As we enter the new year it is very difficult not to be optimistic…borderline exuberant. The Tailwinds Select Portfolio has been on a tear lately, closing the year with a bang. If gaining 20% in the last two months of the year alone doesn’t put you in a positive frame of mind, nothing will, right?
But, I’ve been doing this for long enough to know that, while you should let the good times roll, stocks do indeed go down in price at times. Therefore, despite a huge end to 2017, and despite a great +4% first day of 2018, I will try my hardest to temper my enthusiasm when writing this 2018 preview.
Tempering my enthusiasm will not be easy. One of the criteria for putting a company into the Tailwinds Select Portfolio is a belief that the stock can return well over 100% in the next 12 months. This is not an easy target for any one stock to achieve, much less a portfolio, and there will likely be disappointments. However, with the recent performance in the market, and all of the Portfolio companies having significant opportunities and catalysts in front of them, as we enter January I’m exuberantly anticipating this year.
I frequently get asked which of the stocks I cover are my favorites. Honestly, there are times when some stocks are more timely (for instance, buying CATS at year end when tax-loss selling was hitting it) than others. That being said, I’m a long-term investor and every company is here for a reason, and, if they execute, they can all be stellar performers. There really are no “favorites”; this is a portfolio of unique, disruptive companies that, as a group, has what I feel is a much better than average chance of performing very well.
So, without further ado, here’s a preview of what to expect from each company in the Portfolio. I’ve ordered them based on their relative weightings in the Portfolio. If they can each achieve their forecasts, and barring a significant market hiccup, 2018 has the chance of being a year to remember…
Remark Holdings: due to the extraordinary success of the shares late in 2017, Remark has become the largest position in the Portfolio. Looking out, we see no reason to think the performance should suffer. The company has guided to $30M in revenue from their Artificial Intelligence division, KanKan, in 2018 and has stated that they expect to exceed that number. Possibly more than doubling it. For this to occur, we would expect to see many new contracts announced, and huge year/year revenue growth as they progress through 2018. If KanKan were a private company, it alone would likely be worth over $1B. I expect that discount in valuation to diminish as the year progresses and think Remark is a great growth story at a deeply discounted valuation. New contracts, raised guidance, valuation uptick; those are our goals for MARK in 2018.
Resonant (RESN): this is likely the easiest Company to forecast for 2018 in terms of goals and catalysts. As they enter revenue, all that matters to Resonant is continued design wins and execution. The Company landed 16 socket wins in Q4, a big uptick from prior quarters. Now, there is seasonality involved in this, but still…companies are working with RESN at an ever increasing pace. With 5G expected to come during 2018, filter complexities will only increase. This plays into Resonant’s hands in terms of driving customers but also in more expensive filter designs. ASPs on the first few designs were small; expect to see them grow throughout the year. Meanwhile, the timeline of design wins to revenue is shrinking and we should learn more about that as well. Finally, the fabless model they enable should be made more clear as the year progresses and investors can understand the disruptive nature of that business. Resonant is in a sweet spot and 2018 looks to be a good year for them.
Catasys (CATS): CATS is potentially going to be the best performing stock in the portfolio in 2018 due to a slew of catalysts coming at them early in the year; catalysts that could drive growth throughout 2018 and beyond. The Company has continually stated that they will be signing two of the largest health care plans as clients. It appears that Q1 could be the time when this happens. If you combine this with expected increased engagements with several existing clients, eligible lives should jump from the current level of 24,000 up to much higher ground. When this happens, expect guidance to be raised significantly from the baseline levels they have given the street. And, it’s not just new clients; CATS appears poised to beat expectations with their current business that (as discussed on their earnings call) is running ahead of all projections.
Patriot One (PTOTF): Lots to look forward to for Patriot in 2018 as this is the year their product hits the market. Demand is there as they have pre-booked production; now they need to finish finalizing the product through real-world testing, which is ongoing at a casino in Las Vegas right now. Expect to see more installations announced in Q1, along with updates on partners/resellers. The product should be ready to go to market by the end of Q2, so sales will be starting in the summer. The Company has also hired a quality engineering team, but expect them to complement that with some talented and proven executors who will drive the go-to-market strategy. The PATSCAN is a game-changing device for the security industry and the opportunity is immense; this should start to become much clearer as 2018 progresses.
Cryoport (CYRX): Operationally, we can expect 2018 to be very similar to 2017…lots of new clients, clinical trials progressing into later phases and approvals, and a very strong revenue ramp. Importantly, several CAR-T focused clients should be filing INDs and/or getting approvals in 2018. Cryoport has a virtual monopoly on the shipping of cryogenically suspended therapeutics and this branch of personalized medicine continues to grow rapidly. The only thing we can wish for, but, at over $8 per share it’s tough, is for CYRX shares to perform as well as they did last year. That’s a tall order, but, with their business doing so well, we can certainly expect the shares to attract a lot of attention from investors.
MoneyonMobile (MOMT): 2018 should be a very big year for MoneyonMobile from a business standpoint. They are growing like a weed and bringing on new customers and new product lines. While 17% sequential growth HAS to slow, they should still show phenomenal growth for the year. However, on the corporate side, things are skewed heavily towards January and Q1 being the most instrumental time for the Company. MOMT just completed a financing and is in the process of cleaning up their balance sheet. Once this is accomplished, they will likely reverse split and apply for a move to Nasdaq. Huge growth, clean balance sheet, Nasdaq listing…this is likely a big year for MOMT indeed.
Chromadex (CDXC): following up on a big year is never easy, but 2018 is setting up as another great one for Chromadex. There are catalysts early in the year that will help set the stage for continued success both in the labs and in terms of revenues. We are looking for data from a study at the University of Colorado on Niagen. This is just the first of many trials that will be revealing more data on the supplement, which has gotten nothing but positive news from prior studies. Later in the year, there will be more data out of the Company’s ongoing 2nd human study and we can also look forward to a filing of an IND sometime soon.
In terms of revenues, the big driver right now is their Watsons rollout. Not only will we see more data regarding the uptake of sales at existing locations in Hong Kong, but we should expect the Company to be informing us as to the timeline and scope of a broader Watsons rollout in other countries around SE Asia. If the sales of Niagen continue to ramp, and the studies show continued efficacy in many therapeutic areas, we can expect CDXC stock to be on a lot of radar screens and have possibly another stellar year.
Endra (NDRA): this early stage medical device company is set up for an interesting 2018. On the agenda for them is human-data from a trial comparing their ultrasound technology with that of an MRI for determining fatty-liver disease. This data is expected in Q2 and will be a huge factor in determining what happens next at NDRA. If successful, expect the Company to file for CE Mark approval around the end of Q2. This is a six week process, so expect approval and sales to start in the summer. Followed, of course, by the filing of a 510K application with the FDA. If it all comes together, Endra shares should trade very well…which is good as the other thing to look for in 2018 from NDRA is a financing, likely to take place shortly after the human data is released.
ITUS (ITUS): one of our top picks for 2018, ITUS has a number of catalysts on their horizon. On their C-Chek program, there are several upcoming catalysts. The Company will be presenting data at the ASCO-SITC conference in late January, but the abstract will be released sooner, on January 22nd. This should be a positive. Next, we can expect to see the Company pick an initial indication for which they will be developing their novel, AI based, cancer detection platform. This will hopefully be followed by the signing of a partner to work on developing this indication. If that happens, the Company would likely receive an upfront payment, milestone payments and a back-end royalty. Finally, we can expect to see more robust performance data out in the second half of the year.
Regarding their CAR-T program, as the year progresses, we can expect updates from the Company. With the pre-clinical success shown, I’m eager to see more data on this drug. ITUS’ board and management team have brought in two promising platforms in a very short time. I wouldn’t be surprised to see them accomplish much more in terms of corporate developments over the course of 2018.
The board and management of ITUS has done a lot on the corporate development side in bringing in two platform opportunities in a short time, and they are well versed in building companies. I expect this trend of licensing or acquiring novel platforms to continue and would look for something strategic to happen over the course of the year that adds to their arsenal.
SG Blocks (SGBX): for SGBX, 2018 is a year of continued building of backlog and starting to deliver on their promise. With backlog increasing to $77M at the end of Q3, they have just started to scratch the surface. Officially they indicate backlog will increase to over $100M by YE 2018, but it could come through as a multiple of that figure if the Company lands just one of several large contracts that potentially could come to them. Expect the Company to increase guidance each quarter and to achieve cash flow breakeven in Q1. Not needing to raise more money will also be viewed positively. SGBX is well positioned; if they continue to execute on building backlog and start delivering on revenues in a bigger way, this stock should trade very well.
Vuzix (VUZI): the goals for VUZI in 2018 are twofold; start producing and selling as much of the M300 as possible, build out the Blade 3000 and bring it to market. Vuzix is at an inflection point in their revenues…guidance for 2018 is for a dramatic increase over 2017. If they can hit their guidance, this stock should trade higher. If they can make some real progress on bringing their revolutionary Blade 3000 product to consumers, it could be a home run. And, right as I put this to press, it looks like they have done so…just on the tape, Vuzix Blade will be Alexa enabled and revealed at CES next week. So, Boom!, there it is!!! If that doesn’t bring consumer awareness to Vuzix, nothing will.
3-D Signatures (DXD.V): for 3DS, 2017 was a year to forget. The stock went down dramatically on the back of a very poor financing effort. However, like the Phoenix, sometimes big disasters can turn into outstanding revivals. 3DS is poised to enter into several partnerships for its interesting technology. Meanwhile, the stock’s valuation discounts all success. I expect shares to advance in lockstep with the company’s development of their telomere technology and for 2018 to mark a dramatic turnaround for the Company.
Bioasis Technologies (BTI.V): Another one of 2017’s dogs that could turn out to be a big stock in 2018. The Company has been rather quiet of late, but, with a new management team and a very solid board of directors, this little platform Company could turn into a true gem. Expect non-human primate data sometime in the first half of 2018 and that should be the key to the stock; if the delivery platform works, so will the stock. They will likely raise money in 2018, but I don’t think that’s a concern. The ability of the board to bring big money to the table will likely make any financing a very positive event for the Company and its shares.
Aqua Metals (AQMS): if every time you move, you get half the distance to your goal, will you ever get there? That seems like the saga that is Aqua Metals. Always telling you things are on track as they push out guidance. It appears that they will actually get into production here in Q1. If so, the shares have a lot of room to move higher. When this happens, however, we will be moving on. We have a total lack of confidence in management and, therefore, have lost our appetite for shares in AQMS. It’s too cheap to sell now; once it rallies, see-you-later-alligator.
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