Energy Harvesting, Thermal Fracking, and the “15 Stocks that Double Each Day”

Looking at WSD Insider's "Harvester X" and a few others for the Friday File

By Travis Johnson, Stock Gumshoe, August 15, 2014

First, I should tell you that this is bad for you. This searching for stocks that double in a day. Seeking such instant gratification in investing is like drinking three beers for breakfast every day because you’re thinking you might run into a friendly Brazilian model on the subway and you want to be “loose” enough to talk to her (or him). It doesn’t usually end well, and if you do it every day you might find yourself living in a cardboard box.

But it’s also part of the fun of the market, of course — and if you’re not going to have any fun, well, you might as well just do the sensible thing, put some money in broad index funds every month, and wait for compounding to build you a retirement nest egg. Some of us like to sniff out a little excitement in our investing from time to time, even though we know better than to let it take over a very large part of our portfolios.

So with that said, let’s look at the teaser from Robert Williams and see if we can identify the three stocks he hints at (one looks like just an example, the others may be actual recommendations of his letter, but we don’t like to leave stones unturned so we’ll search for ’em all).

Williams is the publisher for Wall Street Daily, and he’s selling his WSD Insider — so let that be another warning signal for you, they’re hinting at and teasing teensy, tiny stocks here but the newsletter only costs $49.50 per year. At that price, and with their marketing, they likely have many tens of thousands of subscribers (perhaps hundreds of thousands), so there’s no way on earth they can actually recommend the tiniest penny stocks that are most likely to have those “daily doubles”. Unless, of course, they want to cause the double.

The big picture tease is that there are 15 stocks that double every day, on average, and YOU’RE MISSING OUT! The copywriters know quite well that many of us are much more afraid of missing out on the next bit thing than we are of losing money. Here’s how they put it:

“As the sharks on Wall Street like to say, ‘When it’s raining gold, reach for a bucket, not a thimble.’

“Well, grab your bucket because it’s pouring.

“New technologies are coming on-line virtually every week….

“The raw numbers are staggering…

“While this sub-niche only accounts for less than 7% of the entire stock market, it’s yielding an average of 15 different stock doubles every single day, based on eye-popping performance data over the past year.

“For comparison’s sake, not a single stock on the S&P 500 has doubled all year.

“Yet most investors aren’t privy to these technologies as they’re coming to market.”

And that “sub-niche” of stocks where there are 15 stocks doubling every day (on average) is, of course, just “tiny tech stocks.” Here’s how they pitch that:

“Energy harvesting stocks [more on those in a minute] belong to a sub-niche of the market witnessing 15 different stock doubles every day. This sub-niche is comprised of the world’s tiniest technology, industrial and energy companies… from the microcaps innovating the technologies… to the microcaps manufacturing the technologies… to the microcaps using the technologies to harvest power.”

So that’s the idea — no mention of the fact that, as you are probably already guessing, most new breakthrough technology stocks fail or wither if they don’t have real business breakthroughs or financing or customers or if they don’t catch the attention of investors… and, of course, most of them don’t make any money or have any identifiable path to near-term profitability.

But we do love a good story, don’t we? So what are the three stocks hinted at in the ad?

We’ll get to the tiniest one first, the one that seems to be just an example and not a recommendation — it’s the one that carried many of the headlines of the emails transmitting this ad, about the “gun” that blasts apart rock to make mining more efficient.

“As miners struggle with the mounting costs to extract these hard-to-reach resources, many junior miners have been forced to shutter their doors.

“But one tiny company just introduced its answer to the market.

“It’s a new method of mining called ‘thermal fracking’ ….

“Conventional drill-and-blast mining techniques surrender 40% of the resource to the process.

“Thermal fracking finally changes the rules.

“Instead of using explosives, it relies on extreme heat to shatter resource-rich rock formations….

“‘This technology has the potential to have the same impact on the mining sector as shale gas fracking has had on the oil and gas sector,’ says one prominent mining insider whose company is at the forefront of this invention, adding that ‘we will be the Apple of the mining industry.'”

“The company behind the technology only trades for $0.08 on the Toronto Exchange, and it just signed an exclusive distribution agreement with a large South Africa mining operation. (South Africa is home to the largest platinum mines in the world.)

“You can find this stock in the sub-niche of the market experiencing 15 stock doubles, on average, every day.”

This one is Nippon Dragon Resources (NIP on the Venture Exchange in Canada, RCCMF on the pink sheets), which used to be called Rocmec Mining. I’m sure it’s not a recommendation of Robert Williams, it’s just an example of one technology company that’s trying to do something different — it is absurdly tiny, and if three of you decided to go buy it the stock would double. To give you an idea of the company size, they just did a private placement for $50,000. No, that’s not a typo and there are no missing zeros — fifty thousand bucks. They have a market cap of less than five million dollars. Companies this small have no business being public, and they do not behave like stocks that most investors are used to — most days, only about $1,000 worth of shares change hands.

So please don’t buy it, at least not just because I mentioned it or Williams hinted about it, but if you’re interested in this technology they’re trying to implement for high-grade seams of precious metals you can check out their investor presentation here, or there was an article about them on MiningWeb a few months ago.

And then we get to the two “real” stocks that might actually be recommendations of WSD Insider — stocks that are big enough to be reasonably recommended by a newsletter. These are both “Energy Harvesting” stocks — companies involved in the business of turning chemical or environmental sources or reactions into electricity. On a large scale, that means windmills and hydroelectric dams and solar panels on the roof, but the stuff Williams gets us excited about is much smaller and more distributed.

Here’s more from Williams…

“The energy harvesting industry represents a virgin opportunity in every conceivable way.

“Its revenue pool is expected to grow to over $4.2 billion in a few short years. Armed with my research, you’ll be among the very first tapping it.

“I wouldn’t waste a single minute, though…

“The sub–niche of the market in which energy harvesters reside is averaging 15 stock doubles every day.

“Thus, tens of thousands of dollars potentially hinge on your decision to accept risk–free access to my research.”

And then… some hints. The ad actually opens with a story about osmotic power, the harvesting of electricity from the reaction that happens when fresh water hits salt water. Here’s what they say:

“One company’s ingenious ‘super device’ is turning this ‘water collision’ into a commercially viable source of power.

“How’s it work? It’s quite simple, really.

“Salt molecules in the seawater pull the freshwater through a membrane.

“The resulting clash of high-salinity water versus low-salinity water creates hydraulic pressure, which can be used to drive a turbine that produces electrical energy.

“It’s called ‘osmotic power’ ….

“… you won’t likely see an osmotic power plant in your neighborhood any time soon.

“However, the technology is market-ready, and it’s sparking a lot of interest from Wall Street. Especially in the company whose modern marvel super-device is so critical to the process.

“Sales of this device topped $2.3 million in the last quarter alone.

“T. Rowe Price owns $18 million in shares.

“Invesco owns $11.2 million.

“Blackrock owns $7.1 million.

“This is the exact type of technology helping to fuel a dynamic sub-niche of the market. A sub-niche minting millionaires at a phenomenal rate.”

So which is the company whose “modern marvel super-device” is critical to osmotic power? This is an old friend, Energy Recovery (ERII), a company that’s been teased a few times over the years as a play on the need for more desalination plants. Energy Recovery makes a device that allows it to recapture energy from fluid flows — so in practice, that means when they’re used in a desalination plant that has to pump millions of gallons of seawater through membranes the devices can reduce energy demand for those pumps.

And unfortunately for them, they’ve never been able to build a growing business in selling their pressure exchange devices — they continue to try to sell them both into desalination plants and into the oil and gas industry, and presumably they would be useful contributors to osmotic energy generators as well if those come online (there’s only one of those right now that I know of, it’s a small-scale prototype in Norway, no idea whether they use any ERII parts or not), but they were actively teased back when they were newly public in 2008/2009 and… it turns out that 2008 was their highest revenue year ever. Sales have been on a relatively slow but persistent decline for the last five years, and in that time they’ve not come close to making a profit. Will that change now? Well, I’m skeptical — but I haven’t followed the company very closely since 2009, so you might check the Barron’s analyst note that “piled on” after ERII had another weak sales quarter a couple months ago and saw its CFO resign… it’s called “Energy Recovery May Not Make It.

That’s not clearly a recommendation of WSD Insider, but it might be — the hint about it, and this is definitely the stock they hint about (those institutional ownership numbers are exactly right), but they don’t actually come out and say that they’re recommending the stock.

This next one, they do call a “buy” — it’s another “energy harvester” stock and they call it “Harvester X” …

“Harvester X: How to Earn 2,000%, Starting With an Overnight Price Double

“The stock just IPO’d a few weeks ago, and resides in the very same sub-niche of the market already experiencing roughly 15 different price doubles every day.

“I believe Harvester X could be the very next stock to double.

“Over a longer-term investment horizon, if formal announcement of a deal with Apple hits, as I expect it will, shares could blast as much as 2,000% higher.”

A deal with Apple? More, please!

“As compelling as those technologies are, however, what’s likely happening in the middle of the Arizona desert could soon stand the energy harvesting industry – and the entire world, for that matter – on its ear.

“In fact, the insider chatter is so loud it’s deafening.

“Apple’s secret manufacturing plant…

“Last year, Apple quietly procured a massive state-of-the-art manufacturing plant in Mesa, Arizona to work on what the CEO is calling a ‘secret project.'”

Jeez Louise, so now we’ve got not just the hot new technology that creates electricity from water, or the crazy heat gun that zaps gold out of a mine, but we’ve also got a “secret project” from Apple? It’s almost too much to squeeze into one teaser… but, frankly, you’ve got to throw a lot of these kinds of stocks against the wall before you find one that sticks.

So who is “Harvester X?” A few more clues:

“According to a leading U.K. newspaper…

    ‘Filings with the U.S. patent office reveal that [Harvester X] bought a host of patents to do with the practical application of fuel cells from battery firm Eveready in December last year.

    ‘[Harvester X] acknowledges that it did so in partnership with an electronics giant, now confirmed as Apple.’

“The patents would dramatically aid in extending the battery-life of iWatches, iPhones, and iPads.

Business Insider said…

    ‘All [Harvester X] has to do now is shrink that cartridge to fit inside a smartphone.’

….

“Since Harvester X is so tiny, the IPO went virtually unnoticed, easily making it the market’s hottest stock to own for the remainder of the year (and beyond).”

This, friends, is Intelligent Energy (IEH in London, ITNRF OTC in the US, where it doesn’t trade every day and is a “grey market” stock), the hydrogen fuel cell company which went public on the London Stock Exchange back in June — and promptly fell by about 25%. It’s of a decent size, market cap around $650 million (GBP 400 million), and just raised a lot of cash, but it is, of course, not profitable.

The “secret” partnership with Apple was pretty widely publicized last month, as is any rumor about Apple, and the gist of it is that they’re working together to integrate fuel cells into Apple products. That Business Insider article they quote is here, but the story really broke in the Daily Mail after some details came out in conjunction with Intelligent Energy’s IPO. It hasn’t gotten a lot of attention other than that “Apple rumor” flurry, and Apple products are probably at least a couple years from incorporating any kind of fuel cell, but the Fool’s UK folks did post a note on the worrying valuation a few weeks ago.

They also recruited a CEO from Apple (Joe O’Sullivan) a few years ago, which may be another sign of their focus on pushing design and usability and, probably, “cool” in their products. They’re a long way from being profitable, like most fuel cell companies, but that tantalizing Apple connection does stick out. For the most part, despite the fact that they do have this partial focus on small fuel cell devices (they’re developing a portable one called UPP for recharging cell phones, which is almost for sale here), their customers are mostly in telecom, industrial and transportation businesses, like other fuel cell companies. If you’re in search of a cautionary tale, just check out the wild rides of mega-momentum fuel cell stocks like Ballard Power (BLDP) or Fuel Cell Energy (FCEL) or Plug Power (PLUG — though PLUG did just post a profit and freak everyone out yesterday, helping out all the stocks in the sector).

Intelligent Energy’s last really thorough presentation of their business and strategy came in their review of last year (year end September 2013), so that’s not entirely up to date but does give a good picture of what the company is doing — their biggest partner so far has been Suzuki, and automotive and consumer electronics are their best headline-generating businesses, though they have other substantial businesses — including Indian telecom, where they’re trying to build a business supplying distributed generation (cell towers have to have constant power supply, but often they’re far from the grid or can’t rely on an unstable grid — hydrogen fuel cells or other distributed power sources, including big batteries and generators, are often used for energy or backup energy at such sites).

As for the Arizona factory hinted at, Apple did a big expansion in Mesa, Arizona this year — but that was to produce sapphire with GT Advanced Technologies, rumored to be either for iphone screens or for the new iWatch or something similar, I can’t imagine it has anything to do with fuel cells or their patent-owning (and possibly more involved) partnership with Intelligent Energy. Intelligent Energy has a US office in the same office park where Invensense (INVN) is headquartered, near from the San Jose Airport, so they are close to Apple HQ but there’s not any evidence I’m aware of that their partnership, whatever it is, has come close to reaching the “manufacturing” stage yet.

So what to think? Well, like the other Fuel Cell companies (PLUG, FCEL, BLDP), it’s hard to look at them with a straight face when they’ve been unprofitable for so long… and, indeed, when we have seen little to nothing in the way of “real” financials for 2014. But that Apple deal does tantalize, and if Apple figures out how to integrate fuel cells in a reasonably economic way that would be a possible leap forward in electronic devices, batteries are a huge limiter for almost all things gadget-y these days.

The Apple sapphire deal with GT Advanced Technologies (GTAT) that was announced last November has been good for GTAT (the stock has just about doubled since then), but that was a substantial $500+ million supply deal for shared manufacturing space and real production of sapphire, and has prospects for growing in scope. Intelligent Energy is not at that point with anyone yet, but that doesn’t mean it couldn’t happen over the coming years. I suspect we may be in a race between fuel cells and other new battery chemistries and designs to see what wins out, and that Apple is probably exploring any reasonably prospective portable power storage options for the future, but we’ll see.

Me, I can’t get too excited about a stock just because it has a murky patent purchase deal and possible collaboration with Apple for a product that I suspect is probably quite a bit further into the future than rumor excitement would lead us to believe. I’d want to see some more revenue, frankly, and I am not all that thrilled about the level of disclosure in UK stocks that don’t report any interim numbers — presumably we’ll see some real numbers from Intelligent Energy before the fiscal 2014 results come out in several months, but it’s hard to guess at what their trajectory might be when they remain overwhelmingly focused on R&D. I’ll keep an eye on this one, but I think anticipation of a 2,000% gain is very premature — and, frankly, a “one day double” would probably require a strong, definitive Apple production deal (or buyout) or a large scale manufacturing deal with a carmaker, both of which seem, from my quick glance at the company and their sector today, to be fairly distant possibilities.

If we’re talking Apple connections, I still like Apple shares (my largest individual stock holding) even though I’d be hesitant to buy in the runup to their next wave of product announcements in the coming weeks. And I’d still be much more comfortable with our oldtime favorite Invensense (INVN) for their motion-sensing chips that are in smartphones and other mobile devices — even with the stock near a 52-week high and with a very high (35%) short interest… their business is much more established and tied into mobile growth than Intelligent Energy. And I don’t know that I’d go so far as to say I’d buy the absurdly valued Tesla (TSLA) before I bought a fuel cell company, but it’s close (I’d rather buy the car than the stock at this point, though Elon Musk is very colorful in his criticism of the fuel cell movement).

Of course, INVN is not an “energy harvester” and it’s probably too big to double in a day… but I’m not sure these “energy harvesting” ideas are ready for prime time yet when it comes to investors who like revenues, products with substantial market share, large markets, and foreseeable profits. I’d love to see some of the fuel cell companies take a leap forward, and I’ll be delighted if I can buy a Mac that has a four-day battery life in a few years, but I’m not expert enough (after investors have been burned by these stocks time and again) to guess at whether this time their optimism is going to be reflected in imminent reality.

That’s about all I’ve got for you today — we’ve had quite a few questions about stocks I own or have written about in the past, so I’ll try to take a look at a few of those for next week as I prepare our next “Idea of the Month” piece for you (feel free to let us know if there are some “Gumshoe Universe” stocks you’d particularly like to hear an updated opinion on). Have a wonderful weekend!

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9 Comments on "Energy Harvesting, Thermal Fracking, and the “15 Stocks that Double Each Day”"

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wrightpj
Member
10

Travis – I’m a conservative investor looking for ‘safe’, ‘hold for the long-term’ stocks. That’s why I am particularly interested in the Irregular Core stocks. All of the nine certainly meet these requirements. The Core list has comprised 9 stocks for a few years’ now, with SAND being replaced with NOV in the last 12 months. Do you see the Core list expanding to an ‘even’ 10 with the addition of a worthy candidate – perhaps from the ‘Speculative’ List? Thanks for the great work – we always look forward to your reports/writings.

convenient_myths
Irregular
9
Travis – In terms of ERII, it looks to me as if both Williams and you mis-understand the difference between REVERSE osmosis (RO) for water desalination and osmosis for power generation. RO requires energy (pressure) to push the water molecules from the salt water through a membrane (such as those produced by ERII) but leaving the salt ions behind. This process is in wide use, on land (e.g. Saudi Arabia) and on ships (navy). The osmosis power plant in Norway does exactly the opposite, it creates energy from the osmotic (pressure) differential between freshwater and salt water. While the same… Read more »
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DBMD
Irregular
1096

Thanks for the article. I saw the tease and didn’t really look into it due to WSD past record on these small cap type stocks. I’ve been suckered before by these guys. I will say they do also have winners, but not in as great of number. I prefer your analysis and thoughts.

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Alan Harris
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Hi Travis….Im just getting a blank screen from Personal Capital ??

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