Fools, Dips, and Tech

Happy April Fool’s Day 2015! While the origins of this ‘holiday’ are disputed, there is no doubt this can be a really fun prank filled day on those who forgot.

No doubt we have all been the fooler and the fooled.

In Monday’s Goldman Guide we set our sights on volatility and specifically, buying on the dips as a trading strategy. The chart below illustrates the epitome of what we were talking about in one of our small cap sector regulars, technology.

SCON 6-Month Chart

(Source: www.otcmarkets.com)

Superconductor Technologies, Inc. (NASDAQ – SCON - $1.41) has been nearly cut in half over the last six weeks and we believe trading opportunity exists here. On February 17^th, the Company announced a registered direct offering of stock and warrants totaling 3.1 million shares and 1.6 million warrants. This increased the shares outstanding by 24% (excluding the warrants) from year-end 2014, and was a huge catalyst in the stock’s tumble as it prompted dilution.

The Company develops and commercializes high temperature superconductor (HTS) materials and related technologies, including HTS materials and cryogenics to produce HTS Conductus wire for applications in the electrical grid and equipment platforms that use electrical circuits.One of Superconductor’s high tech products is its Sapphire Cryocooler. The cryocooler is currently used to cool high temperature superconducting (HTS) materials in the Company’s SuperLink® product - a high performance receiver used in the telecommunications industry.

There are some positive signs that have us believing there could be some future money flow into SCON over the next several months. First, the forward P/E of 3 on consensus estimates of top line growth an order of magnitude higher in 2015 over 2014 is a normal check mark for us. Additionally, a short float under 4% indicates not many selling out there. Along those lines institutional ownership is relatively low at 22%. This can be seen as a plus for downside protection as large scale sell-offs could be less impactful. Finally, zero debt as of December 31, 2014 indicates the Company has a decent balance sheet and could possibly take advantage of a capital structure change taking on some debt for growth ventures if necessary.

We think the dip for SCON is here. Look for a pop back to $2.00 over the next two to three months.

Have a great day!

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

Disclaimer:

This Market Monitor blog was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research, which typically highlights small cap companies, and Goldman Opportunity Research, which features micro cap companies in a sponsored research format. Thus, the Select product reflects the Firm’s internally generated stock ideas while the Opportunity product reflects sponsored research reports. 

Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.

It is important to note that while we may track performance separately, we utilize the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company’s individual disclosures for each engagement, which can be found in each company-specific report. All information contained in this blog, newsletter and in our reports were provided by the Companies or generated from our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations. 

The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small CapResearch blog, report, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed.

This blog does not take into account the investment objectives, financial situation, or particular needs of any particular person. This blog does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with FINRA or with any state securities regulatory authority.

ALL INFORMATION IN THIS BLOG, REPORT OR NEWSLETTER IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLECONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS   INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLECONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.

For more information, visit our Disclaimer: www.goldmanresearch.com