Small Companies with Great Growth Trajectories

My good friend John Westergaard used to tell me regularly that investors do not want to buy into small companies — instead they want to buy into companies that are going to be big companies, which lets them “get in on the ground floor.”  Keeping that in mind, I decided to scout around and see if I could find some likely candidates.  I looked for companies with fast-accelerating revenues, big niches that they can dominate, or assets that could make them much bigger very quickly. 

Please keep in mind that we never recommend stocks.  We write about companies that we find interesting, and we always suggest that investors do their own diligence before investing.

If you are interested in finding companies that are on trajectories that may make them a lot bigger, here are a handful of interesting companies that you may not have noticed yet.

First, consider New York City-based interCLICK Inc (OTC BB: ICLK, http://www.interclick.com/), a behavioral advertising networker that is growing at a furious rate based on their ability to generate a cost-per-customer that gives advertisers an attractive “ROI” and a steady stream of buyers.  I heard CEO Mike Mathews present at the Rodman & Renshaw conference last week, and found the story compelling.  Revenues for the most recent quarter (keep in mind that we are in a troublesome economy) were up 126% year-over-year, and their growth chart is beginning to look Matterhorn-ish.  The stock closed at $2.05 on Friday the 11th on volume of 225,000 shares, close to its 52-week high of $2.25, and far above its low of $0.45, for a current market cap of about $85 million, which puts them at less than 2 times what looks like this year’s likely revenue, and just over par with 2010 revenue if it continues to rise the way it is rising now.  The management has a messianic attitude about their techniques and know-how, and a big-company client list as long as the CEO’s arm.

Then have a look at New York City- and Prague-based KIT Digital Inc (Nasdaq: KITD; http://www.kit-digital.com/), a video enablement company that allows big brands, telcos and entertainment companies to distribute video content via the Internet, mobile networks (think cellphones), and IPTV set-top boxes.  Their business is a little difficult to understand because it is largely unseen by viewers, but their most recent quarterly results were up 91% year-over-year, and seem to be running at a rate of $40 million minimum, with a current market cap of about $37 million.  KITD presented at the Rodman & Renshaw conference as well, and has a future lineup of other conferences that you can find out about on their website.  The stock recently moved from the Bulletin Board to Nasdaq, and closed at $7.72 on Friday, vs a year-high of $9.80.  KITD suffers from low trading volume, probably largely because of its low level of awareness among investors.

Next, cast your baby blues at Scotts Valley CA-based VirnetX Holding Group* (NYSE Amex: VHC, http://www.virnetx.com/), which has an IP portfolio of internet security patents that sprang largely from super-spook midcap company, SAIC Inc (NYSE: SAI).  Their patents cover the ability to establish secure Virtual Private Networks among computers, mobile devices, and other devices  with a single mouseclick, as well as the right to issue Secure Domain Names.  Current interest is focussed on their gargantuan lawsuit against Microsoft which, if VirnetX prevails, could give them a gazillion-dollar award.  But the Secure DNS part of the business could well justify a significant increase in value separate from the MSFT litigation.  What’s the catch?  VHC is pre-revenue, and has yet to announce their first significant licensing deal, most likely because potential customers are waiting to see the outcome of the MSFT case, which got a favorable nod from the court that is trying the case in its “Markman” opinion this year.  VHC closed at $2.89 on Friday, far off its 52-week high of $5.00, and the shares have average trading volume of 152,000 shares.

Check out London-based Sirius Exploration PLC (http://www.siriusexploration.com/) , which owns some salt and potash mining properties and options in the US and Australia — properties that are envisioned by the company to become storage locations for unused energy in the form of compressed air.  Sirius shares trade feverishly on the London AIM, closing Friday at 0.14 GBP on volume of 8.6 million shares.  Their US ADR trades on the Pink Sheets and closed Friday at $107.60, up $21.00 on the day, and vs a 52-week low of $13.00.  The problems are that there is almost no volume in the US trading, and there seems to be very little recent news on Sirius (the most recent news on Yahoo Finance is from April), as well as a fair level of skepticism on the Internet.  It’s a mining company — dig deep in your due diligence, please. Caveat emptor!!

Finally, look at Foster City CA-based SciClone Pharmaceuticals Inc (Nasdaq: SCLN; http://www.sciclone.com/), which is developing and commercializing drugs for cancer and infectious diseases in China and internationally.  It has drugs for hepatitis B & C, as well as a raft of cancers, including pancreatic cancer, Stage IV melanoma, and liver cancer.  SCLN closed at $4.83 on Friday, up from a year low of $0.63, on volume of 555,000 shares, with a market cap of about $225 million.  Clearly someone is interested with trading like that and a fast rising valuation.

Mr Westergaard died in 2003, but I have a sense that he may be “up there” keeping an eye on these and other small companies with interesting potential.

*client of Allen & Caron, publisher of this blog.

Advertisements

One thought on “Small Companies with Great Growth Trajectories

  1. Hey, I found your blog while searching on Google your post looks very interesting for me. I will add a backlink and bookmark your site. Keep up the good work!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s