TINY Analysis – Harris & Harris Group

TINY Video Analysis

Harris & Harris Group (NASDAQ:TINY) is an early-stage active investor in transformative nanotechnology companies. Sounds cool, right? Well, before you get too carried away…

Here’s a recent Quote from Harris & Harris Group CEO Doug Jamison on current market outlook:

TINY Fundamental Analysis – Market Outlook

“Current market conditions and trends do not favor Harris & Harris Group. American capitalism has not embraced risk. It has no long-term vision. The financial wall is dominated by traders with little knowledge of the underlying security and little interest.”

And hey… it’s true… you CAN make a lot of money day trading stocks and options. But the discrepancy between real and perceived value presents a big opportunity for astute investors looking to buy businesses for cents on the dollar. So…

If you’re into low-risk stock ideas, here is your update on the Harris & Harris group investment portfolio…

TINY Investment Portfolio Summary

The cool thing about nanotechnology are the diverse applications in high tech industries. Life sciences, energy and electronics can all stand to take order of magnitude leaps forward using nanotechnology. Pretty neat right? Well…

You’ll be happy to know TINY is targeting the former two applications for out-sized investment returns in the year to come. And their are some pretty strong macroeconomic and demographic trends supporting the underlying investment thesis. But I hear you…

Is TINY making money right now?

Well, for starters TINY has 6 companies selling or IPO’ing in the next 12 months (approx). They call these “positive liquidity events” (which sounds awesome). In the interim, TINY collected $722,000 of investment income during the year – up a modest 2.5% from 2011. Nothing too crazy. But it’s a nice dividend.

In 2012, TINY made 2 new investments. You can read the TINY 2012 shareholder letter for more insight. D-Wave is one of their current investments that’s generating a lot of buzz – including a personal investment from Jeff Bezos (link) and a new CFO with a lot of experience. The company is solving some of the most complex computational problems that exist. Lockheed Martin actually made a YouTube video on the computing prowess of D-Wave. Cool right?

But that’s not all folks, TINY has a few other big tricks up it’s little sleeve…

Strategic Value Analysis of Management Activities:

Management can make all the difference. But it’s impact is hard to quantify. So here’s an attempt to understand how TINY management is adding to the future bottom line.

First of all…

One especially interesting way TINY is raising income is by selling covered calls against the stock for premium income. Sneaky stuff. Another growth channel management is pursuing is, “increasing AUM without issuing common stock.” Nice…

So, what does that mean?

What TINY is really doing is building relationships with high-tech companies to shop around their nanotechnology. Clever. They’ve met with over 70 companies to gather feedback and validate demand for new technologies. Very interesting way to do it. And hey…

One more thing about this “road show” approach:

The interest in leveraging corporate partners (rather than bankers) is telling. It might be slower for growth to take off, but these relationships will likely prove stronger and more reliable for financing early stage growth than, a dependence on credit markets.

Plus, for visionary companies like TINY, it’s always reassuring to see them actively in touch with the real world. You’d be surprised at the number of CEO’s out of touch with what’s going on. Now…

Let’s take a quick look at the financial statements and then we’ll dive into the charts after that…

TINY Fundamental Analysis – Financial Metrics

As per the TINY video analysis above, TINY jumped up on my radar as a stock of interest because of the solid financial metrics (and the corresponding valuation).

The first thing I like to see is that the stock is trading at a discount to book value. In this age of doom and gloom it’s almost no surprise an optimistic company like TINY is discounted.

Another thing to note is they have quite a bit of cash on hand. They can pay for a couple years of expenses without increasing any of their cash (which is very unlikely)…¬†especially¬†because they have no debt.

The trickiest part about the fundamental analysis of TINY is that the earnings events are rather irregular. The nature of the venture capital business makes it hard to predict earnings, and it all but rules out a dividend (sorry Kevin O’ Leary). On the other hand, when it rains it pours. It’s kind of like drug development, where one blockbuster can pay for myriad failures.

So let’s see if this stock idea is ripe for the picking…

TINY Technical Analysis – Is TINY Ready to Breakout?

Look at the last 5 years on a monthly chart. TINY stock has declined and subsequently consolidated. There is still a few months left for the pattern to develop, but a big move either way looks eminent in 2013.

Harris & Harris Group (NYSE:NASDAQ) TINY Analysis

Monthly Chart of TINY – is a long term breakout imminent?

If you zoom into the 1 year daily chart, you can see how it’s still consolidating within the larger pattern. However, the bottom of the channel was once again recently confirmed. It’s hard to tell if a breakout will come sooner or later. So while the technicals look enticing, just note note the stock is very thinly traded.

So what does it all mean?

TINY ANALYSIS: The Last Word

TINY looks like a great investment idea to me. It’s thinly traded, and might come with a lot of volatility. But if you are investing for the long term this looks like a low-risk lottery ticket to me. I don’t own any yet but would like to buy the next dip a little closer to $3.

What Do You Think Of TINY as a Stock Idea?

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