In today's 24-hour financial news cycle, it's tougher than ever to find the diamonds in the rough. Ironically enough, there's so much information about so many different stocks and industries, that finding profitable investment ideas comes with a daunting set of challenges.
Let me introduce myself. My name is Ryan Nelson, and I am chief editor of The Stock Report. For the past seven years, we've successfully produced cutting-edge analysis of individual equities, commodities, market sectors, and global economic trends — with a focus on ideas that are poised to explode, providing outstanding gains to those individuals savvy enough to be in on the ground floor.
Our ability to identify breakthrough technologies has racked up phenomenal gains for our clients. Our world revolves around discovering profitable investments for investors like you. At the same time, we know the sting of an unprofitable investment, and understand that if we make a bad call, clients will remember it.
At The Stock Report, we have a different perspective of what is real, what is actionable, and what adds wealth to our subscribers long term. Our analysts look at investment opportunities through a unique prism, to isolate explosive situations that possess a macro tailwind behind a company’s idea.
In the next few minutes, I'll cut through the clutter. Simply put, our Top 3 stock ideas
have outstanding growth potential in breakout markets, and I'll tell you exactly why. Here's a preview:
For example, Stock #1 has created a revolutionary technology device, produced in partnership with international telecom giant Vodafone, that promises to change the healthcare landscape forever. It is a consumer product that could prove to be as addictive as smart phones, while helping to change the health and fitness behavior of millions of users. The company’s scientists and engineers have filed over 19 patents and have developed what we believe to be a technology that could impact several multibillion-dollar markets.
Stock #2 is poised to capitalize on the changing regulatory landscape of online gambling, which is expected to generate nearly $200 billion in revenue worldwide by 2015. With an impressive portfolio of 89 patents in online social gaming and gambling and a staggering 250+ million users, their platform is the single largest in the world.
And our #3 top stock has grown revenues at an astonishing double-digit rate for the past six years, and comparable store sales by an average of 40% in that time. Yet, they are just getting started. The global market for their products is expected to grow from $250 billion to north of $325 billion by 2015
We at The Stock Report are always on the lookout for the next breakout opportunity, which brings us to...
Our #1 Stock for 2013:
Biozoom, Inc. (BIZM)
Our first company is one of the most compelling opportunities we've seen since launching The Stock Report. It offers investors an early entry point on an innovation with so many potential market applications that we can barely scratch the surface here.
The company is Biozoom, Inc., traded under the symbol BIZM. They have developed what we believe to be a transformational technology that could impact several multibillion-dollar markets.
Biozoom's game-changing medical technology is the world’s first and only handheld device for the non-invasive analysis of our body’s blood components for preventative and symptomatic healthcare.
No punctures or needles are required. By simply scanning the palm of one’s hand, a user can access data about antioxidant and vitamin levels, free radicals, skin moisture, the presence of bacteria and viruses, and oxidative stress levels, and a host of other elements, and have the results within seconds. Press the company’s app on a smart phone or PC, and you are taken directly to its central diagnostics portal, and 16 milliseconds later you've got your results.
Their scanner allows the user to monitor blood chemistry at home – in seconds – without having blood drawn through a needle at a diagnostic lab, waiting 3 to 5 days for the results, and paying a sizable lab bill.
The Healthcare Market Is Booming
The global home healthcare device industry is expected to reach $29 billion in 2017, and our top pick stands to profit from the changing environment. Bloomberg reports that the do-it-yourself home health related test market, estimated at $2 billion to $3 billion globally, is growing by 20% a year.
The company has partnered with European optics giant Carl Zeiss for the engineering, and manufacturing of the optical unit, and spectral filtration system. It is truly a state-of-the-art product, and the potential market applications are breathtaking.
In fact, the possibility of embedding the "heart" of the company’s technology inside smart phones and smart watches is intriguing to Vodaphone (one of the original partners on the project), and other consumer telecommunication products enterprises.
One out of ten smart phone users surveyed by Vodaphone said they would buy a mobile phone with this device integrated into it.
Biozoom’s scanner is more compact, mobile, sensitive in its analysis, easy to use, and cost efficient to the consumer than anything in existence today.
“Global sales of mobile health applications are expected to
increase from $718 million in 2011 to $1.3 billion this year.”
Future roll-out markets and applications are even more impressive. Relevant biomarkers can and will be identified and analyzed for things such as cholesterol, alcohol, various illegal drugs, smoke, poisons, and blood pressure – to name a few. The unit is being further developed to measure blood sugar levels, tapping into a staggering $220 billion a year diabetes market in the U.S. and 350 million people with diabetes around the world.
Healthcare services have been disproportionately growing in relation to the overall economic trend for decades. The next five years will bare witness to massive changes in the way providers, insurers, and recipients of care view the landscape and interact with one another. Preventive policy and practice will rule the day.
Engaging individuals in their own health monitoring will be a key ingredient in the future health care environment, according to a PriceWaterhouseCoopers report. The Biozoom Scanner is specifically designed for this purpose.
Biofeedback has proven to be an extremely effective means for an individual to learn how to influence physiological activity for the purpose of improving one’s nutrition, health and performance.
The Biozoom scanner facilitates this important societal shift.
Study Reveals Effectiveness of Biozoom Scanner
Charité Berlin, one of the largest and most well-respected university hospitals in Europe, recently finished a study testing the Biozoom scanner. The results were astonishing: 80% of students within the study recorded improvements in key antioxidant metrics over the tested period, and 20% of those tested actually quit smoking!
The message is clear: People will change behaviors if presented the opportunity to see the effects of their actions, and the results of healthier lifestyle decisions.
“While Washington focuses on draconian responses to the rising costs of
healthcare, for-profit businesses are busy inventing small, affordable
solutions. The first of scores of new home diagnostic and monitoring
devices – small, affordable,
and increasingly connected to health professionals via the web
– are now appearing on the scene.”
— Wall Street Journal, “The Sources of the Next American Boom”
Initial Uses: The Low-Hanging Fruit
Marketing and distribution relationships with companies like GNC, Nutrilite, CVS, Walgreens, NuSkin, Neuform, P&G, Walmart, and Target are ideal to help the Company with the launch of the device. The U.S. has approximately 61,000 pharmacies, with Walgreens operating 8,300 drug store/pharmacies and the Drugstore.com and Beauty.com online venues. Their competitor CVS conducts business in 7,000 locations, while GNC clocks in at over 6,000 store locations. According to a report from CVS Pharmacy: “The increasing desire of consumers to detect potential health problems early is making the home testing trend widespread.”
Gyms and Fitness Facilities
Gyms and fitness facilities are a sizable market ripe for such monitoring and service devices. The industry generates more than $25 billion
in revenues at an estimated 30,000 locations nationwide.
Companies that are in the business of selling health and beauty products such as NuSkin (a company with revenues in excess of $1.7 billion) could benefit from equipping their sales forces with the Biozoom scanner and using its screening results to promote the sale of personalized products for the customer.
Integration into Everyday Consumer Products
The integration of the technology into everyday consumer products has impressive revenue potential. The apparatus can be miniaturized to the size of a microchip, enabling the biofeedback scanning capability to be integrated into smart phones and virtually any other small consumer device.
When the device is miniaturized to the size of a computer chip, there will be virtually no limit on where it can go — for example, embedded into electric toothbrushes (to screen for plaque) and razors (to scan for antioxidant levels). The company is working to secure sales contracts with one or more large consumer products companies such as a Unilever, Procter and Gamble, Gillette, or Braun.
“We believe wellness is the next trillion-dollar industry, as employers
invest in healthy living programs and as customers take more
responsibility for optimizing their own health.”
— Consulting firm McKinsey & Company
As Biozoom gains in popularity in consumer markets, it could spark interest from a number of additional future markets. Here are…
7 Additional Ways BIZM Could Rapidly Expand
Government agencies and insurance companies who are invested in the benefits of prevention, proper care administration, education, and cost reduction.
There is talk that the device be utilized to add biofeedback insights during pregnancy. Fifteen million babies are born prematurely each year, and 1 million of those die within 30 days of birth. A study conducted by the March of Dimes estimates that 80% of those deaths are the result of free radical/antioxidant imbalances either prior to or just following birth.
The primary goal of pharmaceutical companies in the coming decade is the advancement and proliferation of "tailored" drugs that fit the biology of individual users and their unique physiology. What better device to employ?
Corporate entities are doing everything they can to encourage healthier behavior in their workforces, and the Biozoom scanner could assist in those efforts.
A device that can inexpensively and efficiently monitor things such as fitness indicators (Cytochrom AA3, VO2 max) for physical endurance, performance, blood oxygen levels, oxygen saturation (HbO2), blood pressure, nutrition and vitamin intake and absorption, hydrogen levels, and stress test variables, would be a valuable device for any sports organization — professional, collegiate, or scholastic.
At the same time, sports doping enforcement agencies could police those trying to skirt the rules: Imagine a remote handheld device that could be used to test for multiple drug biomarkers on the spot, on location immediately prior to a game or race.
Finally, Biozoom could easily be extended outside of the health realm, as well. Early testing suggests that a system utilizing the guts of this device is able to measure the components of exhaust emission byproducts. Based on the data gathered, fuel usage and thus emission expulsion can be optimized, saving the operator fuel expenses while reducing CO2 emissions.
The possible applications of Biozoom are literally endless.
To protect shareholders' interests, the company has assembled an impressive portfolio of intellectual property that could become a multimillion-dollar asset, with huge licensing income potential. The company has filed 19 patents in such areas as optics, temperature drift, nano-filtration, database management, nanospectroscopy, fuel consumption, fitness enzymes, and others.
The healthcare industry is changing rapidly. Cost containment and preventative practices are replacing old guard of reactionary treatment. Biozoom's patented technology stands to profit from such a trend, with vast potential application. We honestly cannot think of a more exciting technology in any vertical of this market.
This stock sits at the crossroads of several important healthcare and technology trends, including rapid growth in home health, medical diagnostics and nanotechnology. Given the overall healthcare sector Price/Earnings ratio of 25.75 and an estimated 2014 Earnings-Per-Share of $0.40 for BIZM
, yields a 12-month price target of $10.30.
About The Stock Report
Before we proceed to Stocks #2 and #3, let me tell you a little more about our team here at The Stock Report. We employ a sophisticated network of financial experts, composed of some of the brightest minds in the world of investments and capital markets. Our analysts come from varied analytical backgrounds, and possess decades of experience working with and for global financial giants and prominent Wall Street firms. However, their focus is very different now from the investment research environments they have come from, in that we are exclusively focused on small investors.
The search for paradigm-shifting technologies, market disrupting innovations, geometric overseas growth potential, and plain old-fashioned stability and strength in management, is the cornerstone our approach to the world of finance, and the genesis of investment ideas that work. We are inquisitive capitalists that scour the landscape from the perspective of fundamental, technical, macro-market, consumer behavioral, regulatory, geopolitical, and international economic vantage points for insights that will pay monetary rewards to those who seek our advice.
We are not, however, in the business of publishing baskets of top 25 or 50 stocks in the hope that a couple will be winners and provide poster material for coming marketing campaigns. We are in the business of providing winners, winning methodologies, and the macro intelligence behind the inner workings of global finance, which sets the stage for all investment opportunities to play out.
We are also not always right. We have picked names in the past that have underperformed the market, and disappointed us. But rather than discourage our team, those outliers have strengthened our resolve and our performance. Our market performance has been better every year we have been in business, and we have no intention of breaking that trend in 2013!
With that in mind, let's view Stock #2 in more detail.
Our #2 Stock for 2013:
Zynga, Inc. (ZNGA)
Our #2 stock pick is Zynga, Inc., traded under the ticker ZNGA, and it is positioning itself for a shift in the way the industry operates and profits from users. The company's impressive intellectual property assets include 89 patents in online social gaming and gambling. Coupled with a customer base of 253 million, and literally hundreds of billions in potential revenues in play, investors could be banking on a bright future.
The company got its start as an online social gaming site partnered with social media giant Facebook (FB), gaining huge brand recognition. In 2012, Zynga began crafting their future efforts toward the small but growing Internet gambling space, in an effort to snatch up share in the global online gambling market.
The market for international online gambling is currently over $30 billion
, but is in its infancy — with the potential to generate nearly $200 billion
in revenue worldwide by 2015. According to Goldman Sachs, the legalization of online poker in the U.S. could create up to $12 billion in revenue alone, an estimate nearly twice as much as previously thought possible.
Major Game-Changer: The Upcoming Mobile Avalanche
According to The New York Times
online gambling from mobile devices will be $100 billion by 2017. Zynga has 253+ million monthly users — 72 million of whom are already on mobile apps. This represents a 25% conversion rate, and the primary focus of the firm in the coming year will be in the area of mobile.
Today, ZNGA is the only company with leading franchises in three of the top four social game categories. "Real money" gambling products are the future – and are set to drive earnings to new heights when real money poker, slots, and blackjack are launched on the backbone of the company’s existing platform.
With $2.17 in cash per share, the company’s share price reflects only a $1.00 premium above cash valuation. Q1 2013 saw net income turn positive at $4.1 million compared to a loss of $85 million a year ago. The company continued its cost reduction program, with further cuts in operating expenses. They recorded a 12% year-over-year increase in total bookings, a 21% spike in mobile bookings, along with a $40 million increase in cash, and $23 million in added free cash flow, all coupled with continued sizable R&D expenditures. They are currently sitting on a huge $1.67 billion pile of cash
. Impressive indeed! However, the story is not about current numbers and financials – it’s about the future.
The company recently announced a $200 million add on to their repurchase authorization. In April 2013, they repaid long-term debt obligations of $100 million, and currently have no outstanding debt to speak of
The firm’s customer base is enviable. Its mobile game players in the U.S. spent more time in its gaming sites than the next five game companies combined.
In the fourth quarter alone, poker alone grew to 37 million monthly active players, up 8% for the year.
According to comScore, Zynga now has the fifth-largest daily audience in mobile in the U.S. They likewise rank fifth in overall time spent on mobile, with 10.7 billion minutes in December 2012, and rank third in time spent per user per month, with an average of 5 hours and 52 minutes in the U.S.
Even with 310 million active users, real money gambling could double that figure. If existing users on average gambled just $1 a month, that would be an increase of over $3.7 billion a year — and cash would triple. Imagine if that grew to $1 a week. One can confidently say that if it is executed correctly, the firm’s new platform can become a multibillion-dollar annual revenue source.
With hundreds of millions of users and a mountain-sized cash pile, Zynga is an extremely attractive takeover target.
Earnings estimates for fiscal year 2014 are $0.15. Using an Internet Information Providers industry multiple of 24 times, plus cash on hand of $2.17 per share, we have established a price target of $5.80, which represents over an 80% upside in the name. We believe this estimate could be conservative. When one considers the wild card of the timing of the roll out of real money gambling, and various other new sources of cash flow, this target could be just a footnote by this time next year.
Our #3 Stock for 2013:
Michael Kors Holding, Ltd. (KORS)
If, as many analysts believe, our third pick is the "new Coach," then the past year's growth may very well be just the beginning of its story. Expectations are for the company to grow sales over the next 5 years at a minimum 30% annually, and we believe those estimates could be conservative.
The company is Michael Kors Holding, Ltd., which trades under the ticker KORS. They've got enormous growth potential outside of the U.S., where markets are essentially just beginning to be tapped.
KORS was one of the top performing retail stocks in any product line in 2012 — rising from a post IPO price of around $25 to a high of over $65. Is it too late to enter the game? Hardly. We believe the company is in the third inning, not the eighth.
With 50% of the world’s population residing in E7 nations, and per capita discretionary incomes rising rapidly in those areas, one can understand the company’s enthusiasm — and thus ours.
Comparable-store sales rose 41 percent
in North America in the October-December holiday quarter, while larger rivals saw negative same-store sales in the same period.
Earnings and sales continued to surge, with a triple-digit earnings increase, and a 70% rise in sales (to $637 million.) Gross margins expanded 80 basis points to 60.2%, while earnings jumping 220% year-over-year. Truly impressive metrics.
KORS’s footprint is expanding rapidly. Adding 66 stores in 2012
brought them to a total of 388 stores worldwide
. Not only have they enjoyed rapid expansion over the past five years, they are beginning to make greater use of department-store partnerships — known as shop-in-shops — to significantly ramp up sales growth in the past couple of years.
This company is very successful with social media. It has more than 1 million followers on Twitter, and over 2 million fans on Facebook. Management anticipates having well over 5 million fans
on Facebook by the end of the year, and continues to build brand awareness both domestically and internationally.
The Company is doing an impressive job "stealing" market share in the global marketplace of so-called affordable luxury goods. World-renowned retail partners such as Macy’s (M) and Nordstrom (JWN) continue to work to promote their brands.
International Growth Potential: Simply Massive
Europe alone is thought to be a $500 million market in which the company is planning to open at least 100 new stores. In the prior quarter, revenue in the region expanded 112%
to $58 million, with comparable store sales rising 58%, despite continued weakness of European economy.
Japan is another huge growth opportunity. Revenues in Japan increased 103% to $6 million in a small number of locations. Growth in other areas of East Asia (China, South Korea, Singapore, etc.) remains a fairly untapped growth venue that we think will be monetized in the coming years.
Since KORS is aggressively capturing market share, we do not think its sales will be materially impacted by any poor macroeconomic conditions that may develop.
Investment shops on Wall Street are beginning to get excited about this stock: Goldman Sachs, JP Morgan, Jeffries, and Morgan Stanley are among many citing targets that represent advances of 50% or more
in the coming year and beyond.
In short, KORS is a rapidly growing global luxury lifestyle brand, led by a world-class management team and a renowned, award-winning designer. It has clear strategic direction and is well positioned to continue growing in Europe, Asia and other regions. Watch out!
We have placed an $80 target on the stock based on the company’s enormous international growth potential in coming quarters, which we believe counter-balances any potential global economic risks, and multiples derived from a blending of the higher end of earnings estimates and peer comp multiples.
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