But while Congress and the watchdog groups focus on solving those giant conundrums, a sleeping problem is creeping up from behind — bandwidth scarcity.

While you may be paying dearly for that blazingly fast Internet connection, industry insiders are flustered about the projected cost raises that will be necessary to meet the sky-high demand for data. Already, the information networks that carry your television programs, phone calls and e-mails are nearing capacity… and without investment today, AT&T expects the Web to reach full capacity by 2010.

And that’s nothing — we’re already projecting bandwidth needs to increase 100-fold by 2015…

These important deadlines are creeping up on everyone involved in the bandwidth biz. But does it mean that you’ll be paying $7,000 per month for cable Internet and digital television services? Thankfully, no…

Today, commerce relies absolutely on the flow of data from the Internet. Hundreds of billions of dollars trade hands online each year — therefore, it’s in the best interest of the utilities and our government to keep it that way. That’s why giants like AT&T and Verizon are prepared to lay down mountains of money to increase Internet capacity across the country.

Unlike a decade ago, they won’t be doing it by laying traditional metal wires. The future is in fiber optics. And we’ve found an undervalued penny stock that’s ready to take advantage of this powerful trend…

Fiber Optics: Your Hidden Profit Generator

Fiber optics are superior in nearly every way to the metal wires that likely feed data to your home. Fiber-optic cables carry more data than traditional cables, and they do so farther, at a lower cost and with less interference.

Instead of running electrical signals through a metal wire, fiber optics work by carrying pulses of light through flexible glass or plastic fibers. Though that may seem like a technology out of the latest Star Trek film, it’s not. Companies are adopting fiber-optic technologies in a big way — most notably with Verizon’s FiOS service, the first of its kind to deliver TV, Internet and phone service directly to consumers on a 100% fiber network.

Of course, the transition to fiber optics isn’t cheap. Verizon’s footing a $23 billion installation bill for the cable required to connect 18 million homes to its service by 2010.

This money is going to a few very tiny fiber optic companies. These companies manufacture and sell components and integrated modules necessary to run fiber cables to consumers. It’s this infrastructure-building phase where the big profits come in. In fact, we found one $38 million microcap that’s actually posting profits. This is unheard of for a company this size, but it’s because of its lucrative contracts with Verizon and other future fiber optic providers.

Best,
Greg Guenthner

June 26, 2009

Catch a Ride on the Fiber Technology Wave was originally featured in the Penny Sleuth.

Web sites like Digg and The Drudge Report are sending more people than ever to Internet news sources – everything from small independent news organizations, blogs and video feeds to traditional media outlets like The New York Times and CBS. News is only a fraction of the story, though.

According to CBSSports.com, 7.52 million visitors watched some of the NCAA men’s basketball tournament online this year. That turned out to be 8.6 million hours of video and audio. These numbers represent a 58% growth in visitors and 75% increase in total hours watched/listened to.

No other media source can claim that kind of growth. Online media is booming, despite our flailing economy. Monetizing it can be tricky, but most media conglomerates know that it’s too important a part of the growing market to pass up.

You can watch the majority of network television on the Internet now. You can also watch live news feeds from many cable providers. Web sites like YouTube and Hulu are tearing this generational gap wide open.

Those two combine for about 141 million unique visitors per month – many from Generation Y.

In relation to this growth is the problem of actually transmitting these videos. Google, which owns YouTube, is dealing with astronomical costs on its bandwidth. Hulu, which is doing slightly better, is still burning cash every month. Most others, like NBC.com, CBS.com and CNN.com, are outsourcing their video problems. That’s where the real money is.

The search for companies that can handle the massive amounts of video in one cost-effective and high-quality bundle is on. While this field is still highly competitive, one small company is starting to emerge…

Providing Everything from Oprah to the Super Bowl

Limelight Networks Inc. (NASDAQ: LLNW) is a content delivery network (CDN) provider for some of the largest media companies in the world. Its customer list contains the likes of MSNBC, Disney, Netflix and Fox… to name a few. Its No. 1 customer, making up 17% of revenue, is Microsoft, which is desperately trying to compete with Google on every front (including YouTube).

Limelight’s contracts with these customers have included all kinds of widely watched events such as the Beijing Olympics, the Super Bowl, President Obama’s Inauguration and even Oprah’s Book Club.

These contracts have helped Limelight’s top line grow 508% over the past three years. But a quick glance at the company’s most recent income statement is a bit misleading.

You see, Limelight has been tied up in litigation with one of its top competitors, Akamai Technologies, over patent infringement. This battle has been waging since 2006, but recently, a court ruled in Limelight’s favor. This ruling saved the company $65.6 million.

The company had this money set aside in case of an unfavorable ruling. In the most recent quarter, this money was released back to the company’s balance sheet, which makes it look like Limelight turned a $55.1 million profit. The real number is more like a $10.5 million loss – still better than previous quarters.

Not the Right Time to Strike…Yet

Investors responded to this announcement quite favorably. Shares are up 47.5% since the ruling and 114.3% on the year. That’s the major reason we aren’t ready to pull the trigger on this one just yet. This run-up was a bit too much too fast. We expect a correction in share prices on the way.

Another worrisome area is the company’s small profit fortress. This industry is extraordinarily competitive. YouTube and Hulu aren’t direct competitors, but companies like AT&T, Level 3 Communications and Akamai are.

We recently put Limelight on our Penny Stock Fortunes watch list. This industry is consolidating right now, so we may see a buying opportunity at any moment. We’ll tell readers when that happens.

Sincerely,
Jim Nelson

June 25, 2009

Profit from the Generation Y-New Media Connection was originally featured in the Penny Sleuth.

A recent article was subtitled, “American attitudes to stem-cell therapies are changing fast.” Inside the article is this critical paragraph:

“Barack Obama has promised to reverse the ban. When that happens, American academics will no longer have to watch enviously from the sidelines as their colleagues in Australia, Britain, China, the Czech Republic, Israel, Singapore and South Korea push ahead. But though the legislative wheels have yet to start turning, the mood has already shifted.”

This article is particularly applicable, as it cites two important SC players — both in my Breakthrough Technology Alert portfolio.

Despite the great performance of the SC sector recently, I’m not encouraging you to buy these stocks for short-term gains. Even if prices do go up significantly in the near future, these are long-term plays. Don’t be distracted by fluctuations. This is the wrong time to even think about taking profits. With prices so low, this is the time to pick up ridiculously underpriced stocks and hold onto them until they produce truly transformational profits.

Inevitably, the wider community of investors will get the stem cell message. Then, we’ll see truly dramatic increases in SC stocks. In fact, I’m predicting another irrational bubble and correction before prices head up permanently. I suspect the bubble will be sparked by high-profile news stories. My guess is that a group of celebrities will admit they’ve rejuvenated their hearts and skin using offshore SC treatments. That may be the time to cash in some, though not all, of your holdings.

Just as you shouldn’t jump at short-run upturns, don’t overreact to downturns. There has never been a medical technology as powerful as stem cells. They will entirely remake the face of medicine. As Sanjay Gupta, Obama’s surgeon general pick, has said, “A new kind of medicine is being created that will definitely break out of the realm of science fiction and become reality. There are places around the world where people are already doing this, such as Moscow… and, certainly, Korea.”

Don’t let yourself be panicked by high-profile analysts who give short sell orders and then talk down the companies they’ve shorted. This happens in every sector, and regenerative medicine is no exception. Prices may dip in response to highly publicized attacks, but this is simply self-fulfilling prophesy. It says nothing about the long-run fundamentals of the targeted companies.

Similarly, don’t get distracted by stories such as the one that broke last week about the Israeli boy. He had developed benign tumors after getting some sort of SC therapy. The therapy included injections delivered directly into the brain from an illegal source in Russia in 2002. That was long before the real breakthroughs in the science. One horrified stem cell company insider told me, “We have no idea what they injected into the kid.” Despite the fact that reports indicate that the therapy did save the child’s life, news seemed to send stem cell stock prices down temporarily.

For perspective, let’s sample some other recent stem cell news.

Miracle Stem Cell Cures Keep on Coming

Egyptian scientists have announced that adult stem cells can prevent diabetes-associated heart dysfunction. I’ve already written about the successful treatment of multiple sclerosis by rebooting the immune system with stem cells. Within a week of that news, a similar procedure was shown to successfully treat AIDS.

The stem cells used in the AIDS therapy came from a donor with a rare genetic resistance to the disease. It worked so well, in fact, that the patient no longer takes AIDS drugs. The donor stem cell transplant also cured his leukemia. This is reality, not science fiction.

The success of the AIDS SC therapy has huge implications. The most important is that it demonstrates the potential of genetically engineered stem cells to give individuals new immunities and biological capabilities.

This is critical because humans are born with a broad range of genetic strengths and vulnerabilities. Now, we’re seeing that those strengths can be transferred via stem cells. These donor cells will give your body the ability to knock out diseases you would not otherwise have the ability to fight. Eventually, designer stem cells will be used not only to cure, but to enhance our physical states. Immunities to cancers, Alzheimer’s and other diseases will be routinely delivered via GE stem cells as a new form of inoculation.

The company I’m recommending this month, in fact, is on the cutting edge of the convergence between genetic engineering and stem cell technologies. Fortunately for early investors, it has been largely ignored by the financial media. The Economist article I referred to above, however, indicates that this is about to change.

This company controls an entire branch of stem cell science and patents. Moreover, it is far closer to market than many of the “big” SC companies that are getting so much old media attention.

The SC Company to Look for in the Short-Run

An odd thing about stem cell science is that we have a pretty good idea about many of the long-run applications. For example, we know that personalized induced pluripotent stem (iPS) therapies will be used for general regenerative therapies. You will provide a blood or tissue sample to a SC company. Those cells will be robotically converted into iPS cells. Then, those cells will be programmed to repair specific organs or tissues. They will rejuvenate everything from retinal nerves to hearts, cartilage and kidneys. Because the cells will be your own, they will cause none of the immune problems associated with donor cells.

This technology, however, is a few years away even for wealthy first-world patients. For billions of others, it could well be more than a decade. This means that most early profits will come from donor stem cell therapies. And as is the case with transplants, this raises the issue of immune reactions.

Fortunately, a great deal is known about immunosuppression. This is due to a long history of organ, graft and marrow transplants. A number of companies are developing stem cell therapies now that rely on immunosuppression technologies.

For transformational profits,
Patrick Cox

March 11, 2009

Breaking Stem Cell News on Immunosuppression was originally featured in the Penny Sleuth.