Remember what I was saying about Stockgroup Information System’s (SWEB) wireless service - MarketStream - being a potential big improvement for the company’s top line? Today’s news is an example of why I thought so. They just found a big partner who will be promoting the service overseas.

The story itself is simple enough - Norwegian company Trigcom AS will be promoting Stockgroup’s financial data platform called MarketStream - a package specifically designed to bring equity market data and quotes to wireless devices such as a BlackBerry.

As far as the caliber of potential partners in Norway, I’d say they pretty much found the ideal one. Trigcom specializes in BlackBerry technology, and has a few hundred corporate customers (each of which presumably has multiple BlackBerry users). Aside from tapping those current customers first, I’m confident being able to offer such a service will also open doors to a few new financial-business customers.

Though the press release didn’t explicitly say it, I think this is ultimately a subscription revenue sharing deal. And despite not knowing the exact details of any of their recent deals (Stockgroup forged a similar deal with Reuters), I think it’s safe to say even just a few hundred users could mean an annual six-figure opportunity. A few thousand users, and I’d say the deal moves into seven figure territory. Just a guess on my part.

That’s not the important part for investors though…at least not in my opinion. There are two key ‘bigger picture’ ideas I see lurking in the news.

First, this is ‘easy money’ for Stockgroup….well, as easy as money can be in this day and age. Stockgroup already designed the software, so there’s no real developmental cost here. Trigcom is doing the promotion, so it’s not like Stockgroup has a big marketing expense there either. In other words, margins are expected to be wide.

Second (and more importantly), I think this partnership plants a seed for parallel relationships in the future. Norway is only one of dozens of countries with capital markets that are developed enough to merit a wireless data service like MarketStream. Once other telecom outfits see what can be done in Norway, I look for them to start shopping the possibility of doing the same in their respective market.

You know what though? As of yesterday, even the Trigcom news isn’t the most interesting thing Stockgroup’s got going on.

Did anybody see SWEB’s volume on Wednesday? The 1.1 million shares we saw trade hands was the highest volume we’d seen in over a year, and the fifth highest volume day ever for the stock. And no catalyst? I smell institutional buying, since most individual investors wouldn’t be buying so boldly just three days after a multi-month low (nor would most people be buying when they see SWEB’s long-term downtrend).

Somebody - or somebodies - with deep pockets may have been waiting for this stock to really get to a deep undervaluation point. And, I’d say the move from a peak of $1.45 to a low of $0.42 (a 71% pullback) more than qualifies as just that. Picking up on an undervalued stock the rest of the market didn’t pick up on, they pounced. 

The question to be asking is obvious - what do they know that nobody else does? It’s mostly a rhetorical question though; the right thing to do may just be to follow their lead.

Here’s the press release.

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I know we haven’t heard much in the way of news in the last few days from small cap company Applied DNA (APDN). However, the way the chart is perking up, I have to wonder if we will in the near future. (Stock charts are usually more predictive than reactive.) If my gut is telling my head the right thing - and by applying a little technical analysis - I suspect APDN shares could become a hot small cap stock real soon.

First of all, this is more lesson-oriented than bullish opinion. Even if Applied DNA doesn’t break out (and up), you may want to put this observation in your mental filing cabinet. That said…

There are two things I really like here, and a third thing I could like soon - conditionally.

1. The buying volume is starting to grow. Tuesday’s 370,000 shares is the biggest accumulation day we’ve seen in a while, and we’re starting to see quite a few of them. With the exception of January 23rd, distribution (selling) days are very mild.
2. APDN is above all of its moving averages…again. I know this is a painfully simple tool, but it’s also something that can’t be misinterpreted. If you like momentum, moving averages tell you everything you need to know. (If you’re a bottom fisher, they tell you nothing.)
3. The aspect I almost like? APDN is on the verge of new multi-week highs. Technically that level is 17 cents, though 16 cents is significant too. A move to 18 cents I would consider a victory, but also a great breakout move. Yes, that means trade-worthy - at least in my opinion.

Of course, I also have the advantage of knowing what’s going on off the charts. If you feel like the good news has been pouring freely from Applied DNA lately, it’s because it has…much more so than the latter part of last year.

An improving small cap chart supported by the underlying company’s real progress? Can it really be that simple? (Yes, it can. The fundamentals tell you ‘which’, while the charts tell you ‘when’.)

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Over the weekend we received this e-mail from a reader regarding our use of Fibonacci lines as a chart analysis tool. Though we’d normally just respond to the e-mail, we realized this may be worth discussing in a public forum - for a couple of different reasons.

Dave writes… 

Your hedging in so many directions your NASDAQ discussion is totally convoluted. Make a damn recommendation for the next 30 days, 6 months, and quit waffling all over the place. If you cant do that, get off the web, as other advisers are MORE DECISIVE.

Two key responses immediately came to my mind.

1) Dave, if you’re looking for us to make market calls just because everybody else is, I have bad news for you….that’s not exactly our focus. Yes, we can, will, have, and still do make market calls. In fact, we’re pretty good at it. However, knowing when not to trade is as important as knowing how to trade, and that’s pretty much where we are right now.

We’re also about high odds. We don’t claim to know everything, but if we don’t have an ‘edge’, we’re not going to toss a coin like most other advisors do. We’ll make the call soon, and in plenty of time for everyone to collect plenty of reward. We just don’t see much reward - relative to the risk - in making a market call in front of Wednesday’s Fed meeting.

2) One of our main non-small-cap missions is education…teaching our readers a little something about trading by sharing our experience and knowledge. If all we did was make calls without explaining our thought process - with all the pros and cons - there’s no personal growth. (It’s the whole ‘teach a man to fish or just give him a fish’ argument.)

Again, that’s not to imply we know everything. We collectively know a lot though, and we work to let our readers know how things really work. That’s actually one of the greatest parts about our publication - we tell readers how it really is…..the good, bad, and ugly. That includes the use of trading tools like Fib lines. You don’t get that too many other places.

Anyway, that’s that. If you’re looking just for buy/sell calls, you may want to look elsewhere because we don’t do it too often. If you want honest, complete opinions and editorials on a lot of market-related themes, stick around.

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Football fans can feel the electricity in the air already, but at 6:20 PM EST this Sunday, we’ll be watching the kickoff of Super Bowl XLII (42). Eli Manning and the New York Giants will by trying to prove to the Patriots - and the world - they deserve to be there. However, Tom Brady has led the Patriots to a Super Bowl victory thrice now, so the Giants may find the Cowboys and Packers were easy prey by comparison.

As for my pick, I’ll take Patriots to win hands down. As for the spread, the last line I saw was 14 points. I also think New England can cover that without much problem. Of course, I figured the Bears would cover the spread last year against the Colts and the ‘other’ Manning. Now I’m not even sure the Bears actually showed up for that game. So, it ain’t like I know it all.

If you’re not a football fan, you can at least enjoy the Super Bowl commercials.

By the way, for those of you who are still subscribers to the theory that the NFL championship team’s original league can predict how the stock market will do for the year, you may want to abandon the idea. It used to work, but has become less and less effective over the last 15 years. It’s become a really poor tool in the last 8 years. Aside from the fact that league expansion and a few conference cross-overs have blurred the ’which team comes from where’ lines, it’s also just silly. Given enough time, silliness is exposed.

What’s your take on Super Bowl 42? Chime in below.

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We’ve gotten a few questions about this, but odds are more of you were wondering. So…if you can’t find any quotes or information for Titan Global by using the ticker ‘TTGL‘, it’s because those shares are currently trading with the symbol ‘TTGLE‘. It’s a temporary ticker change.

What’s the extra ‘E’ mean? It’s something the exchanges do to let you know there’s either a filing or piece of information that is late, or incomplete. In Titan’s case, they were supposed to file Q1 results (for fiscal 2008) a couple of days ago. They haven’t yet, so the exchange is required to notify the market using the ticker change.

While it’s not the hottest of moves in terms of credibility, it’s also not a big deal. It happens more often than you might think, and often for very legitimate reasons. We’re not particularly concerned about the late filings…not nearly as concerned as we are about a plummeting stock.

All that being said, the company still announced what they’d be reporting once they got their official filings submitted. They’ll report record revenues of $122 million for the first quarter ending November 30, 2007, representing a $92 million or 307% increase from the Company’s $30 million in revenues for the same period the previous year. Not too shabby.

Does anybody else find it curious that the market is taking it on the chin (again) on Wednesday, yet financial stocks are actually up quite nicely? The S&P Financial Spider (XLF) is up 3.0% as of my last look, while the S&P 500 is down by about 1.0%. A random occurrence? Maybe, but one that has me curious. What causes the financial sector to move higher when nothing else seems able to do so?

You could argue the Fed’s decision to cut rates is the culprit, but that still doesn’t explain why it’s just the financial stocks that are benefiting.

No, I think there’s something deeper here. I think - despite the rest of the market - investors see a light at the end of the tunnel. I don’t know that these same investors are going to be rewarded tomorrow, as it could take weeks to really shake off some of the lingering problems. I do think, on the other hand, that just about every negative that could be priced in is already priced in - there’s nothing left that could cause any serious problems.

Almost as curious as today’s strength in the financial sector is the strength in REITs (a financial industry) and residential construction. My proxies for both are the iShares Real Estate fund (IYR), and the iShares Home Construction fund (ITB). What happened to theory that the pain has only begun for the housing market and all of its cousins?

Maybe it’s something, or maybe it’s nothing. Either way, I’m not blowing it off. The best time to buy anything is when nobody else seems to want it, and that’s where we’ve been for a few (ok, several) days now. Perhaps the market is starting to feel the same way I do…and is doing something about it. I know I’m far more willing to buy on a dip than buy into a rally.

 I’m not diving in yet, but a couple more days of the same and I probably will.

Hopefully by now you know that I try and stay off the soapbox as much as possible. Sometimes, however, my ‘inspiration’ boils over. Today is one of those days, and you have an article about the widespread retirement of all the baby boomers to thank for it. The basic point of the article (as found on Yahoo! Finance, but provided by the Wall Street Journal Online) was that when the 80+ million boomers really start to retire - en masse - they’re going to sell their stocks and hold cash instead, thus driving the market lower. While the idea can make a little sense if you squint just right, I think the writer overlooks a key reality that I see as more of an opportunity than a threat.

This isn’t the first time we’ve heard from the talking heads that too many retirees flooding the market would mean nothing but pain for stocks. There was a wave of these op-eds about three years ago. I guess the idea is back though - but so is my response.

I don’t think huge numbers of retirees is going to upset the apple cart. There are two basic reasons I feel this way.

1) Retirees aren’t crazy. They know they’re likely to live a couple of decades into retirement, and need to grow more of their money to make sure it lasts for several years. Bonds just won’t cut it for most of these folks. So, I feel any selling of stocks will be gradual…and perhaps imperceptible.

2) Retirees aren’t going to bury their money in the backyard, nor are they going to toss dollars into a burning fire. The reason they want/need cash in the first place is so they can spend it. The question you need to ask as an investor is what are they going to spend it on? I think healthcare, nursing homes, entertainment, and others are obvious opportunities, though not the only ones. Personally, I think the average senior/retiree could become an incredibly powerful demographic over the next 20 years.

I could actually go on and on - it seems like this is a hot button for everyone, even if it doesn’t need to be. I’ll stop there though…I’ve said my two cents.

If you’d like to read the whole article for yourself, just click here. If you’ve got some thoughts of your own to add, as always, just use the link below.

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In hockey, there’s a rare feat dubbed a hat trick. It’s really something special too….the great Wayne Gretzky only scored 50 hat tricks in his 20 year career, and most players never score one at all. What’s the feat? A hat trick is when a player scores three goals in one game. Even if you’ve played the sport or watch it regularly, you’ve probably never actually seen one - that’s just how difficult it is to achieve.

What’s that got to do with Stockgroup Information Systems (SWEB)? After reading today’s news, I realized the company scored something of a corporate hat trick…they hired three industry aces over the past three quarters.

I know most new-hire announcements are just routine. I don’t think Stockgroup’s recent new hires are merely routine though. In fact, I think these newest additions are the kind of players that make the kind of impact nobody else could. More importantly, the three newest team members each bring their own unique expertise to the company…an expertise that’s perfectly aligned with Stockgroup’s specific need. Back to that in a second.

Today’s press release officially announced that Dana Stetson  is the new VP of Licensing Sales. His background is more than a little impressive.

Now I’d be the first to acknowledge one person can make a difference, but I don’t know that one person can make or break a company….even Dana Stetson. However, that’s where the ‘hat trick’ comes in.

Stockgroup didn’t just bring one great person into the fold. I think two other recent hires in addition to this one could mean the difference between good and great for Stockgroup.  And I’m not saying this for general reasons. I don’t like generalities. I’m saying it because each of these three guys does something very well that is unique to them, and quite essential to Stockgroup’s business model.

In a nutshell, there are three ways for Stockgroup to make money. They can (1) sell ads on their high-traffic website, (2) sell subscriptions and services to retail investors through the website, and (3) sell tools and data to financial institutions. All three can be profitable - especially #1 and #3 - even though they’re all quite different in terms of how you market them.

As it turns out, Stockgroup seems to have a resident expert for each of the three profit centers. Check it out.

Joe MCWilliams - Hired on July 18th as VP of Advertising Sales. Mr. McWilliams spent the 10 years with Hoovers (an online provider of business information) in a variety of roles ranging from Sr. Advertising Sales Manager to Director of Global Advertising Sales. While at Hoover’s Mr. McWilliams contributed to the major expansion in clientele and strong revenue growth the company experienced before being acquired by Dun and Bradstreet in 2003.

Karl Buhr - Hired on January 14th as Chief Operating Officer. Mr. Buhr is formerly from Telemedia, a provider of mobile content on wireless carrier platforms that target wireless subscribers. Mr. Buhr helped lead the company to a 400 percent increase in revenue and its recent sale to Conectium Ltd. Prior to Telemedia, he was the Director of Operations for 365 Plc. (now operating as Eckoh Plc.), an Internet and media direct response company, which grew from $12 million in revenue to $90 million during his tenure.

Dana Stetson - Hired on January 17th as VP of Licensing Sales. He worked recently as the Director of Broker Dealer Sales for Lava Trading, a software services company that provides order management and execution systems for traders throughout North America. Under his leadership, annual revenues of the company’s order management solution, during a two year period, grew over 600% to more than $10 million dollars. Lava Trading is now a subsidiary of Citigroup.

See any history of success there? McWilliams should be great for ad sales - one of Stockgroup’s biggest opportunities for improvement, as we saw with last quarter’s conference call. Stetson should be great in the effort to get more ‘big ticket’ institutional sales to companies needing to provide dynamic financail/investment content…which is Stockgroup’s bread and butter. Even Buhr, who is only distantly involved in revenue production, still has a history of improving top lines for web-based businesses. (On a side note, maybe Buhr is the ideal candidate to help grow Stockgroup’s wireless data delivery venture.)

In terms of timeframes, I don’t know if their impact will show up immediately (as in the next reported quarter). However, I do think within the next six months we could start to see significant enhancements to Stockgroup’s top and bottom lines.

Here’s the press release.

I have to laugh, because it’s the only thing keeping me from crying. However, I also had to share with you a mental snapshot I’m assuming some of you took in your heads as well.

I don’t know why it struck me and stuck with me, but it did. It’s funny, because as investors we’ve all been through worse than this (the last month or so). It’s just that for some reason, there was just such a plethora of bad news I started wondering if it could possibly get any worse. Of course, it can get worse.

Anyway, the nearby image is my mental snapshot…the main news piece of the Yahoo! Finance web page. Bad news after bad news after bad news. Makes you wonder if being invested at all is a good idea right now? To my memory, that’s the most thoroughly negative financial news site page I’ve ever seen, and I scan them all.

So do I personally think the sky is falling? No - I’m just poking a little fun at the hysteria. On the other hand, as far as I’m concerned stocks are guilty until proven innocent.

That’s a tough thing for me to say, being a contrarian. I’ve found that when investor’s opinions are most decisive, it’s usually time to bet the opposite direction. My challenge has been (as some of you will know) that we’ve already seen several bullish contrarian clues. Yet, no dice.

Anyway, if it helps you not cry, enjoy the laugh. Don’t lose sight of the prize though. As much as I hate to say Jim Cramer is right, he is right about one thing…there’s always a bull market somewhere. I suggest using this downtime to find good stocks in a bad environment. Then once the market proves its innocence, you’ll be ready to pounce.

I don’t know…maybe the fact that I’m starting to get uncomfortable is a bullish contrarian hint in itself.

What’s everybody else think about this dip? Is it really gloom and doom time? Recession a reality? Do tell, using the comment area below.

Are you a subscriber to the Small Cap Network newsletter? If not, you’re missing out on some great trading ideas and exclusive market commentary. To sign up, just go to the top right corner of any page of our website. You’ll be joining thousands of other subscribers who have already benefited from our news and views.

Being in the small cap stock business for a while, I’ve seen enough hype to last a lifetime. Too many small cap companies tend to overpromise, inflate their potential, and then underdeliver. And all too often, the more emphatic the hype, the less there is to tout. The ridiculous irony in the matter is this…the companies that scream and shout the least usually have the most to boast.

It was a reality I was reminded of a few moments ago as I was scouring through Spongetech Delivery System’s (SPNG) latest 10Q. The headline read…

“SpongeTech Delivery Systems, Inc. Releases 10-QSB, for Second Quarter 2008, Highlights Rapidly Expanding Sales Growth! SpongeTech Reports Current Sales Up $331,736 USD over same Quarter ending November 2006!”

A $331K quarterly sales increase for a relatively new micro cap company - not too bad at all, right? Actually, somehow that’s a grossly inadequate description.

What’s only evident in the actual filing - not the press release - is that quarterly sales soared from $27 to $331,736. More than that, the $331K quarter was also leaps and bounds better than the previous quarter’s sales (Q1 of 2008) of $64,000…..a five-fold improvement.

Though the press release didn’t say, I have no problem saying it…that’s huge, and I think it’s only the tip of the iceberg.

What really clinched their status with me was the fact that they pushed their sales up to these levels without the benefit of the new facility, which they only moved into in the last couple of weeks. If they can do a few hundred thousand without a major facility, what can they do with a bigger warehouse? I can’t imagine that $15-$16 million backlog being a problem for the company now….I think that’s all going to go to the top line over the course of the next twelve months.

As for the stock, the company’s market cap was about $1.5 million as of yesterday’s close.

What else can I say? The stock is valued at what I think is about 1/20th of its true worth, and the company just proved the modest sales increases weren’t a fluke.

As much as I don’t like hype, if you only take away one message, I really hope it’s this - Spongetech just proved (to me anyway) they’re the real deal. They said the business was there, they said they were going to get it, and then they went out and got it. They’re on track to get even more and more of it in the future. As of right now, SPNG is my new favorite stock. I really hope you own some, and I can’t say I’d blame you for wanting to own more.

Side note: The last time we looked, the short holders were trying to filter out. If there are any remaining short positions, I think this news could drive the nail in the coffin. That’s actually good for the stock, since all that buying (to cover) could further fuel any rally.

Here’s the press release.

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To be a small cap company, Stockgroup Information Systems (SWEB) is adding some pretty big names to the team roster. Karl Buhr - former COO of Telemedia - is Stockgroup’s new Chief Operating Officer. While at Telemedia he led the wireless mobile content company (sound familiar?) to a 400% increase in revenues. We suspect that’s the key attraction to getting him on the Stockgroup team….to turn last year’s purchase of Telecommunication System’s Mobile Finance division into a revenue powerhouse. As you’ll read below though, that’s not the only feather in his cap.

It was an idea we mentioned shortly after Stockgroup’s last conference call. Wireless devices such as BlackBerries and iPhones (more than just cell phones) are a big revenue opportunity, as their users are willing to pay something of a premium for content they want delivered/displayed on their hand-held machine. That was kind of the point behind the acquisition of Telecommunication System’s Mobile Finance arm as well as the rational for the deal with Reuters back in June. Up until then though, we felt that Stockgroup had only scratched the surface….and they had, as most of the company’s attention since then was on the new website.

Now that the website’s mostly done though (the new one is winding down the beta test), it’s pretty clear to us they’re moving down the punchlist. Next in line is the proliferation and monetization of subscription-based wireless data delivery…something Karl Buhr has experience with.

The other item Buhr brings to the table is the successful monetization of websites (again sound familiar?). While he was the Director of Operations for 365 Plc., the company’s sales grew from $12 million to $90 million. Not bad.

Again this points to an idea we brought up shortly after the most recent conference call…Stockgroup has a great revenue machine in StockHouse.com, but had not yet maximized its sales with the machine. We suspect Buhr’s experience will aid that effort too. We suspect the impact to the top and bottom line could be found within two quarters.

Here’s the press release.

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Remember what I was lamenting on Saturday about the ISE Sentiment Index reading that said we were close to a market bottom but not quite there yet? Well, I think we got there today. 

Wednesday’s ISE Index hit a low of 70, and then closed at 72. That’s pretty much in line with the 68 level we hit in mid-November, somewhat near the August low of 51, a hair under June’s low of 74, and near March’s low of 58. All of those occurrences are marked with green arrows. As you can see, they also all came at or right before stocks started a recovery. As a result, I’m personally back in the bullish camp.

Something else that surfaced today - and I don’t think the timing was a coincidence - was the S&P 500’s revisit to the 1380. That’s close to August’s low, as well as close to March’s low (though the March bottom dragged on for a while). That support area is marked with a red, dashed line. In my experience, prior support levels are often the basis for future support levels. So, I’m guessing the market needed to do some proverbial clean-up work before it could really get the party started again. Mission accomplished.

Speculators now have a strong bullish argument; for the slightly fainter of heart, maybe we need a day of confirmation (i.e. more buying) to improve the odds that the market can actually keep things going higher for more than just a day. As such, Thursday and/or Friday are key days. Just for the record though, I’ve already started to trickle back into stocks I’ve been mulling over.

Are you a subscriber to the Small Cap Network newsletter? If not, you’re missing out on some great trading ideas and exclusive market commentary. To sign up, just go to the top right corner of any page of our website. You’ll be joining thousands of other subscribers who have already benefited from our news and views.

Color me clairvoyant, but I suspected this - or something like it - was around the corner for small cap biotech company BioCurex (BOCX). Like I said in my Top Ten Predictions for 2008 edition, the company’s deafening silence was the tip-off that something big was brewing…they have a real hot and cold streak going with publicity effort. This morning we learned that the rumor of a new RECAF licensee wasn’t just a rumor.

Inverness Medical Innovations (IMA) is RECAF’s newest front man. They’ll be joining Abbott Labs (ABT) as a licensee, and in some ways competing with them. The Inverness deal will let them market all uses of the RECAF technology…the ones very close to being ready, and the ones not even close to being ready. (As a reminder, the ‘quick-test’ cancer screener has already been proto-typed, and is undergoing some final tweaking.)

More importantly, the agreement will not only mean royalty payments once sales start, but some up-front fees and R&D milestone payments are part of the deal too. No word on how much, but any revenue at all would be big for BioCurex - which doesn’t have a revenue-bearing product just yet.

Though I don’t this as an immediate game-changer, the rest of the market does. The stock is up 15% today. I also have to think the 41% improvement on December’s lows of 53 cents is also related to today’s news….just a little preemptively.

In the long run - and assuming RECAF does actually make it to commercialization in some form - this is huge for BioCurex and its shareholders.

Here’s the press release.

For those of you who recognize the title of this blog entry is also a lyric from M.C. Hammer’s late 80’s work, congratulations….and, I’m sorry. For some reason it got in my head and I couldn’t get it out. For everyone else, never mind. For any and all of you still reading this, the title may well be the perfect description of how many technical analysts are feeling right now - the candlestick chart analysts in particular. Monday’s hammer-shaped bar may be a reason to stop selling stocks, and start buying them.

It was actually an idea I posed in Saturday’s newsletter. A disastrous Friday topped off an even more disastrous week last week. The thing is, it was so bad, it may have been a nice, capitulatory bottom…at least in the short run. My own personal ‘tell’ would be evidence that the bulls really were starting to flow back in.

What would suggest that? A bar (or bars) with a long-tail made by a deep intra-day low, and then followed up with a strong rebound before the end of the day - and a close back at or near the open. That’s a likely hint the sellers have been totally flushed out, and the buyers have taken control again.

The hammer-shaped bar (for the S&P 500) from August 16 I referenced on Saturday was a perfect example of the idea….a nasty, multi-day drop, and then finally a hint of reversal. The NASDAQ and Dow made the same shape on the same day. Needless to say, it successfully signaled a bottom then.

Fast forward to Monday…when we saw the same shape and the same scenario for the NASDAQ Composite. Interesting, isn’t it? I’d never bet the farm, but I’m scoring one for the bulls after seeing that hammer.

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We received a well-informed opinion about our ‘Dog of the Dow’ stock pick Verizon (VZ) a couple of days ago. A former employee who still chats with his former co-workers says the fiber-optic lines (something I mentioned on January 2nd) were indeed paying proverbial dividends. Check out what our reader wrote about the short and long-term revenue growth path the telecom industry - and this undervalued stock - seems to be on…

I retired form Verizon several years ago, but still have friends working there. Verizon’s FIOS (Fiber Optic Service) is being rolled out gradually, and is being well received by customers. The only speed bumps are winning local approval to sell TV service in some areas. I think the coming of I T telephony is a concept well below the radar of most investors. For those who understand old telephony with central offices full of switches………the Vonage model IS the future. In 5 years those switches will all be replaced with servers.

I tend to agree on all counts. The broadband-based services like television and telephony are still underestimated, misunderstood, or completely missed by too many folks. As the technology gets better and better, the old telephone equipment will become obsolete.

If you don’t think it can happen, keep in mind the government (FCC) has already ‘obsoleted’ your old analog television. As of March of 2009, if your television isn’t digital - or you don’t have a digital receiver - you won’t be seeing a thing on your TV screen. (Maybe the FCC has a stake in Sony?) The point is, we’re being whisked into the future - like it or not.

I don’t know if the new age of telephony will mirror the onset of the new television era (I don’t think it will actually). However, I don’t want to be left owning technology that can’t be used.

Anyway, like the guy said, FIOS is being well received. We’ve seen IPTV stories for a while now as well. These providers keep resurfacing, so I don’t think it’s a story that’s going to go away. Maybe we should take the hint. At the same time, maybe the easiest way to jump into the game is with a company that already has a major presence in the game.

Oh yeah, Verizon just announced today their FIOS service in some locations was capable of transmitting data over the Internet at a rate of 20 or 50 megabits per second (mbps). Just for perspective, the very fastest broadband services right now - usually via a coaxial cable - are maxed at 10 mbps. Their price, however, isn’t much more than the 10 mbps service.

See what I mean?

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If you’re a fan of trading gold as much as you’re a fan of trading small cap stocks, then you’ve probably been following my thread on gold’s recent chart. I mentioned back on December 18th I felt a big move was brewing, when gold futures were starting to frame a wedge. On December 24th we saw the top side of that triangle fail to act as resistance, allowing gold to make a breakout. I think the hint was a good one, as gold has since rallied from 816 to the current price of 855-ish….a 4.8% move.

The chart really tells the tale. The triangle shape is clear, as is the breakout. Tuck this chart shape away for future reference. It’s not a sure-fire pattern-based signal, but it’s a darn good one.

As for what’s next, I think the short-run outlook for gold looks weak. If you’re a swing trader, I’d suggest going ahead and locking in what you get, as gold looks a little overbought for my taste.

If your mindset is a little longer-term, I think gold is likely to keep on trucking higher - after a brief pause. Remember, most people doubted gold could run from 400 to 700 between 2004 and 2006, yet it happened. It consolidated during the latter half of 2006 and early 2007, so there could be plenty of gas left in the tank.

Of course, today’s unemployment number played a small role in forming that opinion.

Unemployment is now at 2 year highs, coming in at 5% for December. The Fed was already dealing with some challenges, but things went from bad to worse with that news. I believe they’ll really be pressured to cut interest rates now. (Goldman Sachs thinks the Fed could cut another half-point before the January 30th meeting.)

In turn, inflation woes for the U.S. are apt to resurface. Gold - like many other materials - is actually a potential beneficiary of inflation.

Just something to think about.

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Wow! It didn’t take long for our comments on small cap medical-diagnostic manufacturer Imaging3 (IMGG) to create a buzz among our reader base. We’ve already fielded several questions and comments about the company. In fact, the interest has been so strong that we decided to take our small cap due diligence up a notch. Here’s more of the story…

Like we mentioned on Thursday, Imaging3 makes a device that can take a 3-dimensional picture of a patient’s ‘insides’, like bones, organs, and anything else found under the skin.

Imaging3’s scanner may be superior though, as it lets doctors create 3-dimensional image of any part of the body within a matter of seconds. Current comparable machines can take minutes, if not hours, to do the same. (That’s the compelling theme of the story.)

OK, so far so good, but you’re probably thinking what I’m thinking - what’s the investment potential? Here’s where things get really interesting.

In the United States there are 13,000 hospitals and 1400 surgery centers, many of which have multiple imaging devices. These 14,000+ facilities end up buying a total of about 6000 CT (scanning) devices every year….a lot more than I would have guessed.

As far as pricing is concerned, I was pleasantly surprised to learn these things can easily cost a few hundred thousand to more than a million dollars each. I couldn’t get an exact bead on how much Imaging3’s version was going to cost (they’ll have more than one), but I think they’ll range somewhere between $300K and $500K. For math purposes, let’s just say they sell them for an average price of $400K.

By my estimates, a 5% penetration means about $120 million in sales. A 20% penetration means roughly $480 million per year.

Of course, that brings up the real question…how well can the company acquire market share? That’s ultimately up to you to decide. You read the description of their technology, so that’s really what you’re measuring here…what’s the demand, as measured by future capital spending on diagnostic equipment of this caliber? It looks great to me, but I’m not in the market for a CT scanner. Someone else will be answering that question with dollars.

Or look at it like this: If you were a doctor, would you want Imaging3’s speed and functionality versus, well, there’s no trade-off really…not one that I see anyway.

It’s an interesting company with a lot of potential, at least in my opinion. I think I’ll put it on my radar and see how things unfold. They’ve really started to stir the pot lately in terms of patents, the FDA, and showcasing their wares to the industry. When a company gets that excited about itself, something big could be going on. I may follow up on IMGG again in the newsletter or blog.

By the way, we have a reader to thank for bringing IMGG to our attention. If you know of, or have come across, an interesting small cap company with a good story, feel free to drop us a line in the blog or via e-mail…we may share it with our readers. We’re not interested in pumping up your random stock picks - we’re just looking for interesting small companies that deserve some attention but can’t get it through the mainstream media.

Like golf, trading small caps is not a game of perfect. I’d estimate only about half of all small cap companies have a shot at really thriving. But man, you get the right idea at the right time (like a medical equipment breakthrough), and poof - you have one of those small cap success stories where the unknown venture becomes an overnight sensation. Now, I’m not saying Imaging3 (OTCBB: IMGG) is going to be one of monster-sized small cap winners, but I am saying I think this stock has the potential to be one of those stories.

To give credit where credit is due, one of our readers actually turned us on to the idea. Jim (the same guy who liked Biosolar) pointed out about Imaging3…

Imaging3 is a developer of a breakthrough medical imaging device that produces 3D medical diagnostic images of virtually any part of the human body in real-time. They have created a device called the Dominion Volumetric Imaging Scanner . According to the manufacturer Imaging3, Inc, their newest product, the Dominion Volumetric Imaging Scanner or DVIS, utilizes between 100 to 1000 times less radiation than a standard CT scan. This is a major announcement in light of the new findings regarding emitted radiation in CT scans. Remember, right now people are afraid of radiation. A device that can do 1000 times less, is cheaper and does 3d in real time, not like those other companies that say they do real time but dont, is a really good medical stock to own.

Sounds reasonably encouraging to me, though I’d never pretend to be a medical imaging expert. Anybody out there with an unbiased sense of whether or not CT radiation is a big enough problem to solve with new equipment? For that matter, does anybody in the field really know if the difference between CT and real-time DVIS scans is worth buying into?

Anyway, based on what I personally know about imaging diagnostics and what I read above, I do think there’s something interesting here. My interest is particularly raised by the fact that Imaging3’s technology was only recently unveiled. They contacted the FDA in June, and presented the first prototype in October. In other words, the company’s fiscal past may not reflect what they’ve got to work with in their fiscal future.

More ‘bigger picture’, that’s the stuff that small cap dreams are made of…an unknown, underestimated company.

Unfortunately, I really can’t tell that Imaging3 is sitting on a mountain of demand. Are sales up? And if so, is it because of the Dominion scanner? We have no ‘proof of life’ just yet. Do we even have a reasonable sales forecast or estimate? (So far the asnwer to all those questions is ‘no’, but the floor is open to your input.)

The chart looks ‘challenged’ too…which is my nice way of saying it looks like crap as of right now.

Things change though. Companies change. I think the premise of the trading idea merits a closer look, even if the promise of the company is over-estimated. I consider Imaging3 and IMGG well worth watching. A move above 17 cents may be a buy signal, provided the company backs up the move with real results.

Like I said though, I think Imaging3 is easily worth keeping an eye on. The market cap is only $29 million, so it wouldn’t take much for this company’s revenues to reach more than commensurate levels (compared to other diagnostic equipment stocks).

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In last week’s ‘Top Ten Predictions for 2008′ issue, I added the solar power industry as an investment-worthy idea. Either the suggestion struck a chord with our readers, or all of our readers and I are on the same page (there’s a scary thought). One of our readers submitted a pretty good looking solar power stock idea earlier today…one I think is worth mentioning to all of you. Here’s Jim’s take…

Biosolar (OTCBB: BSRC) is a company that is developing a comprehensive line of bioplastic films and resins for solar cell manufacturers, based on its breakthrough bioplastic technology. There are primarily two kinds of solar cells in the market today: traditional crystalline silicon (c-Si) and thin film solar cells. While thin film technology promises lower cost and more efficient manufacturing, it still represents a very small part of the solar cell market. BioSolar can help reduce the cost per watt through the use of its lower cost bioplastics. They are creating the backsheet, substrate, superstrate and plastic for solar manufactures, removing oil and using green materials. This will save the manufacturer 50% on the cost of traditional materials as the price of oil rises and creates higher costs for them. Solar is hot right now, and a green solar company that creates lower cost plus saves the environment is a good stock to own.

Well, there’s no doubt the company is doing something right. The stock has rocketed from August’s low of 20 cents to the current price of $1.04…a nice 400% gain in about six months. The prompt for the big rally was good news - a wave of technical successes suggests Biosolar’s technology could have some real commercial value.

My only beef with the stock is that the company hasn’t actually made a dime yet, but the market cap is $135 million. Even if Biosolar comes out of the corner swinging and puts up some major numbers initially, I don’t think it’ll be enough to justify a market cap of $135 million. That’s not a bad thing - just some perspective.

Though Biosolar isn’t an investment yet based on fundamentals, the momentum and buzz could certainly make for an interesting short-term trade. However, even from a trader’s perspective it could be tough to jump on board after this recent run-up. Waiting to buy on a dip could be prudent no matter what your timeframe is.

That said, I don’t know enough about Biosolar to say what kind of revenue dollars they may be able to generate. Anybody? Bueller? Bueller?

Anyway, just wanted to mention it. Even if BSRC isn’t your thing, I think there are a lot of interesting stocks in the solar power space that could get real interesting in 2008 and beyond.

Are you a subscriber to the Small Cap Network newsletter? If not, you’re missing out on some great trading ideas and exclusive market commentary. To sign up, just go to the top right corner of any page of our website. You’ll be joining thousands of other subscribers who have already benefited from our news and views.