How This “Tiny” Stock Could Lead to Big Profits (TINY)


Executive Lounge, Penny Pick Elite / Wednesday, September 3rd, 2014

Most market participants have limited access to the stock of promising development-stage companies. When those companies do go public, it’s usually the bigger institutional players and retail players who get the lions share of stock at the IPO price.

There is, however, another way to get in on the ground floor of a bunch of these companies — before they go public — and arguably with less risk than banking all of your capital on a single company. That way is by investing in shares of Harris & Harris, Inc., which trades on the Nasdaq under the symbol TINY.

Founded in 1981 and based in New York, with offices in Palo Alto and Los Angeles, Harris & Harris Group, Inc. is a venture capital firm specializing in early stage investments. The firm seeks to invest in tiny technology including microsystems and transformative nanotechnology companies and applications in the cleantech, biotechnology, energy, healthcare, biology+, and electronic sectors.

Specifically, Harris & Harris seeks companies that employ or intend to employ technology that is at the microscale or smaller — thus the stock symbol “TINY.” The firm may make follow-on investments and seeks to coinvest, and prefers to hold membership on boards of directors or serve as observers to the boards of directors on its portfolio companies.

Every year the company’s CEO, Douglas Jamison, issues a detailed update on the status of each of the company’s investments in a regular letter to shareholders. Encouragingly, in Jamison’s most recent shareholder letter released in mid-August, he documents both the winners and losers in the company’s portfolio— the kind of visibility that investors appreciate, and helps build confidence among shareholders.

In the latest letter, Jamison mentions several intriguing companies that Harris & Harris has either invested in, or is actively trying to bring to market. Of particular interest were three financing deals that took place in the second quarter, as well as a fresh strategic investment in a “stealth” start-up.

“Three important financing events happened during the second quarter of 2014. D-Wave, HZO and PWA are important investments for us due to the potential for outsized investment returns if these companies execute on their business plans,” Jamison said. “In the latter two cases, this is directly tied to our increased ownership positions. During the second quarter, all three companies were able to raise their next round of capital at increased valuations and with impressive partners. We believe this is a strong demonstration of their progress and future potential value.”

The company also announced a new investment in UberSeq, a translational genomics company that originated at Stanford University. UberSeq is currently operating under “stealth,” meaning it Harris & Harris agreed not to disclose any details about it at the current time. “We look forward to sharing more details on the company with shareholders in future quarters as it emerges from its stealth state,” Jamison concluded.

In another promising development, the company announced on August 4th that its portfolio company, Enumeral Biomedical Corp., completed a reverse merger of the company into a publicly traded shell company simultaneous with the closing of a $21.55 million equity round of financing. It is set to begin trading over-the-counter under the symbol ENUM in the near future.

Enumeral is focused on using its proprietary drug discovery platform, developed in the laboratory of Enumeral co-Founder J. Christopher Love, Associate Professor of Chemical Engineering at MIT and licensed exclusively from MIT, to identify and elucidate antibodies and antigens that we believe will be relevant to diseases that affect millions of individuals and are underserved by current therapeutic alternatives.

As for the company’s financials, as of June 30, Harris and Harris reported its net asset value and net asset value per share were $120,878,223 and $3.87, respectively. As you can see from the chart below, since that latest report, market participants have been bidding up TINY’s share price, playing catch-up with the estimated share price value suggested by the company’s assets.

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No trade is without risk, and in the land of start-up financing there’s a higher degree of risk than in many other business endeavors. That said, Harris & Harris has already amassed an impressive portfolio of potential breakout companies, and given the value of their current holdings, the issue’s current share price — hovering just below the $3.40 mark, may prove to be a bargain in the months ahead.

I’m looking for the issue to continue to grind its way north over the next several weeks and hopefully once again challenge its 52-week top of $3.90. Any break through that level on strong volume would be exceptionally bullish, and offer the portent of a blue sky run higher.
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No trade is without risk, and in the land of start-up financing there’s a higher degree of risk than in many other business endeavors. That said, Harris & Harris has already amassed an impressive portfolio of potential breakout companies, and given the value of their current holdings, the issue’s current share price — hovering just below the $3.40 mark, may prove to be a bargain in the months ahead.

I’m looking for the issue to continue to grind its way north over the next several weeks and hopefully once again challenge its 52-week top of $3.90. Any break through that level on strong volume would be exceptionally bullish, and offer the portent of a blue sky run higher.
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As always, trade this and all stocks with extreme caution.

Warren Gates, Senior Analyst, Normandy Research

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