ChromaDex: How an Insider Piqued My Interest

Jul. 6.11 | About: ChromaDex Inc. (CDXC)
Timeless Wealth is compensated for research coverage, which denotes a clear bias to our investment opinion. We believe that our research is objective, weighing both the risks and rewards of an investment opportunity. However, our end goal is to highlight firms that we believe are innovative and offer compelling investment propositions. This leads us to ChromaDex Corporation (NASDAQ:CDXC).
The onset of abnormal volume has historically ignited shares of ChromaDex Corporation, a natural products company and a leading supplier of phytochemical and botanical reference standards. Shares rose to a 52-week high price in early February, congruent with increasing volume.
Yet unusual volume has been well-documented in catering to bullish moves, thereby, none of the events described should intrigue investors - the following two facts aside:
  • More than twice the average number of shares traded daily in the months of April and May changed hands in June;
  • ChromaDex President, William Spengler, purchased shares in the open market in the latter part of May, largely contributing to the change in sentiment that quickly ensued.
From a bird's-eye view, executives often find themselves under duress when it comes to satisfying shareholders. Investors tend to grow furious when management is lackadaisical in trading alongside public stakeholders. Fortunately, Spengler's recent transactions add to a 35% insider holding - a factor Mr. Benjamin Graham himself would commend.
Spengler, who has served as a director of Endo Pharmaceuticals (NASDAQ:ENDP) since 2008, cast a vote of confidence in ChromaDex, investing in the small Irvine, California,-based firm alongside the pharmaceutical giant.

Beyond a reasonable doubt, insiders have aligned themselves with shareholders, betting on the success of the business. The question, then, is should you do the same?

Here are three reasons why ChromaDex will pique investors’ interest:
  • Q1 2011, the company registered a record quarter in revenue, with sales growth of 31% year-over-year. Despite recording a loss for the period, ChromaDex was cash-flow positive, which added considerably to its ending cash balance. Debt stands at less than $260K. ChromaDex stated in a recent presentation that revenue for the current year would top last year's by 60% - at the low end.
  • GNC Corp. (NYSE:GNC) agreed to roll out BluScience, ChromaDex's new line of dietary supplements featuring pTeroPure, in stores nationwide and online, this month. This should reflect in sales figures in the third and fourth quarter.
  • Cott Corporation's (NYSE:COT) beverage division agreed to license Chromadex's pTeroPure pterostilbene "for the joint development of a clinically-backed, proprietary ingredient blend to serve the food and beverage, nutraceutical, and cosmetic markets." Chromadex expects their patented ingredient will conservatively add upwards of $60M in revenue per annum, in 3-5 years.
pTeroPure is a formulation of pterostilbene, found in blueberries, which has the potential to impact heart health by supporting cholesterol and blood pressure while providing additional benefits related to cognitive function and healthy aging. pTeroPure’s applications are quite broad, and thereby should give ChromaDex leeway into a multitude of new markets.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CDXC.OB over the next 72 hours.

Additional disclosure: Timeless Wealth receives compensation for providing research coverage. In May, JSDC Inc., a boutique advisory firm, retained our services on behalf of their client, ChromaDex Corp. We agreed to provide coverage for a period of three months. The views expressed are purely our own.