Frank Curzio: How's it going out there? It's Wednesday, January 30th. I'm Frank Curzio, host of the S&A Investor podcast, where I break down the headlines and tell you what's really moving these markets. Wish me luck, everyone. I'm getting surgery on my back tomorrow. If it doesn't go well, I may not have a podcast next week. If it really doesn't go well, I want to thank everyone for supporting this podcast, and I will see you when I see you. Just kidding. I'm very optimistic and I've done a lot of research on my back before coming to this decision.
And I've mentioned it to you guys a couple of times. I must have received hundreds of e‑mails. It's sad because so many people have back problems. But everyone was like, "Don't do the surgery," and were people were sending me books, which is really cool. And they said, "Frank, read this book. It's about pain management and stuff. It might help you, and it's fantastic." I actually read about three or four books in the past week, which is great and the reason why I love this podcast. You guys are sending me so many e‑mails.
Ninety-five percent of you say, "Don't do the surgery. It's crazy." And the herniated disk I got in my back is pushing into the nerve so bad that I have excruciating pain now through my leg into my calf. And it's been two months now that I've had this pain, so it hasn't gone away at all. But there's a funny thing, and the reason why I'm bringing up the story is I saw four doctors in total. Well, three doctors and a physical therapist, a really good guy. And the first doctor, my primary, I told her I have pain and everything. And she's like, "Let's – we gotta do X‑ray first, then lets do an MRI."
And she got the MRI back and she was like, "Whoa." She's, like, "You need surgery," and she knew right off the bat. And I was like, "Whoa," 'cause you read everything and it says only 10 percent of the people need surgery if you have a herniated disk. She's like, "You definitely need surgery." Then she made – she gave me an appointment to see a pain management guy and also a physical therapist. So both of these guys said, "Frank, don't do this surgery. Wait a couple months."
It's been two months, and they're like, "Let's just go do the physical therapist part," and they were giving me pills and stuff like that. They're pain pills which I really don't like taking. A lot of people love that stuff. I don't. It just makes you a little bit tired and I'm more of an active guy. But I couldn't do any exercise in the past two months and now I've gained ten pounds 'cause I haven't done any. So I started pain meds; I went to the physical therapy. And I found out that one of our Alliance members is also a neurologist and he's in Palo, California. Great guy, he's smart.
I got a chance to talk to him on the phone. He said, "Listen. Send me a DVD of your MRI right away. FedEx it. Send it one day." He's like, "Let me take a look." Now, here's the funny thing, the reason why I'm bringing up this story. I got the MRI at the hospital near my place in Southern Florida. And I figured it would be easier to get a copy of that at my pain management doc or my physical therapist, since they're closer to my house so I don't have to go into the hospital.
So I went to these guys and I said, "Listen. Do you have a copy of my MRI? Can I burn it to DVD so I can send it someone and get an opinion? They both said that, "We don't have the MRI. We never took a look at it." And it was interesting, because I'm like, "What do you mean you didn't take a look at it?" I was like, "You're giving me advice for physical therapist for two months." And the pain management guy is saying, "Yeah, we'll give you shots and stuff like that. You work through it for two, three months."
It's crazy, because the first – actually the two neurologists – the first neurologist that I saw said I definitely need the surgery and he said I could get permanent nerve damage if I keep it the way it is. Could I – lose bladder control, have sexual dysfunction, since the herniated disk is pushing on the nerve in a unique way. It's common procedure, but it's pushing on it in a unique way where he was like, "If you have pain down your leg into your calf, you gotta get this done."
He's like, "You could do whatever you want for three or four months now. You're gonna come back. He's like, "I'm booked forever." He's like, "I don't need your business." He's like, "You're gonna need the surgery. So the point is – I'm bringing this up – is be careful who you talk to. And the pain management guy which gives me injections in my back to reduce that swelling, physical therapist doing all types of stretches and stuff like that, they make a lot of money if I don't get the surgery.
I have to go to them for months. I mean the neurologist is also – he's not gonna make money if I don't get the surgery as well, but at least they looked at my MRI before determining it. And these guys are giving me advice, saying, "No, 60 percent, your body absorbs it and you could be fine. And reading a lot of books like that, it just so happens that if I do anything – like I will ride a bike for a half a mile with my 4-year-old daughter to get her out there in my neighborhood. And I come back and I'm in excruciating pain.
And I'm a guy that, whatever, with pain management and stuff like that. I could take the pain. This is excruciating pain. It hurts; I can't do anything. So it was just amazing that when I went to get the DVD from these guys, both of them were like, "We never really saw it." I'm like, "How could you tell me that I need exercise, I need to do things, when you didn't really see the MRI? You don't even know what's going on, which is kind of amazing.
And I even went to the chiropractor, and that's when my pain really got – I went to the chiropractor and, basically, they just started to strengthen – you know, whatever – straighten my back, going crazy. And I couldn't even walk the next day. I literally couldn't even walk. I have stairs in my house. I couldn't walk. And they didn't even take an MRI or anything. They didn't even notice. I mean if they saw a disk damage, they wouldn't have touched my back. Instead, they were like, "Oh, it's all right. I feel it. It's fine. Bull, rah, this and that."
And I'm like, "Really." I have gone to a – I'll never go to a chiropractor again. But I just want to let you guys know that it's pretty crazy. Thank you for your feedback. Again, the second opinion from the neurologist went well, and he was like, "You definitely –" and he's a good guy. He's a friend of ours at the company. He was just like, "Look, you basically – you definitely need the surgery, especially if the pain's coming down." So I'll let you know how it turns out, which, by the way, is a pretty simple procedure. The incision's very tiny; it's microsurgery. But, hopefully, all goes well.
I just wanted to bring that story up to you, not so much, personally. Don't feel bad; I'm gonna be fine. But, man, I just can't believe these guys were telling me, "You're gonna be fine," and they didn't even look at the MRI. I mean I don't know if that happens anyway. If you want to share your stories with me, fcurziostansberryresearch.com. Again, I bring this up because I've got hundreds of e‑mails on it probably. I feel bad 'cause so many people have back problems. But just interesting the way things work here. I don't know if that's Florida, if that's everywhere. I've never had anything like this. It's just interesting, so I want to open up with that.
But anyway, I have a great podcast for you today. My buddy, also a small cap expert, Lou Basenese, is here. Lou founded Wall Street Daily Insider, also Wall Street Daily eLetter, serves as Chief Investment Strategist as well, their breakdown in small-cap stocks. I really love talking, love talking to Lou. He's always shooting out ideas. He's gonna shoot out at least ten ideas you never heard of, which is great. I mean I have guys in this podcast that say, "Wall-Mart's great. Microsoft's great. McDonald's is great."
He's gonna give me ten ideas you never heard of. That's why I love having him on. He's talking about IPO market, technology, small caps, great. I mean I love having him on 'cause I learn a lot as well. And he's a small cap guy, so we just have so much to talk to. He's pretty cool, a great analyst, and this is another can't-miss interview. It's like last week. Last week Dr. Kent Moors, fantastic, fantastic interview, guys. If you didn't get a chance, go back, listen to it. I've listened to it five times. Amazing stuff.
I'll cover that later in your questions. Later on, I'm also gonna break down the markets, heart of earning season, right. Again, not seeing a lot of upbeat reports. The markets going on, right. Nobody cares. Yet stocks continue to do well. These reports aren't really that good. So I'm gonna break down a few of the earnings reports, and also tell you why you should be taking some profits off the table here. You know, we really hear that too much when the markets are going up, but man, we've just been flying higher here, five year highs. Should be a little careful.
Also, I'm gonna talk about a specific company I recommended in my Small Stock Specialist newsletter, and show you why nobody, nobody looks at long term anymore. Again, I'm gonna give this stock away. This is the one small-cap stock I'm gonna give away from my newsletter that's actually in buy range. It might piss off a lot of subscribers, but the reason I'm giving it away is to prove a big point in this podcast, teach you something about long-term investing.
And, more important, is it's a company that I want you to hold for 10, 20 years and keep reinvesting the dividends compounding that interest. And you guys could make a lot of money on it. So it's a long-term holding. I'm gonna give it away because I've gotten so many e‑mails. It came out with bad news. Stock came down a little bit and I've gotten a ton of e‑mail. I was gonna break that down. Also take some of your questions this week. Have a lot of good ones.
It's gonna be a lot of fun during that segment, at least four or five questions. And, finally, in my educational segment, gonna break down one industry that's about to see massive, massive profits over the next few years. Ill give you a little bit of hint. It's an industry within the oil sector. I'm also gonna give you four best players in that space. I think all these stocks are gonna be huge winners inside of 12 to 18 months. But before I get into all that fun stuff, get to my interview with my buddy, Lou Basenese.
I start by asking him, "Following this run higher to five-year highs, is it getting more difficult for you to find new ideas?"
Lou Basenese: I hate to say this. But, no, it's really not. I think I've gotta pass over some of the obvious names. But there's been some nice volatility in the small-cap space, where as long as I've done the research ahead of time, I just kinda have to sit and wait for those names to pull back to prices that are much more attractive than you could previously get them at. And another thing I've been following too is I follow a lot of technology trends.
And I'm having a lot of success in finding just less recovered, maybe one analyst or no analyst following certain technology stocks in some of these big growth trends, like in the mobile market, that just aren't getting attention. I mean they're growing. Earnings and sales are at least 20 percent clips and, yet, they're just not attracting investor attention yet. And I think that's largely a function that so many investors have been sitting on the sidelines for so long. So, seeing a lot of opportunity in that space as investors return to the market.
Frank Curzio: Well, lets jump right in with technology because it's just one of the fields that I learn a lot from you. You're incredible; you look at patents. I want to get more into detail 'cause, for me, as a small-cap guy, technology is hard. But it's difficult not to the point where you can't find any good ideas, but it seems like the good ideas are expensive.
And same with the mining sector, you're able to – from a risk reward basis, you can find something that's basically uncovered – something like you just said – that has huge upside potential. But it feels like even the good small-cap companies that have upside potential are not public yet, and when they do, the become very expensive. How do you find new ideas in this situation that have that huge upside or, maybe not so much downside, a limited downside?
Lou Basenese: Yeah, I mean it's ironic. I hate to say that I follow a public enemy's advice in investing, but I don't ever believe the hype in technology. And I think a lot of investors get caught up in, you know what, the technologies that are being overhyped in the market. You think about social media, just about every one of those circa-media related stocks that went public in the last two years have just failed miserably. I'm talking about Zyngas, the Groupons, the Facebooks of the world, although Facebook seems to be getting its footing right now.
The first thing is to never treat hype or a lot of media attention to a technology as an indicator that the time is right to invest in them. What I, in fact, use instead, is really just a straightforward [break in audio] that any investor can use is from tech research from Gartner. They put out an annual hype cycle that, really, just gives an overview of the technology market and specific technologies that they think are ripe for adoptions for businesses.
So it's not meant for investors, but it has applications in my opinion. If a company – if a technology's ripe for adoption, that means a lot of companies are gonna start using that technology so that the providers of that technology are gonna reap the rewards. So that's really the two things: Ignore the hype and really focus on trends that are legitimate, that are taking off, gaining traction in the marketplace.
Frank Curzio: So you talk about trends and you look at say, Groupon. I mean Groupon came out. The IPO jumped to $25.00, $26.00, and, unfortunately, some of the investors did get into that price. But then you're looking at these companies, and something I'm seeing in small caps, where it got totally annihilated. It didn't just come down a little bit. It just didn't come down 30 percent. I mean this kinda got crushed like 80 percent, almost 90 percent. It came down to $2.00 and change.
And then, all of a sudden, you're seeing hedge funds saying, "Wow," almost to the point where it's near cash. How many ideas are you seeing of this to the point where – like you said, social media is an unbelievable trend. You're seeing in Facebook – what is it? One fifth of the world has a Facebook account. Some of them just find out how to make money from that. And having these billion people on one site, I think it will be done eventually. But even a company like Groupon, it seems like if you're waiting on these, you could really find some excellent opportunities, right.
Lou Basenese: Yeah, I think what you've brought up is two different things. Do you want to invest in an emerging-growth company? Or do you want to invest in a company that's established, that's more of what I would call a stable growth? And I think when a company that comes onto the scene, like Groupon, is pitched as just this high-growth, emerging-growth company and that isn't actually the case, you see the stock price just correct.
For listeners, the easiest way to tell if an IPO's gonna be a flop or a pop, is to look at the year-over-year growth rates in sales. If that's decelerating before the company's going public, it's a warning sign to stay away. I mean if you can go back and look at the single metric for Groupon, Zynga, Facebook, and see that their year-over-year quarterly growth rate for sales was decelerating. And when you buy an IPO, you're buying into the growth. In those instances, you weren't getting it.
But fast forward to today and Groupon's definitely got a huge customer base. And now is an opportunity where it's at a valuation where, hey, if they figure out how to monetize that effectively, then, yeah, I think there's an opportunity for some more stable growth of an investment. But things I like to focus on on the emerging side, right now, I think biometric authentication is gonna be really hot in 2013. And that's backed up – I mean if we just want clues, just look what Apple did.
In the middle of last year, they acquired a company that I had recommended to readers, AuthenTek. It does fingerprint sensing, so fingerprint biometrics. And the latest rumor is that the next iPhone is actually gonna have that fingerprint technology incorporated into it. So if we just look at the leaders in the space, what they're doing, the Apples of the world, they're going after biometrics. Intel's working with the palm-scanning technology.
Microsoft filed a patent recently for a biometric sensor for the Xbox gaming system. So, for me, those are emerging growth opportunities that are gonna on the scene that provide investors for a chance to really get in in the first run of profits, the first 100 percent run-up, as opposed to sitting back and waiting for some value plays that you might get in the Groupons and Facebooks, after they've gone through that IPO hype cycle.
Frank Curzio: It's interesting you say that because I'm actually getting surgery Thursday on my back. It's minor surgery. They gotta fix a disk that I need. But I went to – it's a major hospital in Jacksonville – I live outside of Jacksonville – and they have this new technology that just came out. Well, it's not relatively new, but it's new to the hospital, where it's all palm sensored. And it's so funny that you mention it.
That's the first thing I did – and this is yesterday – is I put the – and I'm gonna look now, and I have my phone. 'Cause the first thing I did which I found was amazing. You just put your hand there and they scan your palm. This way, they have all your records come up and they make sure they could never make a mistake on you again. But if you bear with me here, it's so funny because I actually was – I said, "Wow, this stuff is amazing. I want to take a look at it." And it's called Biometrix Systems. I think that was it.
But it's the same thing. It was almost like what you're talking about right now. I was just amazed by the technology where, they're gonna have this, I think, across most hospitals. And this is just one application. I'm sure they're gonna have it every place. But it's amazing how this growth industry, they just got it and it was fantastic. It's like people don't realize, in the health care sector especially, it's misdiagnoses all the time and it could result in death. It's a big deal. And just by scanning your palm, it's so simple, and you don't have to go through their paperwork. It's pretty simple, right.
Lou Basenese: Yeah. No, I mean this is – people think biometric, and I mention mobile. But there's applications outside the mobile market like you said. There's over 150 hospitals now that are using that kinda palm-scanning technology. A lot of is provided by – it's a huge company, and it's one of the smaller things that they do, so it's not a huge revenue driver for them.
But palm scanning is actually being done in schools too. For kids that are paying for lunch, they just scan their palm and it links up to a payment form that's already on file from their parents. So I think you're gonna see this come out a lot more, be a lot more prevalent. It's using government settings to verify identity, so it's battle tested. It's not the technology's got quirks and isn't reliable. And an interesting thing for investors too, there's not many publicly traded pure plays in biometrics.
There's actually – there's only two that I know of, right now, that are still in the market. AuthenTek was one of them, but they got bought out last year, like I mentioned. But the only two left are Aware, AWRE and then ImageWare Systems, IWSY. Aware is more of a hardware play, and then ImageWare is really a software overlay. And I like that because of the fact that it can work with any biometric identity system. So those are really it that's left in the market. Every one else has been acquired.
Frank Curzio: Well, it's interesting because the last time you had you on, which is far too long ago, you were talking about 3D printing and the people just getting into it, getting involved. There wasn't too many plays. And you were saying how much you liked 3D, DVD, which is the main player in this space. I think it was in the $20.00s and it just pulled back a little bit, but it's $60.00s now, amazing call. You also talked about another company called Splunk that just came out. Right now, I think it's still at the IPO prices, very volatile.
But you have a habit of looking at things. 'Cause people say with IPOs, "Never ever buy them. Don't go near them when they come out." It seems like you actually love these IPOs when they come out. You research them before; you take a look at them after, and it seems like you have them on your watch list for a long time. 'Cause that was one of the companies, like, "Frank, this company has a lot of growth and looks good." What is your idea when IPOs come out because a lot of people are told, "Never touch them. Never go near them," but it seems like that's a market where you're always looking at to find really good ideas.
Lou Basenese: Yeah. I think there's a lot of just overlooked opportunities that come in the IPO market, and I've really got a stringent criteria for screening for opportunities that just have proven – it's illogical, but it's proven to work over time. And the first – if I run through it quick is, one, you want to make sure that the growth is still there. So, like I mentioned before, make sure the company's still growing; the growth is accelerating. Two, make sure it's a company that's been around for more than five years.
All the research that goes back, most of the companies that IPO'd and then flopped were just really young companies. The average age was three to five years old. They're basically trying to cheat the system that you need to be a mature enough company, demonstrate that you have a verifiable business. Then you want to make sure insiders aren't cashing out. When insiders – a Venture Capital-backed company comes public and everyone's cashing out, that's usually a sign that they think the growth is gonna end. But another big thing is the company's close to profitability, if not profitable already?
And then I think the last thing is just the price. It always comes down to price. You never want to overpay. So I think Splunk came to market at a fair valuation, given it's growth. And you see that happen with a lot of opportunities. I mean there's one now that I'm looking at, is Exponential Interactive, filed to go public in the middle of last year. Waiting for that one to come out because that's leveraged to the mobile advertising boom that's going on right now. And it's a name that no one really knows about because it's not publicly traded. So that gives us a window of opportunity to capitalize on when there's just not much name recognition, because most investors just don't even know that that opportunity's coming.
Frank Curzio: We're talking to Lou Basenese, the founder of Wall Street Daily Insider. That's his newsletter. Also Wall Street Daily – free – eLetter, guys. Kinda like our Growth Stock Wire, Our Daily Wealth. Go there. It's a free e-letter. You guys, I mean who else writes for that site? You do, you could find your stuff on there. Why don't you talk a little bit about some of your services?
Lou Basenese: Yeah, we've got Wall Street Daily. It goes out every day. And we've got a team of research analysts there just working on different opportunities across emerging markets, technology. I love the folks on Contrarian Opportunities, wherever they pop up. And in addition to that, as I mentioned, I'm really keen on technology investments and really sorting out and finding those gems, early-stage, emerging-growth opportunities.
So we've got an advisor called MicroCap Tech Trader that focuses exclusively on those opportunities and comes it from a value bias, but also an intellectual property bias. Looking at the patents, making sure the company has, in this day and age, the intellectual property protection behind their technology so that they can't just be knocked off by some other competitor very easily.
So one of the names we had there was – I think I mentioned it one of the times I was on here – was UniPixel had a display technology, an alternative to Indium Tin Oxide being used in touch sensors. And that one was trading at about $7.00 when we recommended it nearly a year and a-half ago. And now, it's up to $13.00, $14.00 per share. So it's opportunities just like that. More development stage that have strong upside potential that could easily double or triple within an 18-month or 24‑month timeframe.
Frank Curzio: Now, I also have my cap newsletter called Phase 1 and, as you know, ospit
with micro caps, since they don't have any research, we're doing a lot more – a ton of it. You really have to do all the models by yourself 'cause no one is covering these things. Yeah, it's really cool 'cause you really break it down. It's not like you go in micro stuff, you find a thousand reports for free on it if you want to, which is cool. It's like Lou's the only guy talking about this stock and you know it better than everybody.
And that brings me in to my next question, because we're seeing the market near five-year highs, roaring higher right now. How important – 'cause you are a chief investment strategist – how important is it, especially when micro cap and even small-cap investing, that you're paying attention to the markets. Because you know as well as I do, there are a lot of guys out there are bottom-up pickers. They're like, "Oh, we're gonna recommend these stocks no matter what. It doesn't matter what the market's doing."
However, it seems like – it doesn't seem like – but you really have to pay attention or have a good outlook on the market because you could recommend a lot of good stocks, especially in micro cap. Then you get murdered if this market comes down. So my question to you is what's your outlook on the markets, in general, and stocks over the next 12 months? Do you think this rally could be sustained? Or maybe it doesn't even matter to you.
Lou Basenese: No, no, it definitely matters. I describe – people who usually say they're top down or bottom up, I'd like to think I'm a combination or more thematic. I look at where the big growth trends are from the topside and then go bottom up in those trends. So I absolutely pay attention to what's going on in the market. And I think you hit the nail on the head. In the micro-cap world, you can't ignore it. These companies will, for no change in fundamentals, no news announced, the market sells off and they get absolutely slaughtered.
And if you're not – I think that has implications when you try and time it, you know entries into these positions and, also, how you buy into them. I never recommend buying into a micro-cap stock, won and done where you take on your full position right away; just because they're so volatile, I think you miss the opportunity to get in at just a much better average cost. But as far as stocks, heading into 2013 or on our way to 2014, I'm cautiously optimistic. If you look at it from the macro side, there's a lot of fears that are subsiding all at the same time.
There's not much more fear for the media, the mainstream media, to pedal about the economy, getting some stronger reports, or Congress' inactivity or what's going on in Europe and China. All those situations and fears seem to be mending. At the same time, investors are still grossly under invested. The average individual has not been investing in stocks for the last three years. And now, we're starting to see that they're returning to the markets. But I think we still got a long way to run if we look at valuations.
It's counterintuitive to think that after three-plus years of rallying with stock prices that stocks would still be cheaper or fairly valued. But it's exactly what we've got. I mean the S&P, I think, is trading right around 14.8 or 15 times earnings. That's below the long-term average for the U.S. and the long-term average for the world. The U.S. average is right around, what, 16. And then global average PE ratio is like 17.5. So there's still room to run. But, eventually, we're gonna face the inevitable, that we're gonna have a pullback at some point. So I think you have to be prepared for that as well.
Frank Curzio: Yeah. And it's interesting that the way we analyze stock, because we take a historical perspective and say, maybe during growth market, it's a high GDP. Stocks trade maybe 17, 18 times during slow-growth times, which we're kinda seeing right now, 1 and 2 percent. However, it's almost like – the way I feel, and you could disagree with me – it feels like you have throw out a lot of that stuff when you have so much manipulation in the market, especially with interest rates where they're at zero.
And the market – and even they're giving you no opportunity to buy anything else, other than housing if you want to tie your money up. But it just – bonds are a bad investment here. It just seems like the alternatives, keeping your money in Treasuries and savings accounts or whatever, the alternative to investing in stocks is more worse today than I think I've ever seen. Would you agree with that?
Lou Basenese: Yeah. No, I'd agree. Today's investment environment makes the heritage of my ancestors, the economy of ancestors, keeping the cash in the mattresses seemed really profound, like a good strategy. There's not much out there other than stocks or being in caps, like you said. Bonds are just waiting to get clobbered. But the old adage, the market adage, "Don't fight the Feds." Right now, the Feds are printing money like crazy. I think a lot of people just naturally assume that that shows – the inflation from that shows up in actual inflation.
But it's really just an inflation in asset prices somewhere. Every time you see money printing by any country, that inflation shows up somewhere. And I think, right now, it's showing up in the stock market. So I wouldn't fight it as long as you've got – you're using trailing stops, protect your stops and position sizing and not taking out second mortgages on your house in investment stocks. As long as you're doing it prudently, there's no reason not to just – to invest alongside the Fed until they decide to finally start raising interest rates and stop printing so much darn money.
Frank Curzio: Yeah. We're agreeing too much here, so I'm gonna give you a chance to disagree with me here a little bit.
Lou Basenese: All right [laughter]. No problem, man.
Frank Curzio: ____________ for 2013, one of the things I've been looking at is Femtocells. Those are small cells. I don't know if – again, when I do an interview –
Lou Basenese: I totally agree, man. We're not gonna disagree on this one.
Frank Curzio: It's funny. 'Cause when I talk to you and I do interviews with you, I basically have no script. I'll have three or four questions down here and just wherever the interview goes or where it goes, and I don't even wind up asking you these. So it seems like that's a market that's incredible to me. It's been around for a little while, except, right now, with all the mobile technology coming on and we're using more Smartphones, the data, the spectrum. This is a way – let's talk about. I wanted to know what do you know about this trend and is it something – you obviously said you like it. What are your thoughts on this trend going into 2013 and beyond?
Lou Basenese: Yeah. No, actually, man, I first started following Femtocells two and a‑half years ago with a company called Airvana. That was actually bought out, subscribers just got like a 20 percent, 30 percent buy-out premium, which was nice but it wasn't as big as I thought. But, at the time, everyone looked like I had a second head when I used the word, Femtocell. And I think they've rebranded and they start referring to them now as Small Cells.
Frank Curzio: Small Cells, yup.
Lou Basenese: For those people that are unaware, it's really just finding ways to fill the gaps in coverage for mobile devices. Everyone wants mobile broadband connectivity. First we had dialup getting passed over, getting antiquated because we got mobile – I'm sorry, wired broadband. Now everyone wants it mobile, so we're really on a cusp of – I call it a new Internet era. Everyone wants high-speed access on their mobile devices. So the easy, safe way to play it is with the telecom companies like your AT&T, Verizon, Sprints. I mean that's a dividend, large-play though.
But I'm sure you started doing research too, and there's a lot of small-cap names in the space too. One that I really like is Mindspeed, MSPD. They acquired PicoChip back in February of last year, which was of the – it was a privately held femtocell maker that I'd originally been tracking after their success with Airvana for an IPO. And I just think it bounces out their technology offering, as well as the company just growing very strongly and about to turn the corner on profitability. But that's just one of the names in there.
There's a few others: PMC‑Sierra, VICA Semiconductor, Cavium. I think Semtech is another one. So it's a definitely compelling space. The research I've shown is we're looking at the number of small cells being deployed nearly increasing fivefold or at least over the next five years, 'cause it's a cost situation. It's way cheaper to deploy small cells than it is to build a new cell tower. So as demand keeps increasing, it's the only way these cell companies can keep up, in my opinion.
Frank Curzio: Yeah, and it's amazing because it was all like this spectrum. In 2009, you heard so many stories. "We're running out of spectrum. We have to do something about it." And, basically, it's just like the air waves, and the more downloading and the more videos we have, it just takes up more data. It's amazing how these companies don't have unlimited data plans anymore because they can't do it. So as more and more people come online, you need to have something, some kind of a coverage or something to replace it.
But you're not really hearing that we have trouble with spectrum anymore or running out of spectrum because of this Femtocells, which it's called Small Cells now. So it's interesting that you got in in 2009. Because when I started reading it and talking about it three or four months ago, next thing I know – and you probably do the same thing when you research – I started reading and, next thing I know, five hours goes by. 'Cause I was just so amazed, I just kept reading more and more articles. "Oh, my God, this stuff is awesome." And then I like talking to guys like you saying, "I know it's in 2009, right behind the trend.
And then I see a company like Mindspeed just come out with their earnings and this is their growth __________. Like you said, it seems like they weren't – it didn't seem like – but they weren't earning money, they weren't profitable. Now, they're actually profitable and it seems like this is the big growth engine and you're gonna see if this trend takes off. Yeah, it's just interesting to see. I figured you might disagree with me on that 'cause it's something I just found about. And, usually, you find out about technology trends like nine months before me, so.
Lou Basenese: [Laughter]. Not always, man. I'm sure we can disagree on something.
Frank Curzio: Yeah, absolutely. Well, Lou, I tell you I love having you on because you're a small-cap guy like me and I love picking your mind. And you always come here and you provide ideas, opportunities. We can go anywhere with this podcast. I can't do that with all guests like I can do it with you. So I really appreciate you coming. And, hopefully, we don't wait six to nine months; you're coming in just a couple of months. And, no, it's great having you on the podcast bud.
Lou Basenese: Same here, man. Always a pleasure. So call anytime. I'm more than willing to preach to the choir with you man.
Frank Curzio: You got it, man. I'll talk to you soon. Take care.
Lou Basenese: All right, take care.
Frank Curzio: All right guys, great stuff from Lou. I love having him on the podcast. Again, I could talk to that guy for hours and hours 'cause we have so much in common, as you could see. Again, he's just a guy – we can go so many different directions with it and I love the fact we can talk technology. I don't have a lot of guys – a lot of guys don't really talk about technology, so it's really cool to have him on. Any questions or comments, fcurziostansberryresearch.com.
Again, it's not about me. It's about you. So I have to love the guy who goes, "Oh, Frank, we learned something else," but I think you guys are gonna like him too. 'Cause he gave out how many new ideas like you never heard of. We really don't get that from a lot of guests. So great analyst, good guy, and, hopefully, you enjoyed that interview.
Now, lets get to the markets. On the earnings front, not so good, right. VMware was actually terrible, terrible guidance. And their quarterly estimates, guidance is horrible. We talk about huge growth pick there. Growth slows, watch out. These stocks get nailed. Yahoo! mostly in line, maybe a little bit high, the stock price. Pfizer B, Joseph A. Banks got crushed. You got Caterpillar, the core, they went up a little bit. But remember, the company took a hit last week after, what was it, that $500 million, $600 million charge for that China subsidiary that was lying about their inventory, so they had to take a huge write down.
So they had that write down and minus all that stuff, extras and whatever. And it turns out that they beat earnings and issued a pretty good outlook. A lot of upgrades there and a lot of target prices raised higher by South Side analysts. They beat estimates. Apple was real weak last week. Not a good quarter. Who knows what's going on there. Changing the terminology, saying that future quarters our guidance is what? It's gonna be more relevant to what we say now. I mean it wasn't relevant when you said it last time. They were just to guide conservatively so nobody paid attention.
And now, they're like, "No, no, no. This is what we're really gonna earn." [Laughter]. So the stock got nailed. Interesting. Google was strong and a kind of a change in the guard here. Google doing a lot better, Apple getting crushed, $4.50 now. Overall, though, if you're looking at earning season, not so great. It's always expected to be great, right. What are we expecting, 1 percent, 2 percent growth in earnings side? And we're kinda getting that. And we've seen misses, seeing a couple of beats here and there.
Just nothing to blow it out of the water where you could point to it and say, "Wow, this is awesome. Earning season's doing great right now." But not really, and not from where I'm standing. On the economic front, people hate talking about the economy. But, right now, it's roaring, right. I mean housing is still kicking butt. Every sector around housing, homebuilders, retailers, chemical companies, even furniture companies doing well.
Even the guys who started the Kay Shiller Index, those two guys. I mean they're bullish on housing. Those guys hate everything, and they just became bullish now. Imagine the homebuilders are up what, like 150 percent of their lows. They're just like, "Yeah, we are seeing signs that housing's getting better." That's really optimistic for those guys. It's amazing. Durable goods surged last month, blowing out expectations. You have to say most economic indicators are strengthening, good sign. I mean that justifies stocks moving higher. And this is the result we get when we have interest rates at zero forever.
I mean guys, you're gonna see – a lot of people say, "Wow, look what we did. Interest rates are low hasn't done anything." Its done a lot, and you have to be careful. You have to be careful right now. And we made this mistake, Greenspan lowering rates, what was it, 2003, 2004, kept them low. Low back then was what, 1.25 percent, 1 percent. Now it's zero basically. And then you create the housing bubble. Just the effects of having low interest rates.
And you can say, "Well, we have more regulation now." Guys, they'll find ways. Things are going on right now. There's a huge growth. You have to be careful about inflation. I know, it's insane. In ten years above 2 percent. I never thought I'd say that that's high. It's above 2 percent now. So you have to be careful right now because once you see inflation picking up just a little bit, that's when you have to raise interest rates. I know it might be bad for some – you have to. You can't keep them this low forever.
And they're like, "Well, it's gonna be 2014, 2015 when you keep them this low." Gotta be careful playing with fire. This is what we saw in 2003, 2004. Look at what we had. Look at what we had in technology. And you had the NASDAQ, what, double from 96 to 98, and double again from 99 to 2000. I mean it's insane. So you have to be careful here, right now, for you to say. You're seeing the economy strengthen. Unemployment what, not terrible. Some people may disagree. Everybody I know that has a job is doing great.
Maybe they're making the amount of money they're making, but they're busy as hell. Everyone is busy as hell I talk to that has a job. Working hard, working more hours than they ever worked so things are – that's good. That's not a bad thing. I mean it's good for job security if you're working crazy hours and you're working hard. It might not be good, personally, for your family. But it's good for businesses. So it's interesting how the economy is really starting to turn around now. You're seeing a lot of positives out there if this trend continues.
And anything, that the Fed has to do something about interest rates. Raise them a little bit. You can't keep them low forever. We'll see runaway inflation that would really, really crush the market for a longer term. See what they do. And I said before, past couple of weeks we've had a rally. It's going straight up. I think stocks are getting a little ahead of themselves, especially dividend-paying, large-cap stocks, like Coca Cola, McDonald's, even some utility names.
However, I still think there's a tremendous opportunity in small-cap, dividend-paying stocks. And a small-cap guy – everyone's looking for huge growth. I'm just seeing there's a major disconnect in some of these small caps that are paying 3, 4 percent yields, extremely cheap, growing twice faster than McDonald's and Coca Cola. I'm starting a new part of my newsletter just to identify some of these companies that have been raising their dividends, annually, for more than ten years. You don't really associate that with a small-cap company, but there's over a hundred out there.
If you're just waiting for the right opportunity to buy, which I'm gonna talk about this really quick. And it's a company called Diebold. It came out with terrible earnings, right. The company's already down 40 percent from its high. It's one of the companies I recommend, pays a nice dividend. I think people are gonna do great holding this company long term. So you [break in audio]. It was terrible and the stock fell 8 percent.
Now, I recommended this a couple months ago, and the stock was up like 6 percent before this happened, so we're relatively flat, just about flat. Maybe down 1 percent, 1.50 percent off position. I got hundreds of e‑mails. "Frank, Diebold, what should I do." This is a company I identified. I want you to hold for longer than ten years. Compound that dividend. Have a chance to be a next McDonalds. Brand name product. Number one maker of ATM machines. You go to a Walgreens, CVS, those boxes they pull out. That whole they, they say – a lot of them say Diebold on them, great brand, company been around for 150 years.
And people are saying, "Frank –" they actually fired their CEO, so people are like, "Well, the CEO left." He didn't leave. They fired him because he did a terrible job. I like that with this company. But we're flat on the positions since I recommended it. I never thought I'd get so many e‑mails. And that's okay. I understand. I'm not poking fun or anything. But you have to remember, with these stocks. Tom Dyson, who's been on this podcast a few times, did a great job. He used to run the 12 percent Letter for Stansberry. Now he runs a Palm Beach Letter outside of Stansberry. But he did a great job buying McDonalds at like 2008 lows when they had negative sales trends and things were terrible around the world.
And with these dividend-paying stocks, you have to buy them at the right time. You don't want to – McDonald's is one of the best companies in the world. It's a great company. I don't want you to buy McDonald's here at 17 times forward earnings. I don't want you to. I'd rather see you get hit for 25 percent and then you buy a whole long term and compound those dividends. With Diebold, we bought this company down 40 percent from its high, so things aren't gonna be good for the next few quarters.
The same thing with Steel Dynamics. Three quarters in a row the company missed. You know how far it went down for us? Zero. Actually we're up on the stock. It missed three consecutive quarters. You know why? Because we bought it down 50 percent from its highs. Now, we're up 30, 40 percent of the position. And we're collecting dividends at 4 percent yield, so wait for the company to turn around 'cause it's so cheap. And you've seen that in a lot of situations.
So it's amazing. I was so surprised to get so many e‑mails. I was so nervous. What do we do? And what's going on? Don't do anything. It pays a dividend. The company will turn itself around. Every business goes through tough times. What's important is you want to buy them at the right price. Even Lou mentioned that a little while again. It all comes down to price. It does. We got in at a really good price. With Steel Dynamics, we got in at a great price. You're not gonna be able to buy these stocks 30, 40 percent without going through difficult times.
And maybe subscribes were used to a few of our gains that we had and some of the stocks where we had 30, 40 percent moves in a couple of months. It doesn't happen often. Had a great year last year. But, guys, hold this longer term. And Diebold is a great company, a great company. Gonna see growth. It's cheap, going through some tough times right now. But that's why we're able to buy it as such a discount through the S&P 500. I mean we bought this company at a great price.
You want to be able to compound those dividends long term. And you're looking at when you're compounding these stocks, when you go out 10, 20, 30 years. I know it's crazy, 30 years you gotta hold the stock. But you know what, it's not so crazy for the guy that held McDonald's for 30 years. Again, this is a part of my newsletter. It's just a small part of my newsletter. Most of these companies are growth picks, great finding new technologies that work, huge growth potential.
But the disconnect I'm seeing here, I'm providing in part of my newsletter, where instead of buying these large-cap, dividend-paying companies that you think you can hold forever at super expensive prices, there's a lot of great brand name, small-cap companies paying 3, 4 percent yield, that give you the opportunity for a conservative investor to hold these companies long term. So they had a bad quarter, we're flat on the stock. Relax, relax. The best advice I can give you. It's gonna work out, good company. You'll see those trends will start reversing, maybe six, nine months from now. In the meantime, we're getting paid money to wait. The dividend is perfectly safe.
They're bringing in cash flow. They raised their dividend consecutively for 59 years in a row, 59 years in a row. It's a record. More than McDonald's and Coca Cola. It's gonna be fine. Just relax a little bit, guys. I've done the research on these companies. They're fine. It's just amazing how many e‑mails I got in just because this company had one bad quarter. And even though we had that bad quarter, we're still flat since my recommendation, what, two months ago. So, guys, just relax. Hold these companies. We want to hold them long term.
Now, let's get to some of your other questions. Roland says, "It seems that there are two variables, which together determine how many years of natural gas we have, total amount of natural gas that could be produced and the annual rate of consumption of natural gas. They're relationship to being that 1 divided by 2 equals the number of years we have of natural gas. So, clearly, any estimate of how many years' supply we have only takes into account increases in the total supply without any increase in consumption must be both (a) inflated and (b) unrealistic.
It seems that individuals who believe we have many years of natural gas tend to emphasize expected increases in the supply over time. And individuals who believe we have fewer years tend to emphasize concurrent and relatively greater increases in consumption over time. My question is, in your own estimate, how many years of natural gas do we have. How do you account for the rate of consumption?"
It's a good question, Roland. You see so many estimates out there. If you're looking at just like government estimates, you're looking at what, 1900 trillion amount of recoverable natural gas. We use about 23 trillion cubic feet a year. If you're just dividing those numbers, divide 1900 by 23, you're basically given an 83-year supply, which people stretch out to 100 years. For me, I look at that as a base. You have to be careful you didn't go into statistics. And we went over this over this over the past few interviews with Dr. Kent Moors and Arthur Berman.
So both of them had drastically different points, and I do as well. When it comes to the technology of natural gas, you're looking at consumption. Consumption is gonna rise considerably, especially if we export natural gas, especially if we use this. We're using it for trucks right now as an alternative to diesel. And we may use it for cars pretty soon, now that fueling stations are being built all across the U.S. Just go into Google and type in "America's natural gas highway."
It's amazing. Once this happens you're gonna see cars running on natural gas. It sounds crazy, all the major producers that make cars that run on natural gas. They just don't do them here 'cause there's no fueling stations, natural gas fueling stations. Well, they're being built right now, and the cost savings are a lot for people that drive a lot. So I do think it'll happen. Maybe it'll happen in ten years from now, but it is gonna happen. And people didn't see it happening for 40 years. I believe it is gonna be a trend. Also, like Dr. Kent Moors said last week, a fantastic interview, we are gonna start exporting LNG. It's just a matter of time.
When we account the zero percent of the LNG exporting trade and yet want large producers of the world's natural gas, just sitting on it. So if you're looking at consumption, consumption's definitely gonna go up. But the important part here to understand is, you have to ignore the government statistics. If you're looking at the government statistics ten years ago, I mean, seriously, you had Cheniere Energy LNG, who's going to become an exporter of natural gas.
They were building a facility to become an import, and this is what, 10, 12 years ago, of natural gas. That's how much the industry changed. So the fact is, natural gas prices are really low. But we could – the technology is amazing with natural gas. Even when it comes to – extracting is unbelievable. We're just in the infancy of this, believe it or not. And from what I saw, I mean the fact that we can drill down so much lower. Again, we're talking about how much natural gas it is, not how much of the natural gas is available at the right price.
Right now, we're not really drilling for natural gas. The estimates are going higher because it's a byproduct of oil and we're producing a lot of oil in the U.S.. But for the natural gas companies, a lot of these guys get nailed. But if natural gas prices went to $8.00, $10.00, $12.00, these guys would have no problem drilling a lot further. And they can. I'm seeing it in a permanent basis. I'm invested in oil wells there. They're drilling two miles down, Devon Energy. They're gonna report their results in the next six months.
Guys, it costs a lot of money to drill that far down, which is why they wouldn't do it with natural gas. The fact that they're doing it for oil and oil price is up, tells me they wouldn't waste that money unless they knew, they knew they could find oil. So as far as natural gas goes, I think we have a huge supply, well over 100 years, depending on where the price is. I mean if the price went higher, I think we'd drill even further. We'd probably drill three miles down if we had to. But it's amazing the technology. We're able to extract more natural gas from these wells. We're able to extract deeper.
But they're not doing it right now because it's not economical. So I think we have a lot, a lot of natural gas. And that's my opinion. If you're looking at the government's here, it's an 83‑year supply. If you're looking at Arthur Berman, who I interviewed three, four weeks ago, he says we have a 20-year supply. I think we have a massive, massive supply, depending on what price natural gas is, and I don't think we're gonna run out of natural gas anytime in my lifetime, my kid's lifetime, my grandkid's lifetime. So that's just my opinion. That was a good question.
Next one's from Kenneth. He has a different opinion. "As a baseball fan going back to the 1950s I hated bonds in the acquire era." And Kenneth brings this up 'cause I said, "I wish some of these guys __________ again, 'cause I hate baseball so much. The only time I watched it was during that era, the bonds _____ acquire era. He says, "That wasn't baseball. The DH isn't baseball. Baseball's a skilled sport when played properly, you're seeing all the skills, not just one. The hit and run, the stolen bases, sack fly, taking third on a hit to right, speed on the bases, the pickoff," blah, blah, blah. He keeps going and going and going.
He says, "There's so much lost through all those steroids, a few home runs ruining the game. I watched tons of baseball games over 40 years, but I haven't seen a full game since 1998 because they've ruined the game so many ways, starting around that time. It just wasn't fun for me anymore. No, I was a Red Sox fan. I was aware of the American League being the greater problem with the DH. Fenway Park was a toy park, which also contributed to a great deal of the real baseball being hard to find in Boston for all those years."
So, yeah, he just brings up some really good points. And, also, the reason why I'm reading this e‑mail is just the whole steroid thing. And I said I liked baseball. I'm not crazy about baseball, but man, back in the day, Lou Gehrig, Mantel. And you just had legends there. People collected things. It was amazing. Like nowadays, you don't see Albert Pujols as a god, even though he's the best in sport. Oh, I get laughing. It's fantastic. But it's just a different era then, so I understand exactly what you're talking about.
And to bring more clarity, if I ever found out – I'm a huge, huge basketball fan. If I ever found out Michael Jordan, LeBron James, all the super stars, were taking steroids back there, I would be really upset at the sport 'cause I'm a big basketball fan. So maybe I'm the wrong guy to ask about baseball. I just – I'm not a baseball fan, but I did like it when they were hitting more home runs and having fun. I didn't really care if they were juicing or not. But, right now, I just can't even watch a game, and I'm definitely with you, Kenneth. It was a good e‑mail. I appreciate it.
Now Joe asks, "Frank, thank you for educating me about Dendreon on your podcast. I'm up 60 percent in a few months." Dendreon is one of the educational ones I provide in my educational segment, saying it looked great, like $4.20, bottoming out. The stock went up tremendously and made very good money. I'm happy about that. He says, "Thanks for Buckeye Partners. Also, your LNG picks like Westport early 2012, made a lot of money listening to you in your educational segments and the podcast."
Well, Joe, I'm gonna point out something to you. And I love this compliment. I really appreciate it. But I also gave Joy Global, Transocean and Apple, which I was wrong on. And it's important to understand this podcast. I love providing ideas and you guys make money. But, again, it's all about education too because not that I'm happy people are losing money and getting them ______. But it's important to go back and see what you did wrong or what I did wrong on these stocks.
So that's why I provide these segments. I throw out ideas for you, and I think most of them work out. Definitely more worked out than not. But I am wring sometimes, and it's important to realize that. Not every stock's gonna work out for anybody. I don't care who you are. But you have to really look at your mistakes, look what you did wrong. It's important. That's why I provide these educational segments for you. So I really appreciate the compliments in bringing up all my winners. I should've just kept it there and not mentioned my losers, but I'm an honest guy.
And, again, it's more – I focus more on my losers than winners 'cause that's when you learn the most about stocks. So I really appreciate that. Again, educational segment's going very well. I get a lot of e‑mails. Let me know what you think of them. FCurziostansberyresearch.com. Do you like them? Should I keep that segment in there? I have an interesting one coming up in a little while.
Next one's from Mark. It says, "First off, Dr. Kent Moor's interview is possibly the best podcast I've ever heard from you. I've heard almost all of yours. I appreciate that, thank you. They're just great. Thank you for truly posing some intelligent questions to the oil guy a few weeks ago. I was working out, listening to podcast. In some cases yelling out loud. The guy was full of very strange logic. So, again, nice job and I appreciate that." That's Mark.
He also asks about Diebold as well, and I addressed that before. So I Diebold's a great buy 'cause he actually says, "Oh, my God, the CEO stepped down." The CEO didn't step down. He got fired 'cause he wasn't doing his job. I love that with a company. Not that – I don't want to see anyone lose their job, but I'm glad that they're going with different management, which is cool. It's not like somebody left. They had a bad quarter and he's getting a new job. They fired him 'cause, "You're not doing good." That's what I like to see out of a 160-year-old company.
Anyway, As for Dr. Kent Moors, I've listened to that interview, I said earlier, more than five times. He was fantastic. If you haven't heard it, please listen to it. It was a fantastic podcast. He's a guy who has been advising oil companies for over three decades, advising governments on energy policy for over three decades. So a fantastic interview. He's not an arrogant guy. He's shouting out facts. And when a guy like that says LNG exporting is the biggest game changing trend he's seen in his career.
And when he's talking about geo-politically, the worst environment he's seen in decades. Things like that stood out in the interview. Fantastic. I was able to generate a lot of ideas. Again, I've written about that in Growth Stock Wire, and we've got huge, huge positive feedback from it. But it was a fantastic interview. Guys, take a listen if you want. It just tells us why oil prices are gonna be triple digits for a very, very long time. So thanks for writing in Mark.
And the last question here. A little long, but one of the best questions I've ever received. And I'm sure a lot of you guys think about this as well. This is from Jay. He says, "Hey, Frank. Been a long-term subscriber to many Stansberry Newsletters, including S&A Digest and S&A Resource Report. I'm a longtime listener to your podcast. Thanks for help and guidance in the past. And I want to see if you can give me some trading psychology advice, as you are a seasoned trader." I don't know if I'd call myself a seasoned trader. I think I'm an investor. "Here's a dilemma that I constant struggle with and have struggled with since I began trading approximately two years ago. And feel free to comment on this in your podcast."
I'm doing it right now. "I can't differentiate the strategy of not chasing stocks for trend momentum investing. In other words, when I see a sector rallying like the financials recently, the home builds of the last year, I see stocks within that sector to be highs. I feel like I should not buy in the rally 'cause it may be short lived. Many stocks have come too far too fast. I don't want to be the dumb money by chasing these stocks. For example, Bank of America, now it's went off 100 percent from it's lowest. Because I'm so cautious of chasing stocks, I've missed some great guying opportunities, like Visa, Monsanto, L&G, KB Homes. Toll Brothers, which just seem to be going higher and higher.
"I feel as soon as I buy in the stocks will top, sell of and, therefore, I would be the sucker investor who was late to the party, chased the stock and stocks peaked. This goes for the overall markets, index funds as well. So, generally, I try to ______ the market through ETFs." Hasn't been doing too good. Some are. Keeps going higher and think it's gonna go a lot higher.
So yeah, he's talking about – and I don't want to go through this whole e‑mail – but chasing stocks compared to trend momentum investment. And it's just a difference in trading strategies. Andrew Horowitz is more of a trader, breaking through highs and – you know, I'm not gonna tell anyone his investment strategy – but he's more like trading to the point where, for me, I think it's important, and the reason why I took this question is – and I thank you for asking it, Jay – is you have to be able to switch your investment styles. You can't have the same investment style always.
Maybe you could morph it into what's going on in the market. But, right now, we're seeing unbelievable volatility. I've talked to many traders, people who use 200-day moving averages. If you buy when stocks are breaking your 200-day moving average, a lot of these guys got crushed. Maybe not now, in the past two weeks 'cause we're near five-year highs. But a lot of stocks with the volatility, you'll see them go up like eight straight days, nine straight days, and then get crushed.
So a lot of traders that I talk to have been having trouble. It doesn't mean momentum investing is gone. It's something that I use in my newsletter. I recommended companies at 52-week highs today, especially over the past 12 months, maybe the past 18 months. You don't have to pay up for anything. It's almost – what I talked about a little with Groupon. I mean Groupon from what, 27 to 2? Are you kidding me. I mean that company went down and felled the cash. No matter what you think of Groupon. It's not the worst company in the world. I'm probably getting e‑mails of deals now.
Anybody trades at cash, or near cash. You wonder why hedge funds picked up – loaded up on this stuff. It's doubled in a couple of months over $5.00 now. You're seeing a lot of opportunities. And the first question I asked Lou was, "Are you seeing opportunities right now with markets at five-year high." And he says, "Surprisingly, yes," and I am too. So don't ever say you feel like the dumb money or it's not working. It depends. If you're gonna have a training strategy, you have to have tighter stops. You don't want to buy a 3D printing at $70.00 and the stock got crushed two days in a row at $60.00.
If you bought long term when Lou told you to buy, you're up 40 points on the stock. You're doing great, you're fine. But it's just different investment strategies. You don't want to use the same every single stock. Things are different. You're gonna see value plays. For me, right now, I'm seeing – I mentioned it. I like companies like Steel Dynamics, Diebold. These are companies that pay high dividends that are down. Steel Dynamics is down 30, 40 percent from its highs. I don't mind waiting through a few bad quarters when I see everybody's negative on the stock.
I know it has a little downside risk, and I'm getting 3, 4 percent to wait for this company to turn around. And when it does, now look, sitting on a 30, 40 percent gain. And I think you're seeing that with a lot of companies. And those are dividend-paying technology stock in my newsletter, down 50 percent from its highs. I mean people are trashing this stock, sell ratings on it. You know what, insiders are buying it like crazy. CFO just bought 100,000 shares the other day. Subscribers, you know what stock I'm talking about. I'm gonna be writing about it in my updates today.
So it's important to look at these different trading styles. You can't say, "Well, momentum investing. I'm gonna be a dumb investor." Don't call yourself dumb money. It's all learning. Sometimes, I recommend stocks and then I'll be a loser. I'm like, "Wow, I'm such an idiot." You just can't be so hard on yourself, especially when it comes to investing 'cause you're gonna get some things wrong. Even if they – everything. Say if you have 15 things that you look at in stocks, and this one meets all 15 criteria. You might still be wrong. And that's just investing.
What you want to do is limit your losses. I know if you're doing trading strategies, even momentum investing, have tighter stops. Because when that thing reverses, it doesn't go your way, that's the philosophy of trading. Well, it takes – limit your losses. Let your winners rock. But, for me, right now, you're seeing some opportunities like that, and I know you feel like, "Well, I missed the homebuilders and I missed Bank of America." Well, you have to look at valuations too. 'Cause there's a lot of stocks trading at 52-week highs that are cheap. And that's gonna lead me to my educational segment here.
Now, take a look at the oil-services companies. You want to see an industry. If you look at these stocks, the Halliburton, Schlumberger, Baker Hughes. You look at them and they're trading in, and yeah, they're at 52-week highs, most of those. Weatherford got crushed. And you look and you say, "Wow, I feel like I missed these. These are crazy. I want to buy them but the jump too high off their lows." Well, if that's the case, look at valuation. 'Cause right now, these companies are cheap.
In fact, if you put a two-year chart on these companies, they've gotten crushed. They're down 15 percent over two years. The S&P 500 is up 20 percent. So you might look at these and say, "Wow, they're at 52-week highs." That's why it's so important where if you're gonna buy stocks at 52-week highs – which I've done in my newsletter. I have a couple in there now – you have to look at valuations. It still can be considered cheap.
Look at that company like Ashland that I recommended back in 2008. It was $5.00. It went to $10.00, $20.00, $30.00, $40.00. It was still cheap though. Those earnings were just building, building, building. The was what, $70.00, $80.00 today, one of the best calls I've ever made in my life. But you can look at it and say, "Wow, momentum investing." I missed it. Like 3D printing at $70.00 is expensive. Maybe momentum carries it higher. Use a trading strategy, you're fine.
But if you want to look at fundamentals, for me, this is what I do. It might be a lot different from what traders do, which don't even look at fundamentals. You just look at stock patterns. But, for me, _______________. I want to look at fundamentals to see if it's still cheap. For all service companies. I mean you're looking. Barkley's came out with their report. They come out with a report every year on oil service, on Capex spending. And Capex spending has a lot to do with the oil services companies 'cause they do all the legwork for the Exxon Mobiles and Chevron.
So they said the international spending is gonna increase by 11 percent to $644 billion in 2013. That's how much the oil companies are gonna spend. And you say, "Well, it's a forecast." It's not really a forecast 'cause almost all these oil companies come out with how much they're gonna spend. Maybe they change it mid-year but they all report that to their shareholders and say, "This is how much we plan on spending." Capex, finding new oil, replacing reserves. $644 billion. That's enough cash to buy every major league baseball team 30 times over. That's how much the oil companies are spending just this year to find oil.
So if you're looking at it, it's great news for the oil services companies. Again, looking at two-year charts, these guys got crushed. Now, if you're looking more in detail of that spending, in 2010, 2011, most of that growth came from ____ fracking everywhere, oil and gas, just surging. This year, if you're looking at the $644 billion number, look under the head a little bit. Most of that spending is going on international to find oil and natural gas outside North America.
So you're looking at this number, you're seeing what, 12, 13, 14 percent growth, where you're seeing 1 percent growth in the U.S. So if you want to buy oil service companies, you really want to buy the companies that have exposure outside the U.S. And that is the four major players. Looking at Halliburton, Baker Hughes, Schlumberger, even Weatherford. More than 60 percent of their sales come from outside the U.S. They're gonna see a ton of business. You're seeing it right now. They're just touching 52-week highs. It doesn't mean you shouldn't buy it. Maybe you could wait a little bit.
The market's up what? It seems like 20 straight days. It's really like eight, nine. We're having a huge surge here. But still you can buy it – want to be a little more patient, maybe you get a better price. Halliburton just came out with really, really good earning. Stock moved higher. Again, these companies are not expensive by almost any measure, cheaper than S&P 500. Weatherford got hit the worst. However, insiders are buying the hell out of it $10.00 to $12.00. It's still probably a buy. I'd say your downside risk is $10.00.
They bought it there at $10.00, they'll buy it there again at $10.00 probably. Maybe you want to buy it at $12.00. Stock was what, $18.00, $19.00. So if you're looking at the momentum investing. You know you have companies that are there for two-week high. Its Schlumberger. All these companies, to me, look cheap. If you want their value player _______ are buying, you go to Weatherford. Maybe that helps out with Jay's question there. For the oil-services industry, man, huge telling, a ton of money is being spent. Dr. Kent Moors, last week, saying how difficult it is to find more oil now.
The state run oil companies, their reserve replacement ratio is 70 percent. I know that might mean nothing to you. The reserve replacement ratio is huge. That's a very important measure in the oil leach. Those are the amount of true reserves add to the company's base, relative to the amount of oil produced each year. So a ratio above 100 means current production's growing. Below 100 means the company's having trouble replacing its reserves and could eventually run out of oil. It's not gonna happen, but if they continue in that trend, they'll run out of oil.
Exxon Mobile, they're the 14th largest producer in the world, prides itself on keeping their reserve replacement ratio above 100 percent. They did it for 19 straight years, even though they needed to buy XTO to do it. But if you're looking at Exxon, like I said, 14th largest producer. The ten largest producers in the world are state-run companies. And this is where the reserve replacement ratio is down in the 70 percent area. So these guys are having trouble replacing their reserves. That's why Dr. Moors says, "Listen, we're producing a hell of a lot of oil in the U.S.
But prices are gonna go higher 'cause we're not producing any place else as much as we used to. It's getting more difficult to find. That's why you're seeing that cash number, that Capex number go higher. Who's gonna benefit? I don't know if it's gonna be Exxon and those guys. They're gonna be more closely tied to their price of oil. But, man, I think the profits for the oil services companies that have international exposure, like the four I mentioned, are gonna do great. And that's where you can make money to buy these companies on pullbacks.
You could buy maybe Halliburton right now. It just had great earnings. I think it's gonna continue. They positioned themselves out of U.S. shale, natural gas which they did great over the past few years. And they positioned themselves more international growth and more oil. So I think you're gonna see huge, huge profits. Again, they're trading – some of them are trading at 52-week highs. If you look at their two-year chart, they're down 20 percent. So even though they're 52-week highs, they've been so depressed, I think that this is a really, really good opportunity for listeners to make money. So any questions, comments, e‑mail me at fcurziostansberryresearch.com. That's fcurziostansberryresearch.com. You can Tweet me at Frank Curzio and be sure to visit us at http://www.stansberryradio.com.
We have a link to get on our mailing list. It's important to get on that mailing list because you'll get a good offers to Stansberry products. You could x out of the e‑mail anytime you want. That's perfectly fine. But if you're interested in subscribing to one of our newsletters, you'll probably find the best deal through Stansberry Radio. Or if you're gonna subscribe to a product of S&A, please e‑mail me first. I'll try to get you the best deal possible.
My prediction for the Super Bowl coming up on Sunday. It should be a pretty good game. People who are in the studio right now – I actually called the studio in Baltimore. That's where our headquarters are, and then we usually do interviews outside of that with Skyping. So I feel terrible if this podcast goes dead. Because I'm saying that Baltimore's gonna lose, you know why. So our Baltimore fans, I'm gonna render this, but I think San Francisco's gonna win 31 to 24.
If it doesn't, you might not hear next week's podcast 'cause these guys might not even pick up the phone when I call them. But it should be a really good game. I'm actually rooting for Baltimore. I just think San Francisco has an edge on almost every position, except for wide receiver, which Baltimore has a fantastic wide receiver. So, hopefully, Flacko can get it to them. I'm rooting for Baltimore. I think San Francisco is really, really good. Though it should be a great game between the _______. Anyway, thank you so much for listening. See you in seven days. Take care.
[End of Audio]