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Revisiting Stocks That Are Poised to Triple

May 23 2011, 07:28 by: Mark Gomes  |  includes: ATEA, BVSN, CALX, CERP.OB, DBTK, IGOI, LAVA, LIOX, LNKD, MEET, NOVL, OCNW, PVSW, RENN, RNWK, VOLT, ZHNE
When I signed on as a Seeking Alpha contributor two years ago, my mission was to present investors with ideas that represented relatively low risk and relatively high return. Over the past seven months, I have narrowed that focus, zeroing in on stocks that appear poised to triple. Both strategies have proven very successful.

It’s time for an update on those stocks.

Most significantly, Cereplast, Inc. (CERP) has been added to our list. The initiation piece, Cereplast: EU Plastic Policy Should Boost Stock, was published by Seeking Alpha on May 8. Since that time, the company announced strong Q1 earnings, with revenue up 2300% (not a typo) year over year, from $0.3M to $7.2M.

This meteoric growth was due in large part to a ban on plastic bags in Italy, which has sent demand for Cereplast’s biodegradable plastic alternative skyrocketing. The rest of the EU is expected to follow suit. In addition, there are many other anti-plastic initiatives underway worldwide, which is the crux of my belief that shares of CERP are poised to triple. See my initiation piece for further details.

More recently, Cereplast announced a new round of financing this week. The shares dipped on the news. This is not uncommon -- share weakness on such news is often warranted, because the company in question is usually in financial disarray. In this case, the new financing is needed to expand CERP's capacity to meet demand (which the CEO recently said is greater than it can currently handle).

The fact that the company was able to secure a large loan without diluting its share count should have been viewed positively. As such, I believe that this week’s share-decline will be short-lived and represents an excellent entry opportunity.

Moving on to our past and current picks, here’s a complete list of initiation pieces:

As of May 20, 2011
Date
Article
Company
Ticker
5/8/2011
Cereplast, Inc.
3/20/2011
Pervasive Software
11/12/2010
Quepasa.com
11/12/2010
Astea Software
10/24/2010
Zhone Technologies
9/19/2010
Calix, Inc.
8/15/2010
Occam Networks
8/15/2010
I-Go, Inc.
8/15/2010
Magma Design
5/21/2010
Novell, Inc.
5/21/2010
DoubleTake Software
2/17/2010
RealNetworks, Inc.
2/8/2010
BroadVision, Inc.
1/22/2010
Voltaire
1/20/2009
Lionbridge
The portfolio continues to perform very favorably, even when compared to the NASDAQ’s impressive returns. Here’s the most recent performance list for our basket of stocks that are poised to triple:

All data as May 20, 2011
Stock
Initial Price
NASDAQ
Subsequent High *
NASDAQ High *
Peak Return
NASDAQ
Delta
CERP
4.92
2,827.56
5.18
2,887.75
5%
2%
3%
PVSW
5.36
2665.54
7.29
2,887.75
36%
8%
28%
QPSA
6.58
2534.24
15.45
2,887.75
135%
14%
121%
ATEA *
2.25
2534.24
7.64
2,799.82
240%
10%
226%
ZHNE
2.01
2461.6
3.24
2,887.75
61%
17%
44%
CALX
12.45
2318.42
22.97
2,887.75
84%
25%
60%
OCNW
5.41
2183.09
9.84
2,297.51
82%
5%
50%
IGOI
1.56
2183.09
5.19
2,887.75
233%
32%
200%
LAVA *
2.77
2183.09
7.15
2,799.82
158%
28%
126%
NOVL
6.06
2245.56
6.53
2,509.39
8%
12%
-4%
DBTK
10.28
2245.56
10.55
2,352.77
3%
5%
-26%
RNWK
4.48
2200.38
5.41
2,887.75
21%
31%
-10%
BVSN
12.64
2131.92
14.50
2,887.75
15%
35%
-21%
VOLT
6.10
2298.23
8.73
2,497.12
43%
9%
17%
LIOX *
1.23
1532.47
6.21
2,799.82
405%
83%
316%
Averages
102%
21%
81%
* Prices are frozen in M&A situations or when coverage ceases.
Looking down the list of existing picks, here are the most notable changes over the past month:

Quepasa.com (QPSA) – With the IPO of Renren (RENN) and more recently, the red hot IPO LinkedIn (LNKD), QPSA has received a great deal of attention over the past several weeks. Looking specifically at LinkedIn, the company boasts over 100M registered users. QPSA is a third of the way there, with 35.6M registered users. However, LNKD's valuation is more than fifteen times that of QPSA.

Of course, I'm not suggesting that QPSA shares should trade in parity to LNKD (or even close -- that would send QPSA shares from the $7s to over $100). Indeed, Quepasa is still early in the process of monetizing its user base and driving traffic to its site. However, the company has been making steady progress in this regard, which compares similarly to the progress Pandora (which promises to be another hot IPO) made in its early years (see the comments section of Quepasa Shares Still Set to Triple for details).

In the past few weeks, the shares jumped from 5 to 9, and have since settled in the mid-7s. Indeed, the shares are volatile, but predictably rise whenever a social networking company makes big news and tends to drift lower soon thereafter. The next catalyst could be a Facebook IPO, if not a buyout by a larger company looking for a greater foothold in Latin America.

I-Go, Inc. (IGOI) – On May 5, IGOI announced earnings that disappointed investors. Since that time, the shares have slumped from the high-2s to the low-2s. What investors seem to have forgotten is that the real potential in this stock lies with its patent-related chip partnership with Texas Instruments. In that regard, the Japanese disaster will unfortunately delay the chip’s introduction by 3 months.

Weighing this against IGOI’s opportunity (see After Solid Q4, iGO Expects Boost From Texas Instruments Partnership for more on this), the recent 25% decline in IGOI’s shares appears unjustified.

In the coming months, I will continue to provide progress updates on these stocks. I also plan to initiate coverage on several more companies whose shares I believe are poised to triple. Stay tuned.

For my first and most comprehensive review, see the SeekingAlpha article entitled “Eyeing Stocks That Are Poised to Triple”.

Disclosure: I am long ATEA, BVSN, CALX, CERP, DBTK, IGOI, LAVA, LIOX, NOVL, OCNW, PVSW, QPSA, RNWK, VOLT, ZHNE.

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