KVH Industries, Inc. (KVHI) operates in two main segments, each with a different focus. The bulk of ...
New Advisory seeks "Breakthrough Tech"
04/29/2016 10:00 am EST
Jim Pearce, senior editor at the Investing Daily, has just launched a new advisory service -- Breakthrough Tech Profits. Here, he explains the goals of the newsletter and highlights a favorite technology and biotech stock.
Steve Halpern: Joining us today is Jim Pearce, well known to our listeners for his role as editor of Smart Tech Investing and as senior editor at the Investing Daily family of newsletters. How are you doing today, Jim?
Jim Pearce: I’m doing great, Steve. How are you?
Steve Halpern: Very good. Thanks for taking the time. Today, I wanted to focus on your latest newsletter, Breakthrough Tech Profits. Could you give our listeners an overview of the service and discus the strategy underlying Breakthrough Tech?
Jim Pearce: Yeah, sure, Steve. I’d be happy to. You may recall, about two and a half years ago, we launched a new publication called Smart Tech Investor.
And at that time, that service was built around our notion of something we refer to as “innogration”, which is a combination of the words innovation and integration, and that describes the way that successful companies leap ahead of their competitors by developing, you know, new products, disruptive products that the market hasn’t seen yet.
We felt, at this point, that what we’re seeing now is innogration spreading out into other sectors, so we wanted to be able to expand the scope of our coverage to more than just tech stocks.
Essentially, over the 20 years, just about every company and every industry in the world in some way or another is going to have a strong tech component to it, so we want to break through tech profits to literally be able to break through the wall of just the information technology sector and into all other sectors.
Steve Halpern: Now, you cited the emergence of four big trends, computing, cloud, mobile, and data, that you suggest are converging to form a completely new paradigm. Could you expand on that and how this plays a role in this new service?
Jim Pearce: Yeah. In fact, that is at the core of what I just described. Again, each of those things individually are developments that occur in the information technology sector during the first half of a long-term technology wave.
So for the last 40 years, basically, the innovation in computers was to make them faster, cheaper, smaller, and so on, but now, all of those things have matured and evolved to the point that they can be used in concert with on another to create entirely new product categories.
For example, the Internet of Things is something that we’re hearing a lot about now, and going forward, that’s going to be enabled by each of those things you just mentioned.
Same thing with self-driving cars; that wouldn’t have been possible 10 years ago or even 5 years ago, but now, with the way that computing cloud mobile and data have evolved, we are able to create competitive products that are viable in the market and, again, that’s really why we wanted to introduce Breakthrough Tech Profits to start identifying stocks that have tremendous upside potential.
Steve Halpern: So, you’re going to be looking at a very large universe of potential buying candidates. Are there any particular fundamental or technical metrics that you would consider most important when you’re looking for stocks for the service?
Jim Pearce: That’s a great question, and it’s much harder to do for these kinds of stocks than it is for traditional companies. For example, in this other service that I manage, I’ve created a formula that basically measures all large-cap stocks against one another, but you can’t really use that with stocks like this, because these sorts of things aren’t showing up in the numbers yet.
The one thing we do measure is investment in R&D, specifically in either developing internal capabilities, and that’s the innovation half of innogration, or in acquiring other capabilities, and that’s the integration half of innogration, but the most important factor, and the thing that’s hardest to measure is the management team’s ability to execute a strategy of innogration.
That’s extremely subjective, and that requires a lot of time and interpreting in order to do correctly, so this is a very labor-intensive type of process, and you’re right, almost every stock in the world is a potential candidate, so we have, actually, our largest editorial team dedicated to Breakthrough Tech Profits just for that reason.
Steve Halpern: Now, you plan on maintaining a core portfolio focused on long-term capital appreciation without regard to current income. Could you perhaps share an investment idea that falls within this category?
Jim Pearce: Sure, and again, the reason why we don’t focus on income is that these kinds of companies; they’re taking just about every penny they can and reinvesting into growth.
We don’t expect them to start paying dividends yet, so we ignore them altogether, but, to answer your question, I just mentioned a moment ago the internet of things as an example of one of the themes we’re really focusing on.
There’s a company called Silicon Laboratories (SLAB), or pronounced slab. It’s been trading in a range over the last five years, but it really hasn’t broken out yet; however, we think now is the time to buy.
If it’s under $50 a share -- I think this morning it was around $48 or so -- because the other technologies in its ecosystem have finally caught up to it, and we’re going to start seeing an explosion in those kind of products being purchased by consumers, and Silicon Labs creates the microprocessors that enable the Internet of Things.
So that’s just one example of a company; they pay no dividend, it has not participated in the doubling of the S&P 500 over the past six years, but is about to enter into its own bull market, so that’s just one example of the kind of stock we could vastly outperform the market over the next couple of years.
Steve Halpern: Now, in addition to this core portfolio, you will also maintain a special situation portfolio that’s designed for more aggressive growth. Could you share an example of a stock that meets this criteria?
Jim Pearce: Sure. For example, right now, cancer immunotherapy is in the news. A few months ago, Jimmy Carter had a miraculous recovery from cancer that one familiar with the story assumed would end up taking his life within a few months, but as a result of immunotherapy treatment, he is now in remission.
Just within the last month, Sean Parker, made famous in the movie, The Social Network for his involvement in Facebook; he also made a lot of money off of the music file-sharing business Napster. He just committed $250 million of his own money to invest in research for cancer immunotherapy.
This is something that’s really getting a lot of momentum. There’s been some really wonderful success stories. It’s still a high-risk, high-reward area, but stock that we like is Argos Therapeutics (ARGS).
You can still buy it, at least right now, for under $10 a share. They’ve got some interim test results due to come out sometime during the month of May. If those results are positive, we think the stock could double within the next year.
Obviously, if the test results are not good, then it won’t, but those are the kind of risks you take with these kinds of stocks. These are the kind of success stories that five years later, people look back, and they go, gee, I really wish I had owned some of that.
We don’t know if this one is going to end up being one of the big winners, but we think it is. Anyway, so it’s Argos Therapeutics. Cancer immunotherapy is the field that it’s in.
Just last month, a consortium of institutional investors agreed to put up the $60 million in the company to basically subsidize it’s burn rate through the end of the trial phase scheduled for about mid-next year, so this is a company -- they’ve got the commitment for money to see it through.
They’ve had very promising test results overseas, and the stock has bottomed out a couple of months ago and come up some, but we believe it could easily double or triple in value in the years to come if the test results are positive.
Steve Halpern: Again, our guest is Jim Pearce of the newly-launched Breakout Tech Profits. Thank you so much for taking the time today.
Jim Pearce: Thank you, Steve. I appreciate it.
By Jim Pearce, Senior Editor at Breakthrough Tech Profits
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