4 Stocks for the Aggressive Investor

by: Ian Cassel

As many of you who follow me know, I make a living exclusively from capital gains in micro-cap stocks. Many astute investors do not dare go into the micro-cap Wild West, and that is exactly why there is so much opportunity. Unlike in the small-medium-large cap arena, in micro-cap, qualitative analysis (betting on the jockey) is as important as quantitative analysis (betting on the horse). I spend most of my days looking at new companies and evaluating management teams trying to find the next needle in the haystack. Here are a few names I’m currently invested in and/or looking at that I find compelling.

Quepasa Corp. (QPSA.OB): Quepasa Corp. is the only publicly-traded social network. Quepasa.com is a leading online social network and gaming platform for the Latino community. Membership has grown from 7 million to 27 million in the last 12 months. Management plans to roll out wholly-owned and third-party social games starting in Q1 2011, which are expected to increase growth, monetization and retention of the membership base.

Revenues to date have primarily come from “related party” DSM (Distributed Social Media) contracts with municipalities and businesses associated with the chairman of the board, Alonso Ancira. These related party deals served as proof of concept that were used to eventually sign up Grupo Expansion (a division of Time Inc. (NYSE:TWX)) and Sony Pictures Television as resellers for Quepasa DSM.

Comparables in the private and secondary markets value social networks anywhere from $15-100 per member. QPSA currently has 27m shares fully diluted with ~27 million members or valued at $14 per member. Quepasa.com is one of the fastest growing social networks in a highly coveted demographic, so it isn’t too farfetched to think Quepasa.com should be valued at $20+ per member. Even with a per-member valuation remaining constant, Quepasa.com is adding ~2 million members per month, which acts as an ascending floor for the stock price. You put any realistic value per member on an expected 50 million members by YE 2011, and you have a stock price considerably higher than the current one.

iBio Inc (NYSEMKT:IBIO): iBio is a $150 million company with a paradigm-shifting technology addressing a $150 billion annualized market. iBio addresses the worldwide need for cheaper vaccines, proteins, biosimilars, biobetters, and generics. A unique relationship with the Bill & Melinda Gates Foundation, DARPA, and the Fraunhofer USA Center for Molecular Biotechnology (FCMB) makes IBIO a great vehicle for stock appreciation. The Gates Foundation and DARPA have funded $70+ million into the FCMB over the last few years, and IBIO owns all the IP that comes out of the FCMB. It is the perfect blend of not-for-profit and for-profit. IBIO has the scientific wherewithal of a company 10x its size with a fraction of the operating expenses. IBIO has just begun to license its technology in 2011, and with every licensing deal adding increased validation, I expect IBIO to have a great year. A more detailed analysis on IBIO can be found here.

Bacterin International (BIHI.OB): Bacterin is one of the few U.S.- based companies that is expected to grow 200% year/year (expected $15m+ revenues FY 2010, guidance of $52m+ in 2011). Bacterin began in 1998 as a spin-out of the Center for Biofilm Engineering, a National Science Foundation Center of Excellence. After receiving over $4 million in Department of Defense grant funding to develop antimicrobial coatings on medical devices and biological scaffolds for tissue regeneration, Bacterin began commercial sales of its technologies in 2007.

The company's flagship product, OsteoSponge, is an acellular biological scaffold for bone repair. The product is ostoinductive, osteoconductive, and osteogenic when the patient’s own stem cells are combined into the scaffold. The unique handling properties, similar to a household sponge, allow for multiple orthopedic indications to regenerate bone in a safe, fast, and cost effective scaffold. With over 50,000 implants in four years, there has never been an adverse event. Surgeon retention rate is over 80%, with greater than 80% gross margin. The company has successfully transferred the technology to additional scaffolds for the regeneration of subchondral bone and skin.

While regenerative medicine is still in its infancy, Bacterin is poised to be a world leader in the space with its advanced processing technologies. I expect the stock will become much more liquid in another few weeks when its registration statement goes effective.

Augme Technologies (AUGT): Augme is one of the few pure plays in the rapidly growing mobile coupon and mobile marketing industries. The Augme story is one that offers both top line growth (200%+ yr/yr) with blue sky patent litigation win potential (hundreds of millions). Northland Capital Markets is estimating YE 2011 (2/11) revenues of $3.3m, YE 2012 revenues $15.3m, and YE 2013 revenues of $38.3m. In just the past several months, the company has grown its Fortune 500 customer base from just a few to over 25. Adoption of Augme’s AD LIFE platform is expected to accelerate as the mobile advertising market continues to grow. The AD LIFE platform is one of the only complete end-to-end device-agnostic solutions. The total spend on mobile marketing campaigns in the U.S. will drive a four-year CAGR of just under 60%. As it relates to AUGT, the capital structure of the company could be better, but I think shares will continue to be in demand as the company is in the right place at the right time.

Disclosure: I am long QPSA.OB, IBIO, BIHI.OB.