There’s a bit of a tendency for some newsletter publishers to use military imagery in their letters, to try to convey an image that you’re like a Navy SEAL, sneaking up on your target to dispatch a terrorist leader with maximum prejudice (or, as the case may be, buy a stock and make some money, but real cool-like). That’s what first popped in my mind when I saw the ads for Keith Fitz-Gerald’s new newsletter called Strike Force — and it’s even got a little crosshairs logo in the “o” … I feel cooler just looking at it.
Yes, I know, insert your own joke here about a subscription service being named for a fictional band of street urchins. It’s OK, I can take it.
But anyway, this is one of those “super premium” newsletters — at least in price. We don’t know how it will do, of course, but they’re charging close to $3,000 (oh, wait, it’s On Sale! Only $695! I guess we’ll find out after a few months of performance if they’re ever going to actually charge the “retail” price for this letter.)
And Keith, in a faux interview ad for the letter, tells us that this next investment idea of his might be the stuff of which legends are made. Or as they put it:
“We asked if Mr. Lin’s new security system could soon be installed in FIFTY BILLION devices, making it the biggest technology of our lifetime, taking his company’s stock from $5 to $300. This is what we learned …”
The basic pitch is that there is such a massive move toward networked devices and mobile data, that the security challenge is massive and this tiny company that’s focused on mobile security will get rich as their technology is installed in billions of networked devices.
Here’s Fitz-Gerald’s pitch, after he describes the huge number of interconnected devices, from smart phones to refrigerators to vending machines, who will need security to protect them from hackers:
“So what happens when one company is the first to build a fortress of impenetrability around those 50 billion connected devices? And what happens if you invest in that company early on – just before all those billions of connections create billions in profits?
“This is what could happen…
“You’re set up for one of the biggest hockey-stick winners you’ll ever see!
“The company I’m telling you about today is already a global leader in mobile security.
“They’ve got more than 100 million subscribers in 100 countries, and for this achievement, they’re already a $5 stock on the NYSE.
“So what happens next? Here are the scenarios going forward:
“Worst case, in our view: They hold onto their global market share as people move from basic cellphones to smartphones. This could mean a billion subscribers in a couple years, and a $50 stock. That’s 1,000% growth based solely on people migrating from cellphones to smartphones that can tap a vending machine and get a soft drink.
“As for the best case: The company grabs the same big share of the 50 billion mobile connections we’ll be seeing. That could make them a $300 stock. And if you’re doing the math in your head, yes, that’s a 6,000% gain on the money you invest now…”
And, to further the argument:
“… the U.N. tell us there are already almost five billion cellphones out there and we know the world population just topped seven billion!
“Five billion of these, and a lot of them are vulnerable. In China alone, there are 277 million people that could be hacked. And a lot of them are being hacked! This global security outfit we’re targeting has reported that some 2.5 million subscribers were hit with malicious viruses in the first quarter of this year.
“That means that in China alone this year, 10 million people could be slammed with stolen identities, credit card loss, unknown service charges, their calls secretly recorded, their text messages stolen, their photos winding up on the Internet…
“So yes, this is very real. Mobile technology isn’t going to stop just because it attracts criminals. Don’t believe me? Try ripping a cellphone out of a teen’s hands!
“That’s why mobile security is a huge growth industry.
“And that’s why it’s imperative for every device made from January 3, 2012 onward be made with a first-rate security system embedded.
Are you getting our free Daily Update
"reveal" emails? If not,
just click here...“As we see it, they’re practically required to beef up their security!”
We’re also told that this is a company that went public on the NYSE in May. So who is it?
Well, that is, thankfully plenty of info to toss into the mighty, mighty Thinkolator … let it churn for a moment … and there you have it: This is almost certainly NetQin (NQ)
Which is a large operator in the mobile antivirus industry, though that industry itself is still quite small and unprofitable compared to the overall computer and internet security sector, and NetQin looks tiny compared to sector giants like McAfee or Symantec (SYMC), or even to smaller firms like Sourcefire (FIRE).
I know almost nothing about NQ and had never heard of them before this morning, but they are a real business, they did receive a glowing review from a US lab testing their mobile security software for Android devices (they did better than the other solutions that were tested), and they are profitable and carry a reasonable valuation. If you combine the last two reported quarters after the IPO with the estimates for the next two quarters, you’d put yourself in the middle of a year of roughly 50 cents in earnings, so that’s a current year PE of between 11 and 12. Big players like Symantec are currently cheaper (SYMC has a forward PE of under 9), but certainly NQ has the potential to grow much more rapidly if they do well.
NetQin positions itself as a provider of mobile software and services, with their antivirus sometimes preinstalled on phones and sometimes available from carrier-specific app stores. I didn’t see exactly how much of their revenue comes from mobile security stuff, since they also earn money by providing secure downloads for other app sellers and by selling other premium software and cloud services (mostly productivity stuff, it sounds like — calendars and such) that’s not necessarily security related — so I don’t really understand the business model very well. I say that after a short look — I see that they have over 100 million users of their software, but a small percentage of those seem to be paying customers, so I just don’t know how it breaks out in the income or in their planning, I’m not trying to imply that they’re doing anything wrong or silly.
You can check out their investor materials here to get a better handle on them if you like — for the second quarter they say that they had 102 million registered users and revenue of about $8.8 million, so that’s about 8.5 cents per user in revenue, it must be some kind of freemium/upgrade system that gets folks in for a security scan or basic level of service and upgrades them to one of their productivity or security systems or services.
Oh, and from my reading of the ad the January 3, 2012 date is completely made up. That’s the date by which “they see it” as “imperative” that everyone has this kind of security for their mobile devices. They’re not going to have that kind of security on all those phones, I can tell you that for sure — I’m quite confident that there has never been a company that’s gone from 100 million registered users to five billion in six weeks, even if you presume that they’re just trying to get free users.
Doesn’t mean the mobile security market isn’t huge, of course, I just see no reasoning behind the January 3 date other than, “if we can’t invent a deadline and some urgency, why would you subscribe to this newsletter and buy this stock right now, when you’re panicked about the euro crisis and mad at the super duper committee?” If you know of a real reason for the January 3, 2012 date, well, I’ll humbly withdraw my snarky comment.
But anyway, that’s what we can tell you to get started — Fitz-Gerald also teases a few other picks in this inaugural teaser for his Strike Force, and I’ll try to get to those after the holiday mania, but for now the Thinkolator can just quickly strike and tell you that he must be pitching NQ. Whether or not this mobile software company belongs in your portfolio, well, that’s your call — let us know what you think with a comment below.
I don’t buy the hype. MyLookout.com has the largest share of the market and I doubt that they are profitable.
It appears that Netqin along with another company called Feilui are being investigated for a scam involving their software. Although there is a large market for mobile security there is also a great deal of competition.
Yes Travis, what do you say to this?
There’s no doubt about it—mobile malware is on the rise. NetQin is first to detect and resolve 75% of all mobile malware, and our research team has reported 40,000 instances of malware related to mobile applications and about two million malicious URLs to date.
To understand how fast mobile malware is growing, consider this fact: Mobile malware on the Android platform alone increased from about 100 samples in January 2011 to more than 8,000 cumulative samples as of December 2011. As more people use their smartphones to shop, bank, and carry out other financial transactions, we fully expect these numbers to increase in 2012. Cyber criminals know they can get financial and personal data from people’s phones, and will make it a priority to do so, especially if people fail to protect their devices.
We saw false allegations against the company mentioned in a comment here. We hope readers will take a moment to see that these rumors were proven entirely false (see NetQin’s blog for complete details: http://blog.netqin.com/en/?p=697). Simply stated, NetQin’s goal is to make sure that every mobile device user has access to the best possible mobile security and we work hard to achieve that goal every day. Our 122 million users are a testament to this.
I was more struck by the second product they touted, a pharma product in Phase 2 testing.
It’s amazing to me that Keith would promote ANY pharma in Phase 2 trials, when it’s known that a vast majority of products at that stage never see the light of day.
Such a tout brings into question ANY stocks they’re following.
Will have a look at that one. The last study I saw indicated that average chance of going from phase 1 to phase 2 is about 60 percent, phase 2 to phase 3 is about 30 percent. Overall likelihood of a phase 1 drug eventually being approved is about 1 in 10, though biologics do better than traditional chemical drugs. And it almost always costs more and takes longer than investors expect.
That one is Gilead (GILD), though the stock recently tanked and is crawling back from the dead!
“Fortress of impenetrability?” Like we have on our computers…that need updates several times weekly to remain adequate? The basic plan of virus-makers is to penetrate the fortress, whatever it is. So “what is needed” are (oh no!) not just an anti-virus program but several-times weekly updates, permission to download, rebooting, and all that for each phone OS. What ever will happen to all those folks who use smartphones for preventing boredom while driving, in class, or on the job. Oh, the terror.
I agree the second is GILD, a very good company that roller coasters due to some market factor(s) I can’t figure.
Can’t figure! is correct. This is the same Gilead(GILD) that on 11/21/2011 offered to acquire Pharmasset (VRUS) for $11Billion or $137 CASH . Sure they have the QUAD AIDS pill amongst other good products, thus wads of cash, but to pay appx a 89% premium for a $70 stock … ummm!!!!
PS … 11/22…Appears investors have consulted several law firms…The investigation concerns possible breaches of fiduciary duty and other violations of law related to the approval of the transaction by Company`s board of directors; in particular, whether the Company undertook a fair process to obtain fair consideration for all shareholders of Pharmasset.
“and Fitz-Gerald makes it sound even huger by implying”
is that hunger? or more huge? LOL
Sorry, meant to say “hugongerriffic.”
Are you sure Fitzgerald isn’t promoting Authentec (AUTH). This is a mobile security firm recently promoted in a sister publication — White Cap Research.
I suppose there’s a tiny chance of that, but the clues fit this stock much better. Authentec ipo’d much earlier, in 2007, and on the nasdaq, not NYSE as teased, for starters. The company does fingerprint verification security, for folks who don’t know them, including in some phones, similar but different from most other security software thats focused on hacker and malware protection.
http://seekingalpha.com/article/268593-netqin-mobile-s-ipo-a-wait-and-see-deal?source=TheMotleyFool
Have you read this?
I think Keith F. is above average – just!
I logged into get info on the teaser for Taiwan electronics mfr of next generation Apple product components. What is this?
c. gattas
What do you guys think of the company actually called ‘StrikeForce Technologies’? Pls look it up and post some comments..
t.j.
Ask Fitzgerald what happened to his recommendation of RINO stock?
NQ= second biggest first-day IPO loser in 2011! YTD performance= – 47% !
Reference: Wall Street Journal Blog, 12-16-2011
Link: http://blogs.wsj.com/deals/2011/12/16/the-biggest-ipo-first-day-losers/?mod=yahoo_hs
I looked at this promo, which besides the specific companies discussed has a strong spiel about how to be a successful investor you have “got to have a plan, get in, take your profits and get out quickly” and quickly came to the conclusion that Keith Fitz-Gerald has a plan OK: buy thinly traded small companies, spruik them to a large subscriber base, thereby causing the price to rise when as they rush in, sell, and then issue a sell recommendation. Good luck to you if you think you can win at that game. This smells like a giant con job to me.
I posted the following questions related to the malware infecting allegations on the NQ website blog (link provided above). Let’s see how they reply.
” Has China Central TV retracted or corrected their story on this matter? Did the China Ministry of Industry and Information Technology override their instruction to Chinese telecom operators during review of this matter to cease offering your security app and which operators now offer the app? Is Nokia or other major vendors now carrying the app? We would appreciate your posting links to the corrections and retractions.”
Comment by Claire — January 2, 2012 @ 2:42 am”
Does anyone else have further info that the allegations vs. NQ have or haven’t been resolved?
The “after January 3” seems to correlate with the announcement that was made this morning about Motorola featuring it pre-installed on their phones.
Here’s the article:
http://ih.advfn.com/p.php?pid=nmona&article=50611162
Could be — that’s enough to bump the stock 15% today, which gets it back to … oh, just about where it was when they started teasing it in late November.
The first alert that I got was for a webinar at 4PM on November 21st. Looking at the stats for November 22nd,
Open: 5.69
High: 6.05
Low: 5.48
Close: 5.97
Volume: 317,908
Previous days close: 5.60
Previous days volume: 53,603
So I think it’s safe to say that we are above that level. A few days AFTER the first teaser came out, on November 28th, it peaked at 6.62 before falling to a close of 6.49 and has seen a steady decline until Dec 22 when it started showing recovery. So if you would have determined that it was NetQin on the day of the initial teaser, you would have been abot to get in as low as 5.48 before riding it to as high as 6.62 before the decline, reaping roughly 20.8% in profits. I see this going much farther than current values since Google just happens to own Motorola, therefor making it Google’s decision to feature Netqin on its future phones.
If you have been to their website it appears that all their products are downloadable for free!!! If I am not dillusional what are they SELLING?
At this moment it’s at 10.62, and I’m happy. Just after getting the initial teaser I stumbled on this site, learned it was NQ, and bought it, then bought it again. It’s paid for my Irregular subscription about 145 times. Thanks.
Keith Fitzgerald teased NQ again yesterday and it’s up over 6% this morning. It’s the only thing on my list that’s up today. My plan has been to sell half once it doubled, but I’m rethimking that strategy. Rethinking- a common mistake often made.
Granted, Buy & Hold may not be the promoted philosophy…However as of this morning.
NQ: yesterday’s closing price was $21.67 (a quadrupling of his buy price)
AUTH: Has since been acquired, although I could not find historical chart data prior to it’s acquisition.
I just came across one of his internet “infomercials” this morning. I was curious & skeptical during the presentation. But those two examples are reason to look into this a little more. I have no information what recommendations he made of when to sell, buy or hold those stocks. But if one did hold onto NQ for two years he/ she would have have done well and arguable that stock would have been one of their top performers.