I had the opportunity to attend LD Micro's invitational conference this week in Los Angeles, where Chris Lahiji's team put on the premier small/microcap conference. Obviously, I couldn't attend every presentation, but the goal at a conference like this is to get just one name -- one great stock pick can make an asset manager's year.
At LD's conference in December, I wandered into a presentation and came out drinking the AquaBall. I have written about True Drinks Holdings (TRUU) in prior columns, so I won't rehash the story here, but without TRUU's 58% gain since I bought it for my initial "Mad Money" portfolio on Jan. 17, that portfolio wouldn't be crushing its benchmarks. So, here are a couple candidates to be the next True Drinks.
The best story I have heard lately is Energous Corp. (WATT), which offers wireless charging. WATT has developed a transmitter/antenna system that provides power to multiple devices within 15 feet via a WiFi-type signal -- no mats, no pads and no cords.
Energous' WattUp system is currently designed to interface with a receiving module contained in a "backpack." Think of an OtterBox protective iPhone case and the receiving unit is not much larger. But the technology is moving so fast in this space that it is quite possible the backpack may not even be necessary and the WattUp technology could be placed directly on a chip. Quite simply, it is possible you'll never be able to see the WattUp technology. As someone who is constantly seeing the battery icon on my phone flash red, I know this technology is in demand.
WATT's business model is based on commercial licensing of its technology, and, obviously, as WattUp has not yet been commercialized, it has no meaningful revenue. But, crucially, financing is in place for Energous. The company raised $25 million with its initial public offering on March 28 and has no debt.
This is an idea stock and, while a company at this youthful stage is not usually listed on a major exchange, WATT could truly grow into something special.
A story intriguing for altogether different reasons is 22nd Century Group (XXII), which bills itself as a plant biotechnology company. But the company's core competency is the ability to genetically engineer tobacco crops to vary the level of nicotinic alkaloids within the leaf. So, XXII can generate a very low-nicotine blend that allows smokers to puff away while doing less damage to their bodies.
But where would they be used? Company President Henry Sicignano mentioned the magic word in the tobacco world: China. It's no secret that the No. 1 seller of cigarettes in the world is the Chinese government, and profits from those sales fund much of what Beijing does.
While it is unlikely that 22nd Century will be allowed to enter the heavily fortified Chinese market on its own, XXII management is interested in licensing its technology. China's government is clearly weighing the public health risks of a nation of heavy smokers vs. the revenue involved. Low-nicotine products could be a win-win in that scenario, and it's easy to conceive of a massive stream of royalty payments coming to XXII from such a large, smoky market.
Finally, I met privately with management from Deep Down (DPDW), the "Mr. Fix-Its" of the deep-sea drilling industry. Deep Down provides non-helical umbilicals and flying leads to oil producers and drilling equipment OEMs. While always looking to grow its customer base through long-lead-time orders, the real value-added for DPDW seems to come from last minute "uh oh" calls from oil majors.
Deep-sea drilling is expanding rapidly. The industry has rocketed back after the BP Macondo-driven slowdown (DPDW was called in to help during that crisis) and growth is predicted at a rapid pace for the next five years. This week, energy research group Douglas-Westwood released a forecast for $117 billion in subsea hardware capex for 2014-2018, an 80% increase from the preceding five-year period.
So, there will be much more deep-sea drilling, and that will drive business for DPDW. Some of that business may come in the form of last-minute, late-night phone calls to DPDW's CEO Ron Smith, but the business will come. It's an inherently unpredictable business, but it's a great niche, and for patient investors, it's certainly an interesting play.