As I mentioned yesterday, I believe the S&P 500 is clearly overvalued based on current earnings per share estimates for 2015, which I believe are too high. We have ZERO exposure to the S&P 500 in Portfolio Guru, LLC accounts, but we do have some exposure to smaller, high-growth common stocks via my Mad Money portfolios. So, I've been watching several names that I discovered in 2014, one that was part of the original Mad Money group and two that I researched later in the year. Interestingly, all three stocks rose in Monday's broad-market bloodbath, and I believe that's a performance that could be repeated.
Energous (WATT). Energous raised $21 million in a follow-on offering on Dec. 10, an unusual move for a company with virtually no revenues. The company's burn rate was not such that it was desperate for cash, and the $21 million was meant for spending on marketing/regulatory/partnership efforts for its WattUp technology.
But is it worth marketing in the first place? That is the question that will be answered this week at the Consumer Electronics Show in Las Vegas. WATT shares declined sharply in the second half of 2014 due to some delays in regulatory progress and the absorption of the new shares from the company's offering. I would expect more volatility as CES attendees draw their own conclusions on the future of wireless charging.
Make no mistake, though, Energous' WattUp is a game-changing technology in a world of mat-based chargers or chargers that have so little range they might as well use a mat. For the last year, Energous management has been gearing the company's strategy toward a "Big Bang" rollout at CES. Now, that moment is upon us.
Energous has promised to display at CES "unleashed wire-free charging..and...a demonstration of various electronic devices employing the WattUp technology, which has been integrated seamlessly into a common residential setting, providing the ability to charge a multitude of devices free of any wired connection or charging pad."
To buy a stock against the backdrop of an overall market that I believe is overvalued, I need to see a truly revolutionary technology and demonstrated (and patent-protected) intellectual property. Energous fits that bill -- and so does Second Sight (EYES).
Please refer to my November column if you need a refresher on the EYES story, and there has been no new news -- save for an agreement with a Turkish distributor -- since the company's IPO. After coming public at $9 per share, opening at $17 and rising as high as $24 on the second day of trading, EYES crashed all the way down to $10. I believe this is a function of technical trading, where traders allocated shares on the offering try to double-dip by shorting shares of the newly-IPO'd company after they sell their allocations at a nice first-day profit.
So, I learned a trading lesson on EYES, but in no way shape or form am I any less bullish on the prospects for the company's Argus II retinal prosthesis technology. I had the opportunity to meet again with Second Sight's CEO, Dr. Bob Greenberg, in Los Angeles a few weeks ago, and I remain convinced that Argus II is a world-changing technology.
The key is that the retinal implant is a base and that future software upgrades will allow for many improvements to the implanted device. The next big software upgrade isn't scheduled until the second quarter of 2016, but in the interim, Dr. Greenberg and co. will be marketing the technology to retinitis pigmentosa sufferers. Indeed, Dr. Greenberg noted that raising public awareness of the technology was a key reason for the timing of Second Sight's IPO. The company has a rock solid balance sheet, with $42 million in cash and no debt following the IPO, and it can proceed on a schedule that is measured in years, not quarters.
Finally, there is True Drinks (TRUU). TRUU was an early star of my Mad Money portfolio, but the shares began a steep decline after the company's third-quarter earnings report. AquaBall, a vitamin and naturally flavored water drink, is a great product for an increasingly health-conscious society, but the company never raised the appropriate type of capital to facilitate the rapid growth that they are experiencing.
So, rationally, the market has been greatly concerned about True Drinks' ability to finance operations. The company addressed that issue with a press release on Dec. 31, noting that it had retained existing bankers Merriman Capital to "examine strategic and growth financing alternatives to fuel the expansion and brand development of AquaBall."
Oftentimes the "strategic alternatives" press release is an advertisement that the company is for sale. That's probably true here, as well, although I am sure CEO Lance Leonard and crew would rather find a partner to make an equity and/or debt investment in True Drinks.
It's inarguable that the company needs more money to finance growth of AquaBall, and the shares have nearly doubled since their mid-December lows. I valued TRUU at over $1 per share before they had large warehouse club customers. Cash is king, though, and if a larger beverage player or private equity house comes in with an offer closer to $0.50 per share, I'm not sure the company has enough capital to refuse such a deal. That's still more than double TRUU's current price of $0.23, so I am buying more this week.