This year is no different… more than 20,000 new products were poised to be announced at the conference’s start.

And our in-house technology experts, Patrick Cox and Ray Blanco, are covering the 15 miles of exhibits for us…

CES has been dubbed as the “Disneyworld” of gadgets. Over the years, the conference has seen the premier of many state-of-the-art products including: CD player in 1981, DVD player in 1996 and the HD TV in 1998.

Many are on the hunt for the coolest and best new “toy,” but Patrick and Ray are on another mission.

“Ray Blanco and I came here for several reasons,” Patrick said. “One was to talk to some of the engineers behind the esoteric companies that nobody outside tech knows, but are actually driving and enabling the convergence of everything.”

Another, Ray continues, “to engage in one-on-one conversations with industry insiders, helping us identify the hidden technology trends that will help drive profits in the new year.”

So what was this year’s big breakthrough?

If you have been following the press on CES over the last week… most people are talking about the ultrabook. “Ultrabooks” are thinner, faster and quicker than the laptops currently available to PC users. Here is Ray’s take:

“Both Intel and Microsoft displayed a number of notebook computer models called “ultrabooks.” These notebooks feature high-performance processors and displays in small, sleek cases. The ultrabook concept was developed by Intel, and I suspect it is an attempt to inject new life into a relatively flat PC market. Intel is trying to find ways to sell more processors and its current strategy is ultrabooks and mobile computing.”

Many are reporting ultrabooks are the PC form of the MacBook Air. While Intel and Microsoft are not in the “penny stock” space… there are many small semiconductor companies that will profit from the emergence of the ultrabook. Many, in fact, that Ray has recommended to the subscribers of Technology Profits Confidential.

“Another huge splash at the show,” Ray continues, “were LG and Samsung.”

“Both companies showcased unbelievably clear and vivid television displays using OLED (organic light-emitting diode) technology licensed. Available in both 2-D and 3-D display formats, the stunning OLED displays kept LG’s and Samsung’s exhibits packed with attendees. LG’s 55-inch OLED TV, which is only 4 millimeters thick, won the CES ‘Best of Show’ award.”

You may remember Ray’s write-up last year regarding the OLED technology (if you missed it, click here). A number of large-screen OLED TVs will be hitting the display market later this year. Ray predicts that:

“While the display market is expected to be relatively flat over the coming year, both 3-D and OLED display technology are expected to be rapidly growing segments within the space…”

While there, Ray and Patrick also were able to meet the with team behind the 3-D used in the movies Avatar and Hugo. Here are Patrick’s comments on this meet-and-greet:

“Several years ago, I said that 3-D was inevitable in the home entertainment arena as soon as 3-D screen technology reached an acceptable price/quality point. The take-home message from this year’s CES was that the home entertainment industry believes we are there…

“All the top screen builders were showing truly breathtaking 3-D screens. It was, in fact, the ‘big thing’ at CES this year. And the biggest thing was ESPN’s onsite broadcasting of several events live for ESPN3D. The hottest events, the biggest signs and the most exclusive private parties were about ESPN 3D, which Ray and I were invited to.

“As far as I know, we were only attendants given the opportunity to see the technology, in several semi-truck trailers outside the convention center, that made it all work.

“This technology belongs to Cameron Pace Group, CPG. Cameron refers to James Cameron of Titanic. Pace is Vince Pace, the inventor and renowned cinematographer.

“This is an enormous story and the technology can’t be stopped.”

There is tons of opportunity in the small-cap space with these emerging technologies… many of them can be found through the pages of Patrick Cox’s Breakthrough Technology Alert.

You already know that investing in the future of technology can yield huge gains for investors who get in early. While some of the technologies mentioned here today are not from publicly traded companies, they are all technologies that you do not want to ignore.

If you do a quick search on Google Finance, you can find many small technology companies working on and producing the components needed for these breakthroughs right now…

And Patrick and Ray will continue to follow these technologies for us here in the Sleuth. I expect to have more updates for you in the coming weeks about what they saw and what they expect to be “the next big thing.”

Sincerely,

Jessica Comitto
Managing Editor, Penny Sleuth

Inside the 2012 International Consumer Electronics Show was originally featured in the Penny Sleuth.

But the top-line boost of a promising biotech acquisition doesn’t come cheap. Yesterday, I highlighted the Bristol-Myers Squibb purchase of Inhibitex (NASDAQ: INHX) for $2.5 billion, a premium of more than double the company’s market cap at the time. The deal landed shareholders overnight gains approaching 125%.

If the market remains this competitive for quality acquisitions, small-cap traders and investors should have numerous opportunities to cash in on the trend. Several large-cap pharma players have indicated they are actively looking toward acquisitions to fuel growth. Generic-drug making giant Teva Pharmaceutical Industries Ltd. (NASDAQ: TEVA) told Bloomberg that the company is looking for potential deals in Asia and Brazil to improve its position in emerging markets. Merck & Co. (NYSE: MRK) has also thrown its hat in the ring. The company recently told the Wall Street Journal about its desire to make key acquisitions in a quest to solidify its spot in the Hep C market.

In an effort to help narrow your search, I’ve compiled a short list of potential small-cap buyout candidates that are all involved in Hep C drug development . Any one of these small-caps would be an excellent target for a major pharmaceutical firm looking to bolster its patent portfolio or capture market share in this emerging sector. Hep C medications are an important area of focus right now as pharmaceutical players attempt to favorably position themselves within the growing sector. And it’s also one of the best places to look for potential deals…

Idenix Pharmaceuticals Inc. (NASDAQ: IDIX) – The Inhibitex/Bristol-Meyers deal revolved around the company’s unique Hepatitis C treatments. Also, in this sub-sector, we’ve seen Gilead Sciences Inc. (NASDAQ: GILD) plan a $11 billion purchase of Pharmasset Inc. (NASDAQ: VRUS). That’s why it would be wise to keep Idenix Pharmaceuticals on your radar. The stock popped double-digits earlier this week thanks partly to the Inhibitex deal— and partly because the company released positive interim data for its own Hep C drug. I would not be surprised if additional rumors related to multiple Big Pharma suitors were to emerge in the coming weeks and months.

Achillion Pharmaceuticals Inc. (NASDAQ: ACHN) – The timing on the Inhibitex deal couldn’t have been more perfect for yet another Hep C drug developer, Achillion Pharmaceuticals. Achillion also released positive data earlier this week, boosting awareness among investors— and catapulting the company to the top of many analysts’ lists of buyout contenders in this space. A market cap of just over $800 million makes this company the perfect size for a buyout.

Vertex Pharmaceuticals Inc. (NASDAQ: VRTX) – Although this mid-cap is outside the acquisition “sweet-spot” due to its market cap that tops $7.6 billion, the company potentially has a lot to offer a blue chip player who wants a more mature company with a more robust pipeline. In addition to its Hep C work, Vertex is also working on a promising late-stage cystic fibrosis drug. Vertex is also earning praise from analysts after cleaning up its balance sheet and beating earnings estimates for the previous three quarters.

Sincerely,

Greg Guenthner

3 Potential Pharma Buyout Targets was originally featured in the Penny Sleuth.

Just turn on the TV or flip open the paper, and it’ll be clear as day: The economy is still struggling. Governments are unable to pay their bills. Stocks are stuck in a rut.

But while the message isn’t complicated, it’s not exactly correct, either. You see, while the media commiserate about an economy that’s unable to bear its own weight, the truth is that corporate earnings are better than they’ve been in years.

It all boils down to the fact that stocks are out of synch with fundamentals right now.

I know it’s hard to believe that the economy isn’t teetering on the edge of oblivion this summer, but take a quick look at the data and it becomes apparent that the sentiment on Wall Street is wrong. It all starts with earnings…

More than 70% of stocks in the S&P 500 beat their earnings estimates last quarter. A full 83% of the Dow Jones industrial average did the same. All told, the largest corporations took home the biggest profits they’d seen in years – and the stock market reacted by dropping around 5% last earnings season, erasing all of 2011’s gains.

Second-quarter earnings season is just kicking off as I write. How are another quarter’s numbers impacting stocks?

With the exception of a couple of months in 2007, the S&P 500 is sitting on higher earnings right now than at any time in history. The Dow’s profits are at an all-time high this month…and still, stocks are falling.

It gets worse.

Adjusting for current share prices, stocks are actually valued at crisis levels right now.

The Dow’s price-to-earnings ratio is currently 13.67 – that means that stocks are currently valued cheaper than they were at their lowest point in October 2008. Assets are cheap too – with a price-to-book ratio of 2.2, for instance, the S&P 500 trades for the same small premium that shares fetched in the latter half of 2008.

Warren Buffett is known for saying that “If a business does well, the stock eventually follows.” While that’s an idea that I generally agree with, it’s a question of timing. How many months – or even years – could go by before stocks start trading at rational prices again?

The fact remains that market conditions dictate prices. Until Main Street becomes willing to take on risky assets once again, investors are going to be slaves to a volatile stock market.

How to Profit in Spite of Slumping Stocks

I’m not particularly pleased with the idea of waiting for the market to come around on us. It’s incredibly frustrating to see companies raking in cash hand over fist – only to watch their share prices die a slow death each trading session.

That’s why my colleague Greg Guenthner and I have already recommended that our Penny Stock Fortunes readers pick up shares of two companies willing to cut you in on their profits…

Our logic is simple. By buying mispriced companies paying out substantial cash dividends right now, we’re able to generate a real-world return even if market conditions continue to be soft. And since prices are depressed right now, we’ll also be first in line to benefit from a recovery in the stock market.

Don’t think that dividends are only for blue-chip investors. There are scores of small-cap companies out there that are doling out impressive dividends right now. We’re betting on them this month – I’d suggest you give penny stock dividend payers a second look in 2011…

Sincerely,

Jonas Elmerraji
Penny Sleuth

Why Investors Are Wrong About Stocks Right Now was originally featured in the Penny Sleuth.

As I write, the markets are still reeling from massive losses at the beginning of June.  And investors are anxious about what the market has in store as the “summer doldrums” continue.

But even though investing is challenging, opportunities are springing up for those who know where to look…

That’s because quality is looking cheap right now… at least that’s the sentiment being shared by portfolio managers at Morgan Stanley.

Their chart below shows just how skewed high-quality stock prices are looking right now.

The key take-away: high-quality stocks are trading at low-quality prices.

That’s a problem that won’t last for long. In fact, it already appears to be reversing right now…

And that’s the reason to look for quality, even in this market.

A Double Down on Two Quality Sectors

That doesn’t mean that all quality stocks are equal right now, or that you should go on a buying spree – June’s pullback is still a concern for stocks.

That’s why I’ve found two specific sectors you should be looking at. They are offering a solid mix of the cheap valuation and market strength.

I’m talking about green energy and IT infrastructure.

Because both of these industries are full of small-cap names, there is ample opportunity for penny stock investors.

Don’t forget that it’s quality that’s being discounted. In my view, that means that seeking out companies with consistent (and predictable) earnings and growth is the way to go.

Here’s a glimpse at a few names that could be worth watching right now:

• Fusion-IO (NYSE:FIO): A month or so ago, I said that small-cap IT infrastructure play Fusion-IO was the only IPO that I’d even think about buying in this market. Higher-profile names like Pandora and LinkedIn have slid double-digits since going public. But, this stock has rallied nearly 17% since the retail investors have had a chance to buy shares.

(Note: If you followed my suggestion to buy FIO, reply to this e-mail and let me know how you’re doing on the position!)

• STEC Inc. (NASDAQ:STEC): Another infrastructure IT name, computer storage firm STEC is an industry favorite with solid and consistent profitability.

• LDK Solar (NYSE:LDK): Solar stocks have been under pressure of late. But this green energy name is a good way to bet on a turnaround. Shares have slid considerably on the year. I’d suggest waiting for early signs of strength before buying shares.

While I won’t be following these specific names (more on why below), they’re looking like a strong way to get exposure in this market. Even though stocks have been under pressure of late, there’s still ample opportunity to rake in gains this summer focusing on quality stocks.

Cheers,

Jonas Elmerraji
Penny Sleuth

Buy These Two Sectors For Small-Cap Value This Summer was originally featured in the Penny Sleuth.

First, we need to examine how smaller stocks are performing relative to their large-cap counterparts. For this, we can turn to a couple of interesting data points from Bespoke Investment Group. According to Bespoke, 72% of large-cap S&P 500 stocks have beat earnings forecasts this quarter, while only 55% of Russell 2000 stocks have beat their respective number. Obviously, weaker earnings can lead to poor performance. And since money usually flows to the strongest performers, it is possible that small stocks will begin to fall out of favor should they fail to close the gap.

Digging a little further into small-cap territory, you’ll find an ominous signal developing between the Russell 2000, the most-watched small-cap index, and its breadth line. What this means is that while the Russell moves to higher ground, the actual number of stocks in the index that are advancing is not keeping pace with the rally in prices.

This is called a negative divergence. In a bull market, we want to see the number of advancing stocks increase as the market rallies. When the number of advancing stocks begins to dwindle, we can infer that the market’s rise is being supported by fewer strong performers, as opposed to a broader move from member issues. Hence the negative divergence, an early warning that signifies a change in trend could be near.

Poor earnings performance and the negative divergence in the Russell and its breadth line are both significant signals that imply the bull market in small-cap stocks is running out of steam. But it’s also important to note that both of these indicators could easily improve. The market could decide that the lower than expected earnings in small-caps are already priced in — and investors could begin to look forward to improved second quarter financials. Or a rising tide could buoy the lagging stocks in the Russell…

As you can see, there’s no guarantee that the market will turn bearish because of these signals. However, they are all usually solid early warning signs that the attitude of the market is changing. That’s why you have to be prepared to change your trading perspective in light of new evidence…

Obviously, vigilance is our main defense when facing these warnings. We have to be ready for a correction, or even a sharp rally should our forecasting tools prove to be incorrect. Always remember this important rule when dealing with an uncertain market: until the price action actually confirms a change, we have to assume that the current uptrend remains intact. For the time being, it would be wise to remain cautiously bullish. Take profits when the market gives you the opportunity — and remain especially careful when entering any long positions.

Sincerely,
Greg Guenthner
Penny Sleuth

May 18, 2011

Do These Early Warning Signs Point to Lower Prices? was originally featured in the Penny Sleuth.

“What if I’m too late?”

I have a feeling this question has been uttered by many traders lately as they look at precious metals. Gold prices have risen almost $120 to $1,500 an ounce in the past 60 days. Silver is even hotter, shooting from $32 an ounce to $44 an ounce over the same period.

In a red-hot market like this, it’s easy to get caught up in the hype, or to second-guess a major move. Instead of letting fear rule your trading decisions, you should take a step back from the financial headlines and calmly assess your options in this incredible metals bull market. In my view, one of the best sectors to trade is the junior miners.

Emotions aside, I continue to believe there is room for precious metals to run even higher in the short-term, giving traders ample opportunity to go long junior miners. These are the smallest, most speculative mining stocks on the market. As gold and silver prices continue to outperform, shares of these microcaps can magnify the metals’ rise.

I’m seeing some favorable setups in the junior miner sector this week. And even if you didn’t perfectly time the gold and silver dip earlier this week, you should have ample opportunities to trade small mining stocks in the coming months.

Here are a couple of key reasons why you should not fear gold’s recent rise:

First, forget all the “bubble” talk. The wounds inflicted by the 2008 market crash remain apparent in every media report related to the booming commodities market. The word “bubble” has lost almost all meaning since 2008, with every bull move now likened to one form of a bubble or another. No credible evidence suggests that the precious metals market is in the midst of a mania. It’s a bull market, plain and simple. For now, the trend is our friend.

Next, you have to consider how Uncle Sam is aiding gold’s rise. Record deficits, quantitative easing, and the recent S&P downgrade warning all add fuel to the precious metals fire. Gold is and will be an attractive store of value as inflation and the government’s inability to reverse a growing deficit remain widespread concerns.

Of course, a healthy bull market never progresses upward in a straight line. We can expect volatility in gold and silver, which will translate to our junior miner trade targets. The extreme price swings should provide traders with plenty of buying of opportunities to buy shares and take profits…

Sincerely,
Greg Guenthner
Penny Sleuth

April 20, 2011

Why You Can Bet on Junior Miners was originally featured in the Penny Sleuth.

Many of the small-cap companies I recommend to my Energy & Scarcity Investor readers are the so-called Canadian junior companies. These are companies whose shares trade, usually, on the Toronto Venture Exchange (TSX-V), a small-cap version of the highly regarded Toronto Stock Exchange (TSX). Or sometimes, the small guys’ shares trade on the London Exchange, or Australian Exchange or the Over-the-Counter (OTC) board in the U.S.

Often as not, the Canadian junior companies are resource developers that are burning cash. They’re definitely risky… but wow, some of them can deliver the returns!

When you deal with the small-cap resource investment space, it helps to be a geologist. It helps to understand how this business works. It helps to understand exploration, geophysics, drilling, mineralogy and much else. That’s because the vast majority of mineralized zones are NOT commercial ore and will never become a mine. The vast majority of acreage is NOT hydrocarbon-prospective and will never make an oil field. Remember this! Know it, learn it, live it!

Vast multitudes of investors buy shares in small-cap companies that never go up, and likely go down. You can lose your shirt a lot faster than you can make a five- or 10-bagger, that’s for sure!

There are dozens of small Canadian (and Australian and British) junior out there. Sometimes I travel from New York to Toronto to London to Hong Kong — and Brazil, South Africa, Serbia, Hungary, Turkey and more — to find potential investment ideas. You can eliminate almost all of the companies you review from contention before you decide on a small-cap play.

After you make an investment, it requires constant attention. You need to continue to monitor the management, the financials, the developments. The small guys don’t have nearly the information machines that the big guys have, so you may have to dig harder for real information.

So this is what I have to do even to begin to make it all work. I have yet to figure out how to make it work without that level of attention to detail. Point is, these small-cap guys are hard to find, hard to track and risky. Small-cap investing is hard, if it was easy, everyone would be doing it.  When tracking these small-caps on your own, make sure you continually keep an eye on these companies. Keep an eye on their financials and other business developments. If you put in the time and research they can produce outstanding gains for your portfolio.

Until we meet again,
Byron King
Penny Sleuth

April 18, 2011

Big Gains from Small-Cap Juniors was originally featured in the Penny Sleuth.

• Do your homework. The more charts you look at on a nightly basis, the better prepared you will be when the morning bell rings. I recommend familiarizing yourself with as many charts as possible, then assembling a short, manageable watch list from your trading universe. Starting your trading day with 30 or 40 stocks to watch just creates confusion— and increases the chance that you will miss a big mover.

If you consistently review charts and screen for relevant criteria every night, your stock vocabulary will increase as the months go by. Familiar names will begin to appear and reappear in your screens, and you’ll even get to know how certain stocks and sectors “behave” relative to their counterparts. This experience is invaluable, especially when it comes to making quick trading decisions. Once you begin to recognized stocks that made large runs in the recent past, you’ll be able to spot a new move and capitalize on it right away.

• Identify manipulated stocks. Some charts are too good to be true. When you see a perfect penny stock chart, you might be looking at a promoted stock. Promoted stocks can produce spectacular runs. But they all end the same way: the stock crashes, sometimes losing as much as half its value in just a few hours.

Anytime you come across a great looking OTC stock, you should run a quick Google search to see if anyone is promoting it. The promotions are fairly easy to spot, since they prominently feature the company’s ticker and boast outlandish “price targets.”

You can, however, still book strong gains with manipulated stocks. You just have to trade them carefully. There are several things you have to watch out for when trading them. One of them is the controlled shakeout. The shakeout is not the “dump” that so many people associate with pump and dump stocks. With a promoted stock, you never know when the dump is coming, but you know it when you see it. A dump occurs after the manipulation had ended. There’s no more support from whoever was involved in the pump, therefore no one left to support the inflated stock price with additional buying. When the dump happens, shares fall far and fast.

Controlled shakeouts happen when the stock loses a few points and then miraculously finds support. Manipulators usually walk the price back up by the afternoon or the very next day. The purpose of this move is to “shake out” weak hands and large positions, and to attract early short sellers. This can result in a short squeeze once the rise is restarted, producing a significant pop in share prices.

• Don’t force your trades. Sometimes the market will work against you. Most or all of the picks from your watch list might open in the red due to a weak market. If this is the case, don’t force a trade. You don’t always have to be trading. In fact, a few carefully selected trades per months usually perform better than throwing darts. You have to pay your broker every time you buy and sell—so make all of your trades count.

If several of your potential momentum plays do open in the red on any given trading day, you should still keep an eye on them. Sometimes after morning profit taking, the stock will rebound into the green. This is a powerful technical move that can ignite a major surge in the share price. Buying when a stock moves from red to green is a great risk/reward play that many successful traders look for.

Sincerely,
Greg Guenthner
Penny Sleuth

March 23, 2011

How to Play Small Momentum Stocks was originally featured in the Penny Sleuth.

First, let me explain the problem.

Once our current technology hits the limits for passive component miniaturization, we will see stagnation in innovative mobile telephony. We may already be seeing the limits today. For consumers, this will mean the technology will stall. There will be fewer and fewer new features. For manufacturers, this will create a commoditization of the product, along with falling profit margins.

This commoditization of a telecommunications terminal technology has happened before, by the way. Until the invention of push-button phone, consumers endured rotary dial technology for decades. It took a disruptive new technology to transform the market.

We are, therefore, essentially still stuck in a 1950s time warp where it comes to passive electronic components. This raises an obvious question: What if someone figured out a way to do for passive components what past pioneers did for active ones? The results would be revolutionary.

That revolutionary innovator is Frontier NanoSystems.

Frontier NanoSystems is a startup with a disruptive technology that proposes to completely change the industry. We had the pleasure of interviewing founder and CEO Pierre de Rochemont, as well as Juha Juhilla-Song, the director of marketing and supply chain coordination.

The heart of Frontier’s invention is a flexible electroceramic lamination technology developed by de Rochemont. Using this technology, Frontier can mass-produce passive components with tight tolerances. Critically, their electrical properties do not appreciably change with temperature. What this means, in plain English, is that these components can now be vastly reduced in size and included on the same chips as the active components.

The technology uses a process called liquid chemical deposition (LCD). In LCD, the various ceramics are dissolved in a liquid that is sprayed in layers on a semiconductor wafer at temperatures lower than 400 degrees C. At these temperatures, there is no discernible grain structure. The laminate is like a glass.

Unlike powdered ceramic manufacturing techniques, the size in the grains of the deposited layers can be controlled with true nanometer-scale precision. This is accomplished by heating them for short periods of time. This precision is also the reason that component performance is so steady — despite changes in temperature.

Since the structure of the various amalgamated ceramics is so precisely controllable, the kinds of tolerances required to shrink passive components are also achieved. Incidentally, the world famous Argonne National Laboratory has attempted to quantify the precision of the ceramic mix inside the individual components. The variances, however, proved to be smaller than Argonne’s ability to measure them.

This is a game change in more ways than one. Most cell phone components can enjoy economies of scale. Once a manufacturer designs subsystems like the interface or the microprocessor, it can choose to reuse these in other phones or variants of the original.

The big killer for reusability, however, is the radio antenna. Because the antenna reacts to nearby components inside the phone, this makes its tuning sensitive to any changes in the material composition or layout. By way of analogy, think of structures precisely designed for acoustic properties, such as the Sydney Opera House. If you were to make a major change to the interior of such a facility, like removing carpeting or adding glass windows, the acoustics in the building could be seriously altered.

Similarly, any changes to the “electromagnetic acoustics” of a phone require that the antenna be custom engineered for every handset and any variant thereof. For example, if the antenna in your Blackberry were near the microphone and RIM decided to change the microphone design, it would take months of iterative redesign to get the radio to work the same as it did previously.

Frontier NanoSystems’ LCD technology allows radio circuits to be manufactured far smaller than they can be today. Smaller antennae have smaller “acoustic chambers.” In other words, they are not as vulnerable to a phone redesign. Frontier can shrink the radio to a size at which it is no longer sensitive to nearby components. This creates reusability, and it also means that a cell phone fabricator can respond to market opportunities with much greater speed.

In addition, having tiny antennae allows a manufacturer to easily pack several into the same phone. Europe, the U.S. and Asia all use different wireless frequencies for cell phones. This means that for the same model phone, different antennae have to be used for various markets. Having all the antennae in the phone at the same time adds simplicity. The same model could work anywhere. For the first time, consumers could have the option of a true worldwide phone.

Frontier NanoSystems also reduces the number of manufacturing steps required to produce a usable electronic product. In the case of wireless handset manufacturers, this means a great deal. Cell phones require many assembly processes, usually carried out by several different subcontractors in the supply chain. The ability to build passive components on a single chip in one step shortens the chain. That is great for speeding up getting a new product to market, as well as cutting costs.

Frontier NanoSystems isn’t publicly traded, but neither was Fairchild Semiconductor or Texas Instruments back when they were inventing the integrated circuit. It is, however, definitely a company to watch closely. Additionally, any companies that license its technology and put it to use are going to have a huge, disruptive edge on the competition, which creates transformational investment opportunities.

We will keep in touch with Frontier NanoSystems and keep you up-to-date on the business development of this astonishing new technology.

Yours for transformational profits,
Patrick Cox
Penny Sleuth

March 8, 2011

The Next Big Thing in Circuit Miniaturization was originally featured in the Penny Sleuth.

Some of the blame should be cast on the mainstream media’s assessment of tech’s recent success, which has been nothing short of breathless. These have been easy stories to write, considering household names such as Groupon, Twitter, and Zynga are all in the midst of their own respective stages of testing the IPO waters.

But the main culprit that’s been causing all the buzz is Facebook, which has been pushed to the almost unimaginable valuation of $52 billion, thanks in part to yet another late stage investment, according to MarketWatch.

It’s easy to get caught up in these larger-than-life numbers. However, the same skepticism accompanied another famous IPO that soon became the emblem of success for the post-dot-com tech era: Google. In 2004, most investors were unable to see Google’s potential. This was due in part to the fact that many in the media could not fully comprehend the company’s powerful business model — but also because it was difficult to ignore Google’s gaudy valuation when it first emerged as a public company.

Public offerings aside, it’s important to note that technology’s recent run has been fueled by earnings. Here’s a breakdown courtesy of the Associated Press:

Judging by diluted earnings per share, a conservative method of valuing what a company’s stocks are worth, the companies in the Nasdaq index were collectively earning $39.28 per share in December 1999 and priced at 103.6 times their annual earnings. Now, the index has diluted earnings per share of $127.64 and a price-earnings ratio of 22.11.

The justification of the dot-com boom of the 1990s at the time was paradigm shift. In early 2000, then-hedge fund manager Jim Cramer claimed that Internet-related companies were the only stocks that warranted a second look. “You have to throw out all of the matrices and formulas and texts that existed before the Web…” Cramer stated.

Today, there’s little to link the tech bubble of the 90s with the current strong performance of the same sector. Tech companies today appear to be fairly judged based on rational earnings expectations, as opposed to the mania that gripped the sector more than a decade ago.

“Bubble” is the new buzzword for post-financial crisis America. In reality, the opposite holds true. The dot-com swindlers of the 90s have been replaced by cutting-edge performers: a solid group of companies that have successfully monetized what was once the Wild West of investing. Instead of tech being the new market recovery killer, you should view it as an excellent sector to search for your next small-cap investment.

Sincerely,
Greg Guenthner
Penny Sleuth

February 23, 2011

Don’t Run from Tech’s Second Coming was originally featured in the Penny Sleuth.