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(Editors' Note: This article covers a micro-cap stock. Please be aware of the risks associated with these stocks.)


My prior small cap ideas have generated average returns well exceeding 100% at their peaks following publication of my articles. In my continual mission to deliver alpha to readers, today I present a company whose shares should meet or exceed these prior results. Aetrium (NASDAQ:ATRM) is the quintessential "fallen angel" of Wall Street, down from a split-adjusted $200+/share in the mid-1990s to a mere $5 stock today. However, Aetrium has recently seen a sharp uptick in business and has elected a shareholder champion and Soros protégé as Chairman of the Board. Aetrium currently stands as one of the most compelling turnaround stories heading into the new year.

Note: As of this writing, shares of Eltek (NASDAQ:ELTK), a low float name in the PCB sector, are soaring. Aetrium likely gets picked up as a sympathy play on this parabolic Eltek move.

Eberwein to Drive Shareholder Value

Earlier this month Aetrium underwent a significant management shakeup that happened to coincide with a product launch that seems to be gaining significant traction (discussed below). A feckless Board has been replaced, and veteran Jeffrey Eberwein has been appointed Chairman. "We are excited about the management changes and board additions. The Board and management are committed to maximizing shareholder value," proclaims Eberwein. Eberwein has served as Portfolio Manager of Soros Fund Management, in addition to positions at Viking Global and Cumberland Associates. Eberwein is highly regarded for an "intense focus on creating shareholder value." He is known to take activist roles in underperforming companies. And he puts his money where his mouth is. In addition to his substantial personal equity stake, his Lone Star Value Management holds a 5.6% position in Aetrium shares, a self-described "investment fund focused on long-term investing in deeply undervalued public securities where we help create value through a hands-on approach." A quarter of Aetrium's float is closely held.

Sales Ramp Following Successful New Product Launch

Aetrium recently announced multiple orders for its just released VMAX IC test handler. This announcement sent shares soaring 250%. Notably, in addition to receiving orders from long-term customers, Aetrium gained at least one new customer almost immediately following this launch. Shares have since relinquished most of those gains as the fast money has since exited the name, providing an opportunistic entry point at these levels.

Q1 Earnings Catalyst

If the early adoption of Aetrium's new product offering is any indication, the first quarter of 2014 should be a monumental turnaround quarter for the company. The comparables really couldn't get any more favorable; Aetrium posted a loss of 7 cents on $1.28 million in revenues for the first quarter of 2013. Aetrium will book the revenues of the recently announced order in Q1 of 2014. This order represents almost twice the revenue generated in the entire first quarter of 2013. Year-over-year revenue growth of 100% (and likely much more), and possibly accompanied by a swing to profitability, should re-ignite shares.


Atrium shares are unjustifiably hovering right around all-time lows, despite the recent developments and catalysts discussed above. Judging from their purchases, several insiders of the company considered shares undervalued even when they were trading at significantly higher levels. Chairman Jeffrey Ebervein, Director Richard Coleman, and Director Galen Vetter, have all purchased Atrium shares at higher prices over the past couple of years. The market is currently pricing Aetrium as a shell company with zero revenues or assets, which is nonsensical. Aetrium should, at a minimum, be trading at a valuation akin to a company like Superconductor Technologies, which would imply a share price of around $20. Small cap momentum players have pushed stocks like Mediabistro (NASDAQ:MBIS) to a valuation of 4-5x Atrium's, despite the fact that Mediabistro merely hosts conferences featuring the technology that companies like Aetrium deploy. Multitest, a larger competitor of Atrium's, was acquired by LTX-Credence just a couple of months ago at a price of over $90 million. I would expect consolidation to continue in this sector.

Dismissal of Litigation

Another recent positive development for the company announced in September involves some closure on a lawsuit that has distracted the company for the better part of two decades:

The litigation was a concern to our customers and shareholders, prompted significant defense costs, and proved to be very distracting to our normal course of business. We can now fully concentrate our attentions and resources on growing the value of the company.


Aetrium shares provide a compelling opportunity for the speculative investor at these levels. A fallen angel with a compelling turnaround story... a venerable activist investor now Chairman of the Board... a tightly held float with high insider ownership... represent an ideal combination for the small cap thrill-seeker looking for a potential home run heading into the holiday season.

Disclosure: I am long ATRM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.