Small Cap Stock Picks: The Next Ultimate "Comeback" Company
By Ann Sosnowski
In this article
Taser International Inc. used to be one of Wall Street's Darling Stocks, but I consider it a comeback candidate.
Taser International worked hard to prove that its non-lethal weapons were exactly that, through court cases and health studies.
Taser International Inc. is a good buy at its current price and could return 83% gains in the short-term.
Small Cap Stock Picks: The Next Ultimate “Comeback” Company
Since it's Friday, I want to address a letter I received yesterday concerning one of my favorite companies:
“If this is your area, [I was] wondering if Taser International Inc. (TASR:NASDAQ) would be recommended now as I have read it's on the rebound and the last four quarters shows a profit.” -- Mark. P.
I've considered Taser International the ultimate “comeback” stock since September 2006, when I recommended buying shares of the company to WaveStrength Hot Sheet subscribers (which is now known as Diligent Investor MicroCap Hot Sheet.) Subscribers made near-term gains of 20% by October on half of their holdings.
Taser was once one of Wall Street's darlings, rising up 1,798% between 2003 and early 2004, to a high of $32.07 per share. The stock ran between $13 and $25 during the middle of 2004, and then rose to a new high over the course of the last four months of 2004 to a high of $33.45.
Then the stock's bottom fell out. Taser posted an open letter to its shareholders and customers in January 2005, stating that the U.S. Securities and Exchange Commission was conducting an informal inquiry into the safety of TASER(R) products, as well as information concerning its distribution agreement with Davidson's Inc.
Regardless, Taser stood by its products stating:
“We firmly believe that our public statements are fully supported by medical and scientific studies. These studies include both TASER-sponsored studies and completely independent safety evaluations that were conducted by the U.S. Department of Defense, the Home Office in the United Kingdom, various government agencies in Canada as well as studies in Australia and other countries.”
Small Cap Stock Picks: Taser Continues to Defend Its Products
TASR dropped as low as $5.31 per share by October 2005. During that time, Taser's financials were still strong, but were offset by legal and insurance fees for the liability cases that were being pursued against the company due to wrongful death claims. Taser reported record revenue of $67.7 million, up 177% compared to 2003.
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Taser continued to receive orders for its products from the United Kingdom and the U.S. military. It began to increase medical research concerning the effects of its non-lethal weapons to prove that they did not affect the heart and cause cardiac arrest… but that drugs or pre-existing heart conditions were the culprit in these cases.
In 2006, Taser began gaining support from the media and consumers by announcing whenever its non-lethal Taser weapons were being used to prevent catastrophe. Some of these headlines include: “Taser Device Prevents Suicide Attempt,” “Taser Device Ends Armed Standoff,” and “Taser Used to End Domestic Dispute.”
I started paying extremely close attention to Taser in March 2006, when the Royal Canadian Mounted Police ordered 216 more tasers, on top of the 1,800 it already used. Shortly thereafter, police in North Carolina placed orders, and the company announced record first-quarter earnings of $13.9 million. Its sales increased by 36%.
By May 2006, the SEC had announced that it had terminated its investigation of Taser International Inc. and that no enforcement action was recommended. The company immediately received four international orders for its non-lethal weapons.
By the end of 2006, the company boasted that it had its 30th product liability case against it dismissed!
Small Cap Stock Picks: Short-Term Potential of 83%… But A Long-Term Hold
Now that I've brought you up to date, let me talk a little about the potential for this company to become a blockbuster stock again.
The company started off with a boom in early 2007, by unveiling its TASER C2 Personal Protector at the Consumer Electronics Show. This is a smaller taser that citizens can purchase to protect themselves and their property. It includes SureCheck™, technology that makes sure that the taser is not activated until the purchaser undergoes a background check and receives a code that matches their product serial code.
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It also has unique AFID (Anti-Felon Identification) that disperses confetti with the weapon's serial number on it, whenever it's used.
The C2 is also somewhat trendy, available in different colors, including metallic pink.
The company's law enforcement and military versions are also available with TaserCams that record all activity during and following the deployment of the taser, so that it can be used in court cases to absolve officers of wrongful death.
My current Diligent Investor MicroCap Hot Sheet subscribers are holding shares of Taser with an entry price of $8.18 per share, near where Taser is currently trading. I still consider it a strong buy at current levels.
TASR stock just jumped above its 200-day Moving Average a few days ago, with rising Money Flow and RSI patterns. This same kind of move occurred in February 2007, just to set support.
I still anticipate a short-term price of $15 per share on Taser International Inc. (TASR:NASDAQ) by the end of 2007 at the latest, giving my current subscribers gains of 83%. With all of the liability cases against the company being dismissed, and its weapons coming back into favor after extensive health studies verifying their safety, I believe Taser has the potential to return to its 2004 “Wall Street darling” position.
I believe this is a long-term small-cap stock pick.
***
Ann Sosnowski is a small and mid-cap stock analyst for Taipan Financial News. She is the editor of Diligent Investor, a monthly newsletter that balances conservative and moderately risky investments that pertain to current market trends. She is also the editor of Diligent Investor Micro-Cap Hot Sheet, a monthly newsletter that finds the hottest penny and micro-cap stocks on the market.
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Related Resources
Taser: Visit Taser International's official website for more information on the company and its business.
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