG) or International Flavors and Fragrances (IFF)[8] or AkzoNobel or Givaudan or probably dozens of others who don’t immediately come to mind, well, I dunno.
So what do you think? Will Senomyx (SNMX) cure obesity and “become a $100 million company” as teased by Ryan Coles? Think it will double to the $7-10 range as he expects over the next two or three years? Want a piece of it, or want nothing to do with it? Let us know with a comment below.
P.S. $100 million in revenue might be enough to make them profitable, but again the tease that they’ll become a “$100 million giant” is, well, silly. They’re at roughly $30 million in sales now though they are, of course, already a “$100 million company” in market capitalization … in the global food business, $100 million wouldn’t likely make you a “giant” even if you’re talking about $100 million in profit. The $6 billion “mid cap” flavorings company IFF has profits of about $250 million a year.
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Sexy story. It’s like a starlet whose been around so long that her anatomy is sagging. If this were going to be a success it would have already been there. It’s a speculation that gets still more speculative with age. It’s possible, anything is possible, but it is common for traders (especially shorts) to manipulate the price of small unprofitable companies with sexy stories.
There is too much serious stuff to read, so I eliminate any e-mails with ‘double’, ‘triple’, ‘secret’, ‘limited subscribers’, etc. in the dialogue, which puts Agora on the “endangered survival” list. I still however read all of your stuff Travis, and thank you for it.
By the way I’m nowup $2,000 on YPF a rec from Dr. Moors you recently covered
Natcore and Stellar Biotech remain my ethical (help humanity) microcaps. This company could do a lot more harm than good with its FrankenFood additives. This should have been the Halloween story–scary stuff! : )
No kidding, DB. The first thought that came to mind when I saw the title was “don’t eat that shat in the first place” which is how I live. Paleo diet and Intermittent Fasting to cause beneficial hormone cascades and high intensity weight lifting ( to failure).
Right on, brah — preach it! I’ve been doing the paleo thing, too. In fact, I flint-knap my own stone knives to cut my raw meat and thereby maximize mineral transfer. Then I slap myself in the nards before I work-out for the adrenaline pump, followed by hanging and banging the most extreme exercises: 10 reps of Red-Rover Bend-Overs; 10 reps of Sailors Ahoy; 15 Tug-and-Groans; and, finally, a half-dozen Reach-Arounds. The thing is, I don’t do my sets to failure, I do them to SUCCESS!
All in all I feel this makes me a much more savvy investor. I mean, does Travis even lift???
Ha! Some days I can barely lift my head 🙂
Very funny there pencil neck.
Laughed so loud at WTs post I scared the lady next to me, absolutely brilliant…. Half dozen reach arounds….. Laughing while I type this….
Paleo diet is great, but you may want to read up on Rhabdomyolysis and other dangers of repeatedly exercising to failure.
Not to worry, Don. My routine is based on Dr. Doug McGuff’s book “Body by Science” and the principles of my personal physician, Dr. Mok, creator of ” 20 Second Fitness”. I do three 20 min. max routines per week and work major muscle groups once per week to allow for recovery/healing. Have been doing it for almost 2 yrs. now and my health increasingly improves per check ups/ bloodwork every 3 mos. Thanks for the concern, though. Check out Dr. McGuff on Youtube for a revelation of how “inroading” your muscles can improve every aspect of your health.
THERE IS SOME SUBSTANCE TO SNMX. ONE OF MY SERVICES REPORTS THAT INSTITUTIONAL HOLDING OF THEIR STOCK IS 59.22% AND RATES THE STOCK AN 80% BUY ON TECHNICAL REASONS. ANOTHER SERVICE REPORTS THAT ITS ANNUAL SALES ARE 31M AND RATES IT A HOLD WITH A STOP LOSS PRICE OF 3.49. CURRENT PRICE IS 3.91
I like the idea of tweaking taste buds. Chemical shmemical. EVERYTHING is chemicals. Get over it. And ultra-tiny doses are very likely harmless and excreted/metabolized in a matter of minutes if they even get absorbed. But I’d guess that this technology is not going to fix obesity any more than low-fat cookies did: once they were labeled “low fat”, instead of eating 2 cookies, the weight-gainers figured, “Hey, I’ll eat the whole bag ‘cuz gosh it’s low-fat!” Oh well. But if Senomyx can really mimic a salty taste, that might be very useful for those who need to curb their sodium intake. There are way too many high-sodium foods on the market and in restaurants, and most people simply will not tolerate low-sodium versions.
Mercola’s (from the link) opinion on ANYthing to do with food/nutrition—worthy of ignoring, IMO. Concern about the HEK293 cell-line used for the research and tying the products to abortion of a “healthy, electively aborted baby” (as if the baby were sacrificed for developing flavor enhancers, for god’s sake) is worthy of only one thing: upward-rolling eyes.
I wonder how this might compare with Olestra/Olean as a food additive (or substitute) for investment purposes. Skimming “A Brief History of Olestra” at http://www.cspinet.org/olestra/history.html, one concern I might have is Senomyx’s lobbying power (versus, say, that of Olestra’s owner, Procter and Gmable) when it comes to special treatment by the FDA and the patent office.
Read somewhere that olestra was even worse than transformed “Trans” fat. Can’t believe the FDA is actually talking about banning hydrogenated oils in food instead of serving their Corpo Bosses who make that poison and feed it to people. Banning transfats and replacing it with olestra would likely be one step forward and two steps back. Problem with olestra is that is a nonabsorbed “fat” that removes fat soluble nutrients from the body.
In a recent four-week study conducted in Holland, 3 gm/day (equivalent to just 6 potato chips) of sucrose polyester (the general name for olestra-like chemicals) caused a 20% decline in beta-carotene levels and a 38% decrease in lycopene, another key carotenoid (Am. J. Clin. Nutr. 62:591 (1995)).
That was a very old paper. The solution (more or less) to the fat-soluble-nutrient drain was to fortify the Olestra-containing foods with those nutrients to offset the losses. The same thing would happen if fat itself were not digested/absorbed–these fatty/lipid substances all mutually dissolve each other and when the major component isn’t absorbed, all the other stuff dissolved in it gets carried out with it to be flushed down the toilet. Olestra does also inhibit cholesterol absorption somewhat (good for lowering LDL, in theory) and probably also drains some additional bile out (also a potential LDL-lowering effect). It’s actually still on the market in Pringles “processed” (formed from potato powder, I think) potato chips. I bought a can a year or two ago. Ho-hum chips.
I’ve followed SNMX for years. I think 2015 will be transformative for them. Unfortunately 2014 will be bumpy. On the upside, very little dilution over the years with large companies picking up the R&D tab. I think snmx has now refined discovery to regulatory and is ready to go it alone for some things and make side deals for others.
Currently revenues are small potatoes.