What are Keith Fitz-Gerald’s “Cyber Military Complex” Picks?

Friday File look at three teaser stocks in cyber security from Fitz-Gerald's Strike Force

By xiexgp@gmail.com, August 10, 2012

Some pondering was going on as I figured out what to write to you about this week for our Friday File — there’ve been some developments at a handful of the companies that I follow or own, but most of the news has been fairly standard quarterly releases that didn’t shake the trees very much here on Gumshoe Mountain. But really, almost all of you are here to hear about teaser picks, and more folks have been asking about Keith Fitz-Gerald’s cyber security teaser than anything else this week, so we’ll focus on that for our Friday edutainment.

Fitz-Gerald is trying to get folks signed up for his Strike Force newsletter, another in a long string of investment newsletters that use military terms to make subscribers feel extra cool. He’s teasing the idea of cyber security as a huge new growth industry, which is certainly a reasonable theme, and then goes on (of course) to tell us that he’s got a few favorite picks that he thinks will do even better than the sector as a whole.

Here’s how he whets our appetite:

“It’s been overlooked, neglected, misunderstood, even spurned…

“Yet It’s the Only Thing Standing Between Civilization and Chaos…

“It’s projected to grow up to 408% faster than any other industry tracked by the Bureau of Economic Analysis.

“And now it’s about to bust out….”

And the basic argument for the sector is laid out in the first couple lines of the ad:

“If you could personally design the safest, most lucrative place imaginable to make money, what would it look like?

“For me, it’s a no-brainer. It would be an industry that is:

  • So vast that its products and services it provides are DEMANDED by every other business in the world…
  • Growing exponentially with no end in sight…
  • Instead of being made obsolete by new technologies… it would actually become more valuable and more in-demand with every new advance in technology…
  • It would be stimulated – rather than spooked – by political and economic chaos…
  • And it would have literal life-or-death importance to every person on the planet….
  • It would be an industry engorged by the free-spenders in Washington, with billions pouring in.”

He also takes credit for recommending a hugely successful mobile security stock to his subscribers several months ago — which is true, at least as far as I can tell, he did tease NetQin as a mobile security play late last year, before they changed their name to NQ Mobile (NQ), and it was very likely a successful pick for his subscribers (the stock went from about $5 to $12 or so, though it has since fallen back to about $7). Not sure if he’s still recommending NQ, at the time he said the “worst case” was $50 in “a couple years” but he thought it would be “one of the biggest hockey stick winners you’ll ever see” and get to $300 a share when their software is installed in the lion’s share of 50 billion mobile devices (yes, in that he’s including the massive number of interconnected devices — like vending machines and pay terminals, not just the actual phones).

He says the industry’s top plays are already beating the market, and that he thinks the gains will exceed the huge gains that early investors in cell phone companies enjoyed. So what stocks are being pitched now as cyber security plays? He teases three of them, let’s have a look at the clues.

“I’ve discovered a company that’s positioned itself as one of only a few that specializes in security for devices using the Android platform.

“Now, while Apple’s iPhone grabs all the headlines, here is the truth of the matter:

“Android is the world’s most widely used smart phone platform….

“87% of U.S. smart phone users surveyed say they have something on their phone they want to keep private.

“But only 4% of smart phones and tablet computers shipped in 2010 had any form of mobile security downloaded and installed.

“This company is the ONLY pure play in the mobile security market worth talking about.

“This is the new Strike Force play I’m so excited to tell you about. And we’re among the very few who know about this.

“Plus, the timing couldn’t possibly be better. The company is supercharging its position as THE leader in mobile security on many fronts…

  • Q1/2012 the company reported record net revenue: an increase of 109.6% year-over-year.
  • At $16.0 million per quarter, the company is on pace for $64 million of rev