One of the great features of Private Briefing, obviously, is the access you get to our experts – and to some of their recommendations.
And once we’ve passed one of their recommendations along, we’re pretty diligent about keeping you updated on any new thoughts those experts might have about those particular profit plays.
Today I want to give you an update on two particular Private Briefing recommendationsthat came to you courtesy of our experts.
The first stock we’re going to talk about is iRobot Corp. (Nasdaq: IRBT), the maker of household and defense robots that Permanent Wealth Investor Editor Martin Hutchinson recommended to you in the May 1 Private Briefing report “Now You Can Cash in on the Patent Portfolio Sweepstakes.”
Though the recommendation has been profitable at a number of points since then, it’s also been a volatile stock that has whipsawed us between a profit and loss. Right now the shares are down about 8% from where we first told you about them.
But I wanted to follow up on iRobot today because Martin has rated it as a new “Buy” to his Merchant Banker Alert subscribers.
“As you know, Bill, I’ve loved this stock’s long-term potential for quite some time,” Martin told me late last week. “But a decline in the defense robot business pulled down the overall financial performance and caused the stock to tank.”
As Martin explained it, the defense robot business is still a drag – but it's a much smaller drag. Government robot sales plunged in the fourth quarter to $17.8 million, but home robot sales were up 11% on the quarter and 28% for the year, at $82 million.
And the home-robot business is the one to watch, since it will account for 90% of the company’s revenue – and is projected to surge an additional 20% this year, Martin says.
About 70% of IRBT's home robots revenues come from overseas, with the Mint floor cleaning robot of ER Systems (a 2012 acquisition) providing growth as it's rolled out in international markets.
(Prospects for international defense robot sales are good; they are expected to account for a third of defense robot sales in 2013, up from 15% to 20% in 2012.)
“But here’s what’s really has me excited here, though: In January, the U.S. Food and Drug Administration approved sales of the RP-Vita Remote Presence Robot, the first telemedicine robot designed for remote doctor-to-patient consults,” Martin said.
RP-Vita was developed in a joint venture by iRobot and privately held InTouch Health for use in hospitals and clinics, in cardiovascular, neurological, prenatal, psychological, and critical care assessments and examinations. The robot can be used in emergency rooms, before, during and after surgeries. It can also be used for patient monitoring.
The RP-Vita will cost hospitals about $4,000 to $6,000 a month, which will include the robot itself, the software, networking and communication and installation. The first units are expected to be shipped this quarter.
The bottom line?
“It really looks like iRobot this year will be able to avoid many of the headwinds that plagued it in 2012,” Martin said. “And RP-Vita gives IRBT exciting growth prospects for 2014 and beyond.”
As we’ve mentioned in past briefings, there are two other nice potential catalysts that will at the very least provide a buffer – and that could also fuel a surge in the stock should the right conditions be met.
I’m talking about the company’s cash hoard, and its tremendous patent portfolio.
Let’s look at them both, starting with cash.
At the close of last year, iRobot had $127 million in cash – more than $4.50 a share – at the end of 2012, giving it a nice buffer should any of its strategies take longer than expected to get rolling.
A year ago this month, IRobot said it received its 100th patent – a pretty amazing milestone for a company of iRobot's size. And there clearly is value contained in that technology portfolio: We’ve been watching companies auction off their patent portfolios for hundreds of millions of dollars.
Given the company’s tiny ($598 million) market cap, that portfolio is clearly an undervalued asset.
Finally, it’s worth noting that iRobot recently boosted its guidance on full-year revenue, which it now projects at $480 million to $490 million. The company expects to earn 57 cents to 72 cents per share this year – a range that “bookends” the consensus estimate of 67 cents.
But we’ll be watching for additional upgrades.
“Best Investments of 2013” Report Update: Chief Investment Strategist Keith Fitz-Gerald’s “Buy” call on CommTouch Software Ltd. (Nasdaq: CTCH) – one of seven investments detailed in that special report – was incredibly timely. It’s risen as much as 23% in less than three weeks. Last week, he told his Strike Force subscribers that he’d set a profit target of $5.40 a share on the cloud-based security player. CommTouch was trading at $3.65 late yesterday.
The Weird Ways of Wall Street: Shares of blood-cancer biotech Pharmacyclics Inc. (Nasdaq: PCYC) surged enough last week to make the company the second “triple” (200% gain or better) that we’ve notched since launching Private Briefing in August 2011. But the stock sold off yesterday after investment banker Leerink Swann downgraded it to “Market Perform” because of the torrid run-up. The stock was trading at $83.87, meaning we’re up 195% since recommending it last April 2. But here’s the part I like. Even though Leerink downgraded the stock, it raised its “target” price on Pharmacyclics shares from $80 to $97. There’s nothing like hedging your bets in order to be right no matter what happens, I guess. If that target price is reached, folks who bought on our recommendation (and there are lots of you, as know from your notes) would be up 241% from where we first made our “Buy” call. For our most-recent update on Pharmacyclics, check out Friday’s briefing by clicking here.
The Hacking Story That Just Won’t Die: Less than a week after we last updated you on the “cyber-hacking of America,” Mandiant Corp., a U.S.-based computer-security firm, has a new report that says that a surging number of cyber-attacks against the United States are linked to the China's People's Liberation Army. According to the study, 141 U.S. companies have had their data breached or stolen since 2006.
The New York Times apparently got an advance peek at the report, and yesterday reported that “on the outskirts of Shanghai, in a run-down neighborhood dominated by a 12-story white office tower, sits a People’s Liberation Army base for China’s growing corps of cyber warriors. A growing body of digital forensic evidence — confirmed by American intelligence officials who say they have tapped into the activity of the army unit for years — leaves little doubt that an overwhelming percentage of the attacks on American corporations, organizations and government agencies originate in and around the white tower."
Beijing disputes the allegations and says the U.S. is guilty of its own digital transgressions, although it did not provide specifics. Indeed, a Chinese ministry spokesperson said claims are "unfounded accusations based on preliminary results" and that "China resolutely opposes hacking actions and has established relevant laws and regulations, and taken strict law enforcement measures to defend against online hacking activities."
Kevin Mandia, Mandiant’s founder and CEO, says China’s claims that it knew nothing of the attacks don’t hold water.
“China has a controlled Internet access, everything people do on the Internet is monitored there. We have seen thousands of attacks just in the last two years alone," Mandia told CNBC. “So it's hard to believe … that the Chinese government does not notice thousands of attacks coming from a neighborhood that happens to be co-located with [the PLA unit in question], it's hard to believe they don't notice.”
We’ll have more to report after we’ve had a chance to peruse the report.
[Editor’s Note: We recommend investors employ a 25% “trailing stop” on all holdings. And on stocks that double, Keith generally advises investors to employ his “free trade” strategy. That calls for investors to recoup their original investment by selling half their holdings – and to remain invested (sans the trailing stop) on the remaining half.]