Short-term, I’m a little leery that Dow 10,000 marks a temporary high-water mark. A little profit taking up here is probably not a bad idea.
But long-term, I remain quite bullish, and not just because the folks at the Contrary Opinion Forum were bearish.
No, the main reason for my bullishness is the charts, which remain in strong uptrends. The second reason is that the number of stocks hitting new lows remains minuscule, and that’s an indicator that we value highly. Adding to that is the Advance-Decline Line, which is healthy as a horse.
More generally, I remain bullish because in this period of major change, there are some major investment opportunities that make me very excited!
While Detroit and the old-line automakers struggle to rebuild the crashed industry, numerous young companies with innovative new technologies are making early investors rich. Makers of batteries, ultracapacitors and electric motors are thriving!
While the coal industry fights against emission controls and the oil industry struggles against the power of the Saudis and the long-term fact that the well is slowly running dry, hot young companies are making great strides in solar power, wind power and other non-polluting technologies.
And China continues to boom, growing at an 8% annual rate or better, and increasing the market for U.S. exports.
Meanwhile, in the communications sector, the wireless revolution continues, as more and more users demand increasingly complex content delivered to their wireless devices.
Which brings me to my recommended stock.
It starts with the fact that I’ve got an iPhone. In fact, my wife and two of my three kids have iPhones. The iPhone is absolutely wonderful as a portable computer, camera, music player and casual gaming device. I use it to check on stocks, keep notes, view maps, find where I am, figure currency conversions, send instant messages, play Scrabble and more. But the iPhone is a disappointment as a phone. And the main reason–to use a technical term–is that AT&T‘s network stinks! In short, dropped calls are more common than corn in Iowa and Democrats in Massachusetts.
And the problem is getting worse, because every new iPhone user (Apple sells roughly 80,000 iPhones a day) puts greater demands on AT&T’s network.
The problem may ease a little when AT&T gets its LTE (4G) network deployed in the years ahead. And it may ease a little more in 2011, when Verizon starts carrying iPhone traffic.
But I can’t wait, which is why at the top of my Christmas wish list it says, “One femtocell.”
What’s a femtocell?
In short, it’s an in-home cellular tower that covers up to 5,000 square feet, and that connects to your cable or DSL connection, so that your cell phone activity (voice and data) travels on the Internet and not on those crowded airwaves.
It’s not really a tower. It’s really just another plastic box.
Sprint and Verizon are already marketing similar devices, under the names Airave and Network Extender, but they only work with 2G handsets, and only for voice calls.
The device AT&T is just beginning to sell, however, is designed specifically for 3G smartphones, so it carries both voice and data. 2G phones can’t use it. Dubbed Microcell, it’s branded with a Cisco logo, but in fact the innards are probably from ip.access, a non-public company Cisco invested in last year. When you set it up, you can authorize up to 10 phones to use it (so your neighbors can’t piggyback on the signal), and up to four of those authorized phones can use it at any one time. Voice quality is crystal clear. And if you leave the femtocell’s range in the middle of a call, it hands off seamlessly to the regular cellular network. There’s more information on the AT&T Web site.
But I can’t buy one yet. AT&T began selling the Microcell less than a month ago in select markets: Atlanta, San Antonio, Seattle and North Carolina. There’s no word on when it will come to the Boston area, but I’m keeping an eye out.
And I’m betting that when word gets out, demand will be terrific … especially as the AT&T network gets worse with every new iPhone sold.
Plus, I’m not the only one. Over at http://www.thinkfemtocell.com, David Chalmers says, “The state of the femtocell market today can be compared to a scene in an action movie, where the large dam has been blown up, the audience is holding its breath waiting for the enormous wall of water to descend, but only a trickle is so far seen to appear.”
Another researcher predicts that femtocells will be a $12 billion market by 2012.
So what’s my stock recommendation? It’s not AT&T (T) and it’s not Cisco (CSCO). They’re big old slow-growing companies. Their best days as investments ended long ago.
And it’s not Apple (AAPL), though there’s nothing wrong with that idea. One look at the charts of competitors Research in Motion (RIMM) and Nokia (NOK) tells you those guys are hurting while Apple is smelling like a rose.
My recommendation is an attempted home-run swing with an unknown little player in the femtocell market, a company whose revenues were just $4.9 million in the second quarter … mainly from non-femtocell electronics.
The company, located here in Massachusetts, has been working with Alcatel-Lucent, Motorola, Hitachi, Nokia Siemens, Thompson Electronics and Pirelli … and most of all, Nortel. But Nortel filed for bankruptcy back in January, which not only slowed business down but also made the stock pretty cheap. Since then, Nortel’s relevant intellectual assets have been acquired by Ericsson (for $1.13 billion), and I have little doubt that Ericsson will be a big player in the femtocell market using this company’s technology.
In the meantime, the company has been recently buying its stock back, a clear indication of how cheap management thinks it is. (It’s currently trading around 7.) Another fan of the stock is Tom Garrity, editor of Cabot Small-Cap Confidential, who recommended the stock back in July, when it was trading at 6.
Here’s a little of what he wrote:
“The average operator’s core traffic, measured in terabytes, is up some 35 times in the past year. Data is flooding the network and carriers are struggling to stay afloat. [Company X] is here to teach them how to swim.
“[Company X's] established relationships with the biggest players in the telecom industry have us imagining a day when its superior technology is not only dominant, but ubiquitous. In other words, we think this company is setting a new industry standard. [Company X's] wireless technologies and its network management software are second to none. Investors have an opportunity here to get in at the beginning of a period of industry-transforming growth of a kind that’s not seen every day.”
I’d love to tell you name of this high-potential company, but it just wouldn’t be fair to paying subscribers of Cabot Small-Cap Confidential.
But if you click here and order a subscription to Cabot Small-Cap Confidential now, you’ll have access to the original report along with your first issue. I think this little stock is going places!
Finally, if you’ve had any experience with a femtocell, I’d love to hear from you.