3D Technology Has Far Reaching Implications
The three-dimensional craze certainly didn't end this Easter weekend. Clash of the Titans opened over the weekend and brought in $64.1 million in North American, and an additional $44.2 million in foreign markets. While the film isn't showing in any IMAX (NASDAQ: IMAX) theaters (my current choice to play the boom) the solid box office performance of the film was almost certainly propelled by its conversion to 3D.
You wrote in with interesting companies that you're finding as ways to play the popularity in 3D technology. One of the more creative suggestions was Viking Systems (OTC BB: VKNG), a $7.9 million market cap company that sells 2D and 3D cameras to help surgeons perform minimally invasive surgery. Now, this company is not currently profitable, and would be an incredibly risky investment. So don't mistake my mention as a recommendation, because it's not. In fact, I haven't yet performed due-diligence on the company, a critical step that absolutely needs to precede any decision to buy or sell shares in any company.
But I want to bring Viking Systems to your attention because it is a good example of how far reaching the interest in 3D technology is. And it's one to put on the radar screen for signs of a break-through to profitability. On February 18, the company's CEO Jed Kennedy remarked,
"…we believe we are now in a unique position to take advantage of the recent breakthroughs in 3D technology and plan to deliver our "Next Generation" 3DHD vision system to the market during the fourth quarter of this year. We believe this product introduction will represent an inflection point for the Company. Given the trends we are seeing in non-medical markets around the world, and the obvious benefits 3D offers the minimally invasive surgeon we believe the medical market is now well positioned for the adoption…"
Finding small-caps with breakthrough technology right when they are at the inflection point is every small cap investors dream. At this point, Viking is worth taking a closer look at to see how risky it is, and try to determine the potential for the company to grow.
***While we're on the subject of risk vs. reward as it relates to small cap investing, I'd like to discuss an email I received last week. Charles wrote,
"I look forward to and enjoy reading Ian's commentary every day on his various web letters. However, what I would really appreciate is some advice for persons like myself who possess limited funds to invest and would like to get started…How is one with smaller amounts available [supposed to] get going? Are there sources to receive information and advice for persons like me?"
Charles brings up a point that many individual investors out there ask themselves every day. And I can't say it any better than the American economist and value investing great Benjamin Graham. Graham wrote,
"The individual investor should act consistently as an investor and not as a speculator. This means . . . that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning that satisfies him that he is getting more than his money's worth for his purchase.
Graham essentially is saying that individual investors need to begin by running potential investments through a process of fundamental analysis to help guide investment decisions. Picking great small-cap companies with lots of promise, strong financial performance, and attractive valuations is the starting point to profitable investing. You want to make sure that you increase the odds of success and focus on those small caps with the greatest potential for dazzling returns and growth. But you also want to limit your downside. This requires not only smart analysis of the facts, but also a keen sense of timing. As with most things in life, timing is everything. You can increase your profit potential by timing your entry and exit skillfully.
Everyone needs to evaluate their ever-changing risk tolerance with many considerations in mind: age, experience, income and tax situation, and long-term personal goals. These are not complex issues, but sadly, they often are not addressed by investors. Investors must ask themselves: (1) How much risk is appropriate, (2) What is a reasonable financial goal, and (3) How should one combine risk and investments to find appropriate methods for accomplishing those goals.
In the coming weeks I'll discuss these in more detail and provide more tips on how individual investors with limited capital can get started. If you have a particular approach, or a story that helped you get started with a small amount of money, send it to me. I love to hear your success stories and will include yours in a future issue. My address is: editorial@smallcapinvestor.com.
