TPS Trade Alert – February 14, 2014
February 14, 2014
Recommendation:
Buy Wave Systems (NASDAQ: WAVX) up to $1.10 per share.
Trade Rationale:
One of the most discussed topics these days is the growing concern over the public’s digital security and privacy. Not only have there been several major headlines on the topic over the past few months, but there are also plenty of question marks ahead.
Everything from credit cards to smartphones can be targets of hackers and thieves. These aren’t the old days of someone stealing your wallet. Today, it’s our digital data we have to protect more than ever.
Of course, everyone’s aware of the massive privacy breaches of the NSA. The legality of the NSA’s data collection is still in question, but the public’s lack of comfort with the activities is certainly not. People don’t like their privacy being invaded.
And we can’t forget the unbelievable credit card debacle at Target (TGT). Millions of credit cards were electronically hijacked when used at one of the nation’s biggest retailers. Most of those cards had to be replaced by the banks.
Here’s the thing…
That doesn’t even take into account the everyday security issues of employers. The vast majority of security breaches are made by employees on the various PC, laptops, and mobile devices issued by companies.
So what can be done?
Software security and encryption has been the standard solution for most companies. However, these layers of software protection don’t seem to be all that effective.
That’s why the corporations and governments are moving to hardware-based digital security. Namely, many products are now protected based on the Trusted Platform Module (TPM) standards.
TPM is an international standard for digital security written by a computer industry consortium. In a nutshell, since 2006, most workplace desktops and laptops have a chip built in to the computer providing encryption, password protection, and more.
A physical chip is inherently more secure than software alone. It makes it possible to monitor and control an individual device and its data, regardless of location.
While TPM and related technology is already standard on business computers, adoption is not standard on tablets and smartphones. As such there’s plenty of room for growth.
And that’s where Wave Systems (NASDAQ: WAVX) comes in.
WAVX develops products for hardware-based digital security, particularly products based on TPM standards. The company’s primary products are designed to bring functionality and user value to TPM enabled products.
Wave products provide services such as device authentication, data protection and encryption, network monitoring, and more. Services range from being able to stop an employee from logging into Facebook at home from a work computer, to enforced encryption of sensitive data.
And with the shift from using desktops and laptops to tablets and smartphones, there is a ton of growth opportunity in this space. As one of the few companies out there actually specializing in TPM products and services, WAVX is in a very good spot to capitalize from the spread of TPM standards.
For a microcap company, WAVX also is decent financial shape. The company generates $26 million a year in revenues but has a market cap of under $32 million. Wave also has nearly $2 million in cash and just over $500,000 in debt.
Early in 2013, the stock traded for roughly $4 a share. The company didn’t quite meet investors’ expectations and the share price has fallen to under $1.00.
But that’s just a great buying opportunity for us. Slowly but surely, the company is building its client base. It’s just a matter of time before the market cap catches up to the company’s growth potential.
Let’s grab WAVX share while they’re trading at dirt cheap levels.
Remember to use limit orders when placing your trades. And stick to your position sizing rules.
Key Facts:
| Company: | Wave Systems |
| Ticker: | WAVX |
| Recent Price: | $0.95 |
| Market Cap: | $31.7 million |
| Avg. Daily Volume: | 428,324 shares |
Chart:
Category: TPS Trade Alert
