eMagin: Keep a Close Eye on This Technology

| About: eMagin Corporation (EMAN)

Today there are all sorts of technologies to keep men and women in the military from getting shot. These brave people, many of whom are fighting in Iraq and Afghanistan, deserve the latest and greatest technologies to help keep them out of harm's way. And companies that are developing the best solutions are finding huge demand for their products.

Some of the most exciting technology is found in virtual imaging headsets. These headsets combine thermal images, GPS, target position, integrated camera, laser rangefinder, and other capabilities in a tiny display that looks like a large screen television to the user. Put one of these bad boys on and you're ready to navigate intensely dangerous terrain with a lot more confidence.

The idea is to let the modern soldier see the enemy first, navigate the battlefield easily and execute their objective under any circumstance.

Some displays are full high-definition, others have transparent screens. They are getting lighter, more resilient to damage, and more energy efficient - and are even reliable in extreme climates. The few companies that supply these highly specialized screens enjoy a solid customer base in a growing industry.

Seven months ago we invested in one such company for our Small Cap Investor PRO service. eMagin Corporation (AMEX: EMAN) has a proprietary technique that allows it to build organic light emitting diode (OLED) micro-displays, those less than an inch in diameter, directly on silicon. The technology makes its miniature displays the best on the market and management believes it is the only company using this superior method.

Two weeks ago we closed our position in eMagin for a nice 67 percent gain.

I still like this stock. Actually, I like it quite a bit. However, there were a couple of details from the last conference call that seem to have held shares from moving higher recently, and actually contributed to some selling pressure.

Here are those details...

Specifically, U.S. Government spending might contract (remember that debt ceiling?) which could mean some of eMagin's contract revenues could get pushed back. The company also worked double duty over the last quarter to overcome production issues - those are what led to the first quarterly loss ($0.01 per diluted share) since the second quarter of 2008.

On the positive side of things, development of new OLED micro displays, like the 15-Micron pixel VGA OLED display, appears to be progressing well. This display uses less than half the power of the current model, a huge improvement when less power consumption in the field can mean hours more battery life.

I'm going to keep my eye on eMagin because I do think that this stock has the potential to move higher in the coming years. But I doubt it will be very fast, and very soon, meaning that we can bide our time and look for a lower entry point.

Catalysts that I'll be looking for include significant new contract announcements, and hints of rising demand from the company's small consumer and industrial markets. I'm also monitoring the company's progress getting a new OLED Deposition machine online, which should happen in late 2011 or early 2012. This should increase yields, while lowering manufacturing costs.

I'll monitor the stock and consider adding it back into our portfolio if I see a good entry point. Right now, I want to reduce some of our exposure, book that 67.4 percent gain in 7 months, and hold the cash for our next opportunity.