| Have you ever dreamed of "finding the next | | | | advantage that so many companies seek. |
| Microsoft"? Fantasized about riding a tiny stock | | | | This is important because... |
| for thousand percent gains or more? I know I | | | | A competitive advantage leads to rapidly rising |
| have. There's no greater thrill than seeing your | | | | sales, profit margins, cash flows, and earnings. For |
| penny stock grow up into a 'respectable' blue chip. | | | | investors, these are the things dreams are made |
| (Except maybe raking in the huge profits!) | | | | of - and can propel stock prices into the |
| Unfortunately, these monster winners aren't easily | | | | stratosphere. |
| found. | | | | Don't believe me? Here's a real life example. |
| You see there are literally thousands of small | | | | Luminex (LMNX) is a small biotechnology company |
| companies in the marketplace. They all seem to | | | | in the $20 billion clinical diagnostics market. It |
| tell a great story and promise untold riches. It can | | | | develops biological testing systems for the life |
| be hard to know which ones will survive. | | | | sciences industry. Pharmaceutical companies use |
| For every company that becomes a market | | | | Luminex's technology to discover new drugs. |
| leader there's hundreds that go bankrupt. Finding | | | | In 1999, Luminex developed an innovative |
| tomorrow's big winners is a lot like panning for | | | | approach to bioassays called xMap Technology. A |
| gold. You have to sift the golden nuggets from | | | | "bioassay" is a type of test to see how effective |
| the worthless grains of dirt. | | | | a new drug treats a disease at the molecular |
| But, what do these nuggets look like? | | | | level. |
| Not an easy question to answer. I spent years | | | | I don't want to go into all the scientific details here |
| trying to develop a reliable system to separate | | | | but suffice it to say - these bioassays are crucial |
| the nuggets from the dirt. I read every book, | | | | for developing new drugs. |
| magazine article, and website on penny stock | | | | And Luminex came up with a way to consolidate |
| investing I could find. Analyzed thousands of | | | | and standardize these tests. An innovative |
| stocks over various different time frames. And | | | | technology to be certain. |
| tested dozens of different investment strategies. | | | | So how did this breakthrough affect Luminex? |
| What I found might shock you. | | | | The numbers speak for themselves. Net sales |
| Everyone knows that all gold shares the same | | | | grew 42% per year over the last 5 years |
| chemical composition, no matter where you find it | | | | (compared to just 14% for the industry). In |
| or its size. The next big penny stock winners are | | | | addition, the company posted a profit in each of |
| no different. They share similar qualities too. | | | | the last 5 years. Unusual for a biotech company. |
| If you know what characteristics most big | | | | This sounds all well and good, but what about the |
| winners share, you can limit your investments to | | | | stock? |
| companies with those characteristics... greatly | | | | In December 2002, Luminex was trading for a |
| improving your chances of hitting a homerun. | | | | mere $3.50 a share. Over the next year, its |
| Unfortunately, I don't have enough space to | | | | shares quadrupled to just under $14. A 300% |
| cover all of these 'characteristics' today. You'll just | | | | return in less than 12 months. |
| have to settle for one that we find quite a bit. | | | | But the story doesn't end there. |
| Homerun Characteristic #1: Innovative Technology | | | | The shares recently hit another high of $27. A |
| This has probably caused more stocks to | | | | 671% return in less than 6 years - an average |
| skyrocket than just about anything else - a new | | | | annual return of 112%. |
| and different technology. Innovative technology | | | | Not too shabby. |
| can provide the all-important competitive | | | | |