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No. of Recommendations: 6
I'd like to propose Caliper (CALP) as a possible Rule Breaker.

The top dog and first-mover in an important, merging industry...

Right now, most people consider Caliper a biotechnology company. While it is true that the only three commercial products they have are used for DNA and RNA analysis, this looks like only a beginning, albeit a fantastic place to start.

Caliper has microfluidics technology that performs chemical analysis of fluids with very small samples that should be faster, cheaper and more consistent than standard laboratory measurements. Basically, they are making a computer controlled microchip that performs chemical/physical functions rather than electronic functions. The potential industries they list as possible targets (other than biotech) are pharmaceuticals, agriculture, chemicals and diagnostics. However, I think they have even greater potential if, by gaining expertise in building miniature physical componentry, they become the leader in nanotechnology.

As the only company in this industry, or at least solely in this industry so far as I can tell, that certainly makes them top dog. They will face competition in one form or another from companies such as PE Corp and even their own customer, Agilent (a factor that hasn't hurt JDS Uniphase).

Sustainable advantage gained through business momentum, patents, visionary leadership, and/or inept competition...

Caliper just announced their 5th patent, and more will likely follow in the coming years. Part of their patent portfolio is licensed from the government through the Oak Ridge Laboratory.

Excellent past share appreciation, measured by a relative strength of 90 or higher...

93

Good management and smart backing...

The management resumes clearly show lots of expertise on the R&D side, with some support from the venture capital partners. Right now the R&D is key, but we will need to watch management closely to make sure they can execute a business plan.

Agilent (spun off from Hewlett Packard) is the primary customer for Caliper's product (over 90% of sales). With HP's reputation for excellence, this is a good sign. Also, two big investors are DOW Chemical and Hoffmann-La Roche. Other customers include Amgen, Hoffman-La Roche and Eli Lilly.

The greater the consumer brand, the better...

This really isn't a consumer brand, and I suspect it never will be. On the other hand, just as electronics revolutionized the use of computers in homes, perhaps we will see laboratories migrate to the home environment. Even so, there will be clear consumer benefits if Caliper can design medical diagnostics that require only small samples of blood, urine, saliva and or sweat.

A significant constituent of the financial media is recently on record for calling it overvalued...

I wouldn't know. I don't read the financial media anymore. Has anyone out there seen anything? The company IPOed in December and has nearly become
a ten-bagger. It's hard to imagine anyone calling it fairly valued, but I suspect it hasn't hit the media's radar screens yet.
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