I'm not well known here on Seeking Alpha - just another guy with a day job who enjoys using the stock market as a means of wealth accumulation. Specifically, I prefer micro & small cap companies with very favorable risk/reward ratios and bright future prospects that are not priced into the shares.
In previous articles, I've clued my readers onto a small biotechnology company called Celldex (CLDX), which went from being worth $150 million to almost $2 billion today. That company alone has changed my financial future in a big way, and I hope it's done so for the readers who joined me. I believe I've found a company with similar potential, though in a completely different field.
Soros was known for finding bubbles, getting in early, and riding them on the way up. The 3D printing "bubble" has been well under way for years, as stocks like 3D Systems (DDD) and Stratasys have rewarded investors with high percentage gains. While those stocks have run up too much for my taste, I've found a smaller, lesser known way to participate in investor appetite for this field.
While not technically a 3D printing stock, Perceptron (PRCP) is engaged in 3D metrology with various solutions, including its proprietary Helix system. I won't even try to pretend that I fully understand the technology - just think of it as being used in product inspection as it gives information that can be used to improve the manufacturing process. For example, if a car is on the assembly line, Helix can give a 3-dimensional picture of the part being inspected.
Per Perceptron's management, the Helix system is used by "automotive and manufacturing companies worldwide to help them manage complex manufacturing processes to improve quality, shorten product launch times and reduce the costs associated with variation in the manufacturing process."
What I see is the story of a stock that has rebounded from a 52-week low of $5.00 to a high of $13.95, as the story plays out of a gamechanging technology experiencing rapid adoption in the automotive industry. Additionally, management has stated many times that Helix has plenty of potential in other industries, but they are focusing on automotive for now. That's music to my ears, additional upside that isn't priced into the stock.
PRCP is currently trading well above its 52-week high and looks ready to break out yet again. Relative strength is 97, upward sloping, and very bullish. With a low float and trading volume (average daily is 85,000 shares), the potential is even greater for a squeeze as institutions jump on the bandwagon.
To reiterate, sales are growing at an accelerating pace. In the fourth quarter of 2013 income from continuing operations was .46/share versus negative .16 in the same quarter of 2012. Management has commented on "robust" bookings and a strong $30 million order backlog with more coming in. Management has proved themselves to be shareholder friendly by paying a special dividend in addition to their first annual dividend. Management has a "confident outlook" on continued sales growth in 2014. They have stated that Helix should start to become a double digit contributor in 2013 and then continue to grow over the next few years.
To conclude, there are many risks involved in a microcap company like Perceptron, including increased volatility and share price manipulation. There could be a few hiccups along the way as Helix is in the early adoption phase. I have initiated a medium sized position, added to it once, and would call myself a cautious long, as I wait for the story to play out, keep a close eye on the technicals to confirm, and wait for opportunities to add to the position again. For patient investors, I believe we will be rewarded over the next couple years.