My Top Small Cap Pick for 2011
December 1, 2010By: nathansArticles RSS feedPrintPrint

This is one of my favorite times of year.

You've got the holidays, of course. And the college football bowl season is right around the corner. But I can't think about those tempting diversions just yet. Because here in the office, December means just one thing -- it’s time to unveil our favorite stock picks for the coming year.

StreetAuthority co-founder Paul Tracy started this tradition in our flagship Market Advisor newsletter back in December 2002. Incidentally, that inaugural list of recommendations went on to deliver an impressive return of +38.4% in the next 12 months. And every December since, we have presented readers with a fresh batch of our best and brightest ideas for the year ahead. 

Aside from the crash of 2008, these picks have outpaced the benchmark S&P 500 every single year -- and by no small margin.



For those of you keeping score, Market Advisor's annual "Top-10 Stocks" have posted a cumulative return of +99%, easily besting the +45% return of the overall market.

Along the way, we have dug up some real gems for readers. In 2009, we flagged Grupo Aeroportuario del Pacific (NYSE: PAC), which went on to gain +45.8%. Last year's list included Skyworks Solutions (Nasdaq: SWKS), which is currently up +83.2%.

And those were far from being the best of the bunch.

With all this in mind, you might be itching to know what we've got on our plate for 2011. Well, you're in luck. Last year, I decided to share the name of one finalist with the public. That pick, Silver Wheaton (NYSE: SLW), has soared +139.0% since January 1.

I'm expecting equally big things out of Augme Technologies (OTC: AUGT) in 2011.

Google has built a $200 billion empire on the back of online advertising. But consider this: nobody hauls their PC around to the bank or the supermarket. By contrast, we are inseparable from our mobile phones -- so demand to reach consumers through wireless devices could be just as explosive.

There's an avalanche of cash plowing into this sector -- and Augme is right in its path. The company has developed innovative marketing platforms and video content delivery systems that "connect brands to consumers" across all wireless networks.

The firm is revolutionizing ways for businesses to communicate and interact with potential customers. For example, pasta maker Delverde is using Augme's platform in a clever way that lets shoppers at certain grocery stores scan a barcode or text a keyword to unlock fine Italian recipes and wine pairings.

These digital, point-of-sale marketing strategies are highly targeted and reach responsive customers -- attributes for which advertisers are usually willing to pay a premium. Augme has a first-mover advantage protected by valuable patents and its growing customer base includes deep-pocketed clients like HBO, Ralph Lauren (NYSE: RL), Colgate Palmolive (NYSE: CL) and Johnson & Johnson (NYSE: JNJ).

At this point, the company is still in the nascent growth stage. Last quarter, it generated just $718,717 in revenue -- about what Google probably spent on postage. But that small size can be an asset...

Investors love double-digit growth and salivate over triple-digits. But almost never do you see quadruple-digit growth. Yet, the revenue I just mentioned represented a jaw-dropping +1,700% increase compared with the same quarter last year.

It's pretty easy to move the needle when you're raking in less than $1 million per quarter and you're at the vanguard of a briskly growing niche. From nothing a few years ago, mobile advertising is projected to be a $5 billion market by 2012.

Action to Take --> Right now, Augme already has $20 million in signed bookings and commitments in the sales pipeline. Even if just half of that is converted, the company could still take in $10 million in the next year.


That type of potential makes it much easier to swallow the dilution that comes with a young company issuing stock to raise capital (the share base has swelled from 13 million to 56 million in the past four years).

The stock is best suited for aggressive investors willing to shoulder some volatility. But the rewards could be huge -- Augme has "multi-bagger" written all over it.


Nathan Slaughter
Editor: StreetAuthority Market Advisor
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