They say that the third time is a trend, so I guess it’s time to make it official. Every time a stock doubles from my cost, I’ll be doing a write up detailing what caused the move and whether or not it has legs to go higher. Today’s piece is on Patriot One (PTOTF), a stock that has more than doubles from our cost basis of $.50, to a current price of $1.05.
The cause of the strength in the stock is very obvious. On Monday, October 2, the Company put out a press release saying that their concealed weapon detection system, PATSCAN, had received FCC approval.
The FCC giving its seal of approval to Patriot was really, in my mind, a foregone conclusion. A very important catalyst, but one that really (post Canadian IC approval) was as close to a 100% certainty as could be found.
It just so happens that virtually simultaneously to the FCC approving PATSCAN, some asshole decided to shoot up the Las Vegas strip. Now, it’s not like he was walking around with a concealed handgun, but the ease with which he brought 19 weapons into a major hotel is unreal. Especially since casinos are known for their security.
The bottom line is that the Vegas shooting demonstrates that security guards alone are not enough to protect public places. There needs to be a better solution, which is exactly what PATSCAN is; an improvement over metal detectors for keeping weapons out of public places without disturbing the mood/openness of a location. It’s not a perfect system, but it certainly would be a near perfect fit for places like casinos.
To that point, we can rest assured that casinos and hotels will be installing new security measures post the Vegas tragedy. And, it just so happens that Patriot One already has a unit in place at a casino in Vegas, where it has been running tests for quite a while now.
So, while the FCC approval alone, which, to repeat, was not a surprise, should be a decent catalyst for the stock, I believe the Vegas shooting is responsible for investors waking up to the potential for PATSCAN to be a huge product.
The Company has already announced that production for the balance of 2017 is sold out. They are taking orders for 2018 and are also partnering with major security systems integrators like Siemens and Tyco.
In my opinion, 2018 will be a blockbuster year for Patriot, with sales potentially reaching $25,000,000. This is just the tip of the iceberg as the potential areas of application for PATSCAN are too numerous to count. They include all public areas like subways, schools, movies, mall, hotels and casinos.
It is also possible that PATSCAN gets integrated into turnstiles, which would not only increase the areas of application, but could dramatically increase the number of systems per location. For example, every turnstile at a stadium could have a screen. Or, buses could become a weapon free environment. The market potential is truly enormous.
I believe that, for a disruptive technology like PATSCAN, the market could put a multiple on this of 10X revenue. If that were to happen, Patriot One would be between $4 and $5 per share US. That is the potential upside we are looking at. And, for that reason, I’m not selling any stock here at $1, even after it has doubled from my cost.
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