The back story: I started buying Liquidmetal Technologies (LQMT) in April at 21 cents per share, largely on speculation that liquidmetal glass would become the backing on next-generation iPhones. The company had a marketing deal with Apple and a new president with a substantial track record.
It has become my most-profitable trade ever. I have realized $28,115 in profits, and at the close yesterday had another $61,511 in unrealized profits spread between 200,000 shares (average cost 32 cents) in my swing-trading portfolio and 300,000 shares (average cost 26 cents) in my long-term trading account.
The news: The new iPhone came out last week, with Apple officials talking about how it has the most-durable glass ever used in any smartphone. No one said what the glass actually is and whether it is made by Corning – the expected supplier – or some other supplier.
Patently Apple – a reputable web site that looks at how Apple’s patents are developed/used and the first place to suggest that future iPhones would use liquidmetal — – published an article this week which suggested that the new glass might be using liquidmetal glass. That speculation sent Liquidmetal Technologies stock – which had been in the $.40s before the Apple announcement and re-traced to .30 after fallen into the $.30s after – back to the 40-cents range.
The reaction: Beyond the pop in the stock, the buzz around LQMT is that if there is any confirmation forthcoming that liquidmetal is in the new phones – or that we are moving toward its use in future generations of the phone – it’s a game-changer for the stock, a massive attention-getter.
With a market capitalization approaching $400 million, it’s going to take some news to push this stock to the next level. In my mind, a real company is one that makes something, sells it and has a path for profitability; LQMT isn’t there yet, but with good news on liquidmetal glass and a licensing deal with Apple, it looks closer to becoming a real company than it ever has before.
How I’m playing it: With stocks like this – and it was a turd left for dead under previous management – you look for reasons for your investment thesis to fall apart. In this case, where even the news is a speculation (I believe the glass will be a Corning product), the reasons for buying the company continue to hold up.
That said, LQMT is a hold right now to see how this story develops. My goal has been to sell into a major event when it unfolds – and it’s possible that an announcement on the use of the technology could be that event — at a price closer to $1 per share. I’m still willing to be patient because I think there is a lot of room to run.
Jason Bond runs JasonBondTraining.com and is a swing trader of small-cap stocks. At the time this was published on RagingBull.com, as described in the article, he held 500,000 shares of LQMT; he started accumulating shares in April, and has realized and unrealized profits in the stock amounting to $89,626 and was planning to hold the shares as described in this article.