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RedChip's long history of success includes the first to issue independent research coverage on Starbucks in 1992. Other names RedChip discovered as they were on the cusp of becoming Blue-Chip stocks were: Nike™, MarketWatch.com™, Daktronics™. Over the years, RedChip has evolved into a... More
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  • Big Opportunity With Cancer Genetics (CGIX)

    Cancer Genetics, Inc. (NASDAQ: CGIX) had a big run in September; at one point, shares were up more than 130% over their IPO and secondary offering price of $10.

    As recently as October 2, CGIX ranked as the 8th best-performing biotech IPO and the 19th best-performing IPO overall for the year. Also on October 2, Feltl & Co., who began covering the stock shortly after its IPO, raised their price target for CGIX to $30.50, nearly 100% higher than recent trading.

    CGIX is in the right space at the right time, providing DNA-based diagnostics for cancer.

    It was only 13 years ago that the human genome was first mapped out, a process that took many years and billions of dollars. Today, this can be done in days and for a few thousand dollars. This dramatic shift in economics has resulted in a relatively new arena where DNA-based diagnostics are becoming available to the average person.

    According to Walter Isaacson's biography, Steve Jobs paid a reported $100,000 to learn the DNA sequence of his cancer. This work, completed at MIT and Harvard, led to the launch of Foundation Medicine (NASDAQ: FMI). Foundation Medicine has grabbed headlines over the past couple of weeks as it entered the capital markets with a high-profile IPO led by Goldman Sachs.

    Flush with cash, Foundation Medicine is currently branching off from its broader FoundationOne DNA-testing platform to develop diagnostics for specific cancers, including blood-borne cancers such as leukemia and lymphoma.

    It's estimated that hematological and urogenital cancers account for annual testing of approximately $6 billion in the U.S. and $15 billion globally.

    CGIX already has five proprietary products in the market in these historically difficult-to-diagnose cancer categories, beating FMI to market. The Company's unique microarrays diagnose the specific subtype of a patient's cancer, provide important prognostic information, and inform physicians of likely treatment outcomes. This is a great example of the goal of personalized medicine. By analyzing the specific genetic information of a patient, doctors can generate the necessary insight to get the right treatment to the right person at the right time.

    Like Foundation Medicine, CGIX is building its war chest too. It's already successfully closed on $23 million in gross proceeds this year and just filed to raise an additional $46 million. We view this raise as a major positive for CGIX. We expect after a quick closing, CGIX will up their projections significantly - likely bringing their longer-term plans forward by as much as 18-months and giving the company a national sales footprint as early as 2014.

    This accelerated growth comes from a strong foundation. CGIX has already demonstrated that they can grow their business. The benefit of established reimbursements, combined with growing test revenue from recent and ongoing launches of proprietary tests puts CGIX in a great position. A position that strengthens dramatically with a major influx of new cash.

    CGIX is already receiving reimbursements for its proven, proprietary tests, and additional cash will allow the Company to expand and deepen relationships with third-party insurers. Additionally, CGIX can take advantage of expected volume increases due to the Patient Protection and Affordable Care Act, which is extending coverage to approximately 32 million previously uninsured people. Higher capacity utilization will yield increases in gross margins.

    Another big positive that will come from this raise is the ability to fully fund the Company's OncoSpire joint venture with Mayo Clinic. This JV has the potential to provide cutting-edge IP through the development of next-generation sequencing technologies in oncology.

    While this latest funding is a major long-term positive for CGIX, the news of the raise had an initial negative impact on the shares. For investors who missed the first big run-up in CGIX, this pullback provides a solid opportunity to accumulate shares at low valuations.

    The market appears to have simply had a reflex reaction to its fear of the unknown - the unknown of how much dilution this offering may bring. But for those reading our reports, they already knew our original target of $26.75 per share, issued in August, factored in additional dilution. Even taking into account a very conservative capital raise priced at $17.00 per share (the volume-weighted average trading price over last 30 days) would only result in a maximum increase in the shares outstanding of 2.7 million, giving the Company total shares outstanding of 8.7 million.

    If the past is any predictor, this pullback will be brief. This also happened back in June when CGIX announced its previous round of funding. While the stock quickly dropped to around $7 in June, it rebounded quickly and spent the majority of the next eight weeks at the high end of its trading range, near $12 per share.

    It's also worth looking at some other numbers. CGIX's average volume-weighted price for the past 14 days is $19.50, and its average volume for the same period is more than 400,000 shares per day. That puts the recent sell-off in perspective, especially considering it happened on relatively light volume. This pullback also coincided with a big sell-off in the broader biotech market.

    By doing this raise now, CGIX is able to put itself in a position of substantial financial strength, potentially reducing the time needed to reach profitability. A major raise, on top of a sizable cash position from prior rounds, will provide the fuel for the Company to truly capitalize on its emerging leadership position in this rapidly evolving and expanding market.

    Read the latest RedChip research update on CGIX, or watch our interview with billionaire investor John Pappajohn at the NASDAQ MarketSite, and see why he invested $12 million in Cancer Genetics.

    Disclosure: The subject securities are clients of RedChip Companies, Inc. RedChip Companies, Inc., employees and affiliates may have positions and affect transactions in the securities or options of the issuers mentioned herein. For full financial disclosures for all RedChip clients, please visit http://www.redchip.com/disclosures.asp?src=rcv.

    Oct 11 9:40 AM | Link | Comment!
  • Two Tech Microcaps With Big Potential

    Social media site Twitter's pending IPO, which analysts estimate could be valued at more than $10 billion, has sparked fresh interest in technology stocks. Although large-cap tech giants such as Apple and Facebook attract the majority of headlines, investors can find opportunities in the microcap segment of the sector as well. Here are two microcap tech stocks with the potential for strong returns:

    SMTP (OTCQB: SMTP) provides email delivery services to over 8,000 customers worldwide, ranging from small businesses to large Fortune 500 companies. The Company helps ensure that its customers' bulk emails reach the intended recipients, rather than ending up in a spam filter or being returned as undeliverable. Their services enable customers to initiate aggressive email marketing campaigns without being blacklisted by Internet service providers. The Company is a leader in the email delivery segment, the fastest-growing area for email marketing.

    SMTP's track record of consistent sales growth and profitability enables the Company to pay a quarterly dividend, one of the few microcap stocks to do so. For the most recent quarter, SMTP declared a quarterly dividend of $0.023 per share, a 28% increase over the previous quarter and a 53% increase year-over-year. At recent share prices, the Company offers investors a 7% trailing annual dividend yield.

    And while the Company pays a dividend, it's also a growth stock. For the fiscal year 2012, SMTP grew revenues 25% year-over-year to $5.3 million and after-tax income 18% to $1.1 million. SMTP's strong sales growth and high quarterly dividend yield provide a unique combination for investors. Watch our interview with CEO Jon Strimling here.

    Quadrant 4 Systems (OTCQB: QFOR), a provider of informational technology software and services, is focused on four key areas that are shaping the future of business: social media, mobile technology, big-data analytics, and cloud computing. According to market research firm IDC, these four areas are expected to account for $5 trillion in spending by 2020. QFOR's solutions help blue-chip companies such as Walgreens, Ford, Citibank, and Cisco improve their efficiency and better serve their customers.

    QHIX, the Company's new health exchange solution that enables consumers to shop for health insurance, is a potential game-changer for QFOR. The Affordable Care Act is creating demand for private health exchanges, with major companies such as Time Warner, Sears, Darden Restaurants, and IBM moving their employees and/or retirees to private exchanges in recent weeks. Accenture, a global management consulting firm, projects that nearly 1 in 15 Americans will purchase insurance through private exchanges by 2017. QFOR is positioned to benefit from this industry shift.

    For the most recent quarter, QFOR increased revenue 37% and EBITDA jumped 133% year-over-year. Management expects $38 million in revenue and $4.5 million EBITDA for FY13. With growth likely to accelerate moving forward, it looks like a great opportunity here at only 1x trailing sales. Watch our interview with Chairman Dhru Desai here.

    Disclosure: The subject securities are clients of RedChip Companies, Inc. RedChip Companies, Inc., employees and affiliates may have positions and affect transactions in the securities or options of the issuers mentioned herein. For full financial disclosures for all RedChip clients, please visit http://www.redchip.com/disclosures.asp?src=rcv.

    Oct 02 12:01 PM | Link | Comment!
  • Abakan's MesoCoat Recognized By Inc. Magazine

    Abakan's (OTCQB: ABKI) MesoCoat subsidiary was recognized by Inc. Magazine last week and ranked as the 15th fastest-growing manufacturing company in the United States on the magazine's annual Inc. 500|5000 list.

    "Our technologies, solutions and potential have been recognized by some of the world's most prestigious media organizations, including The Wall Street Journal, Forbes and now Inc. Magazine. This is our debut on the Inc. 500|5000 list of the nation's fastest growing companies, and we expect to be one of the top companies on this list within a couple of years. We have received a tremendous amount of recognition and support for our innovative technologies and are now entering a phase in which it is our turn to deliver on their promise and potential," stated Abakan CEO Robert Miller.

    We first featured ABKI nearly a year ago when the stock was trading for just $1.75 per share. It's been as high as $3.50 since and can be picked up for a bargain price of around $2.60 today. With technology that impacts multiple multibillion-dollar markets, shares aren't likely to stay at these prices for long.

    While the Company's technology has been developed over many years, ABKI is just now entering commercial production with its high-revenue-potential clad-piping technology - CermaClad™. Winner of this year's Steel Excellence Award from American Metal Market (AMM) under the 'Best Process Innovation category,' CermaClad delivers up to two orders of magnitude higher productivity, outstanding mechanical and metallurgical properties in the final product, and a host of other high-value benefits such as ease of inspection, reeling, and installation of clad pipes.

    CermaClad™ technology uses a high-intensity plasma arc lamp to rapidly melt, fuse, and metallurgically bond corrosion-resistant (NASDAQ:CRA) and wear-resistant materials to metal substrates, including pipes. The technology addresses the large and increasing demand-supply gap for corrosion resistant alloy (CRA) clad pipes in general, and more importantly, it addresses the huge demand for large-diameter and thick-walled CRA clad pipes, which are extremely difficult to manufacture, inspect, reel, and install using existing technologies.

    This April, MesoCoat commissioned its first large-scale CermaClad manufacturing facility in Euclid, Ohio. This plant will serve as a critical pathfinder for full qualification and market entry of 12-meter CermaClad seamless clad pipes. In addition to the Euclid plant, MesoCoat is currently planning to build an additional four-line facility in Brazil.

    To learn more about this exciting company and its massive market-changing potential, watch a recent interview we did with ABKI CEO Robert Miller: http://www.youtube.com/watch?v=uFSP3VLUNJk

    Disclosure: The subject security is a client of RedChip Companies, Inc. RedChip Companies, Inc., employees and affiliates may have positions and affect transactions in the securities or options of the issuers mentioned herein. For full financial disclosures for all RedChip clients, please visit http://www.redchip.com/disclosures.asp?src=rcv.

    Aug 27 8:27 AM | Link | Comment!
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