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Investing/Strategies / Small Cap Investing
|Subject: companies to ponder||Date: 8/27/2003 12:27 AM|
|Author: obenation||Number: 11 of 66|
So to contribute to the success of this board, I'd like to tell you about some stocks that may be of interest. Some I own, some I'm considering positions in. I'll specify for each one.
To let you know, my investing style is medium term (few months to a year), aggressive growth, high risk tolerance. I'm looking for small companies that aren't that well known, often times aren't yet profitable, but that have potential for huge rewards (and conversely big-time losses).
The first one I want to talk about is American Technology Corporation, or ATCO. I found it after reading a fascinating article in the Sunday NYT magazine about its sound technology. I'm going to try to print that article below. Anyway, in a nutshell, this technology enables you to direct sound such that the only person who can hear it is the person standing in its path, even long distances away. Its potential applications are everything from law enforcement to point of sales sounds to many military applications. Here's a paragraph from that article to illustrate:
Imagine, he says, walking by a soda machine (say, one of the five million in Japan that will soon employ HSS), triggering a proximity detector, then hearing what you alone hear -- the plink of ice cubes and the invocation, "Wouldn't a Coke taste great right about now?" Or riding in the family car, as the kids blast Eminem in the back seat while you and the wife play Tony Bennett up front. Or living in a city where ambulance sirens don't wake the entire neighborhood at 4 a.m. Or hearing different and extremely targeted messages in every single aisle of a grocery store -- for instance, near the fresh produce, "Hey, it's the heart of kiwi season!"
So that's what got me interested. Then I looked at the financials which aren't so pretty. In a nutshell they're not making too much money right now, but they're good at spending it. The company is LT debt free, but doesn't have revenues to come close to its manufacturing and R&D costs presently. The HSS technology is still relatively unknown, although Sony has been testing it, as well as some other big names.
The point is that IF the technology is widely identified and there is the demand for its applications, then thru sales and licenses, the potential revenue growth and profitability for ATCO is huge. There are some extremely interested insitutional investors and lots of private investors too, but soon they are going to be demanding big results. Espec. as the company has only about $1m in cash and more current liablilities than assets (quick ratio of 0.9 = not good)
Some good signs include the fact that they hired a new CEO, who isn't exactly a Wharton MBA but does appear to have some business savvy and connections. The former CEO Woody Norris, who is the man behind ATCO and its technology, still has a major role with the company but is the mad inventor type who fortunately has moved away from the financial aspect of the business. Another good sign is that they've been hiring new high positioned officers including a new man to look after all the military business that seems to be coming in. Sorry that this isn't more specific, but I'm doing this from memory because my internet connnection is slow tonight.
It's stock rose from mid $3s in March/April to $5 after one article in USA Today about the technology. It then rose some more on an announcement that Sony was working with HSS and it has held around the high 5s to low 6s since then. Even after an announcement that ATCO was restating its losses (down) the stock didn't lose any ground and actually gained a little. Excuse me for being a little grandiose and speaking on behalf of the market, but I'd say people are basically waiting for the next piece of good news (increased sales or a major agreement with a major company like a Wal Mart or Sony or car manufacturer).
Anyway, I'll put excerpts from the article in the NYT below. I have a long position in this company and am obviously a big fan and a relatively big believer in the technology, but that doesn't mean I'm not aware of the risks. ATCO has the potential to disappear very very quickly if it doesn't deliver soon. Although it seems capable of winning institutional financing, there'll come a point when people will stop waiting for results and put their money elsewhere. Right now this is a glorified penny stock, but it does have a unique product and the potential to be huge.
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