First of all, I would like to make an important point. I really enjoy reading your feedback on my articles, sparking a great debate is part of human nature. There were some great comments left on my 'Who wants to live in a socialist utopia?' article – if you haven’t had your input, you can do so here.
But when someone claims that I "must hold a lot of these shares, to be ramping them so consistently?", I quickly want to set the record straight.
This feedback was on a comment I wrote on Parallel Media (PAA) on 1 January. I believe I have written about Parallel Media twice, which hardly constitutes a major campaign and most interpretations of my latest article would hardly describe it as a ringing endorsement. But that is not the point.
I don’t actually hold any shares in Parallel Media, and even if I did and wanted to ramp them up, that kind of stint could put me in jail. And frankly, I don’t want that to happen.
What I aim to do here in my Penny Sleuths is to offer unbiased, honest commentary on the penny share scene so that readers may be able to negotiate it a little more successfully. Is that so hard to believe?
I mention this today, because I want to go back to another company I have mentioned before (Penny Sleuth 5 April 2012) – and no, I am not a shareholder.
Digital health is the future
The company is Fitbug (FITB), and it recently made a presentation in the suitably steamy surroundings of the Citypoint Fitness Club. Chairman Fergus Kee and Chief Executive Paul Landau had just returned from the massive Consumer Electronics Show in Las Vegas where the new ‘Fitbug Orb’ had attracted some positive comment.
If you remember, Fitbug is trying to cash in on the new American drive for physical fitness. "Connected health" is the buzz phrase, as fatties and unfitties across the country seek to shed the surplus pounds and stave off diabetes. The electronics industry sees this as a big opportunity, and the hype is everywhere.
"The stars are aligned", says Forbes Magazine. 2013 will be "an inflection point for digital health", seeing the birth of "a profound transformation of healthcare that will make the vision of Star Trek and Fantastic Voyage seem almost mundane."
Back in the land of facts and figures, a report by ABI Research predicts that "in five years, the number of wearable wireless health and fitness devices will hit 170 million, up from 21 million last year." So what is this all about?
Penny shares to watch 2013
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Here is the vision.
Before long, we will be wearing little devices that can sense how much exercise we do, how our heart is beating and various other physical manifestations. Wirelessly this information will be transmitted to smartphones and tablet computers, giving us an instant online check on our level of activity and aspects of our health. This will lead us to challenge ourselves to do better, or engage in competitions with others to see, for example, who can walk the furthest.
Fitbug is in the process of launching three devices. The ‘Orb’ is basically a motion sensor which can track our physical activity. The ‘Fitbug Wow’ is a set of scales that will simply transmit our weight back to our base monitoring station. And the third is the ’Fitbug Luv’, a blood pressure monitor.
The ‘Orb’ attracted a degree of favourable publicity in Las Vegas. At $49.99 it has achieved a mass market price point. To suit fashionistas who don’t want to be seen wearing a clunky fitness monitor on their wrist, the Orb can be attached to various parts of the body – the waist works best. And it can also monitor your sleep pattern.
Stiff competition from the big players
Frankly, I see a few difficulties here. So far as the concept is concerned, this feels to me like a business that the electronics industry wants to push, rather than one that is being demanded by consumers.
Evidence from genetic studies has shown that people who are told that they carry an above average risk of a certain medical condition rarely change their habits. For sure, there will be some enthusiasts, and Kee told me that the Orb had attracted the attention of some of major US retailers. But the best hope of mass adoption probably lies with healthcare providers and insurers.
If by demonstrating that Americans are not couch potatoes, they get to pay lower health insurance premiums that could just persuade them to hook up the sensors. Or else employers, who foot the bill, may encourage us to do so.
Broker Hybridan is projecting rapid growth for Fitbug. But in the immediate future, it looks certain to have to raise more money. Beyond that it has plenty of competition from giants like Nike, Adidas and Motorola, all of whom are a great deal bigger. For the time being, I am going to watch this one – from the comfort of the sofa.
For the gamblers amongst you
Finally a few people have gotten in touch to ask for more information about YuuZoo, which I covered on Tuesday. YuuZoo certainly looks a very promising business. As I said on Tuesday, the company expects earnings of $21.4m this year, $99.4m in 2014 and $232m in 2015. And these numbers, at least so YuuZoo claims, are based on some conservative assumptions.
Now this isn’t a typical story for Penny Sleuthers. But it might interest those of you who like a bit of a gamble with money that you are prepared to lose. If you are looking for further information, you can contact Johnny Townsend of Beaufort International Associates at Jonathan.Townsend@beaufort-int.co.uk.
• This article is taken from Tom Bulford's free twice-weekly small-cap investment email The Penny Sleuth. Sign up to The Penny Sleuth here.
Information in Penny Sleuth is for general information only and is not intended to be relied upon by individual readers in making (or not making) specific investment decisions. Penny Sleuth is an unregulated product published by Fleet Street Publications Ltd.
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