Wouldn’t it be great to have bought Berkshire Hathaway Inc. (NYSE:BRK.A), Microsoft Corporation (NASDAQ:MSFT) or Dell Inc. (NASDAQ:DELL) at an early stage and bagged huge returns? Of course, there’s no such thing as a free lunch and if you base your entire investment strategy on investing in small, risky companies then the result is not likely to be a happy one.
But, just for fun, it doesn’t hurt to put a small amount aside and make a speculative investment in a hidden gem with huge potential in the hopes that it will become the "next big thing." I have unearthed three. Two of these were recently listed on the NASDAQ, and the other has been around for a while with turnaround potential.
The natural gas innovator
Power Solutions International Inc (NASDAQ:PSIX) manufactures engines that run on natural gas or propane. The company's engines support a wide range of equipment such as pumps, generators, fork lift trucks, delivery vans and buses. There is huge momentum building for natural gas because it is much cheaper than diesel and more environmentally friendly. Power Solutions International Inc (NASDAQ:PSIX) was first listed on the NASDAQ in May and with a market capitalization of $300 million has significant growth potential.
Revenue grew at a steady 9% in the first quarter, but the company is in a consolidation phase and is predicting a period of strong growth starting in 2014. Excluding non-cash warrant revaluations, the company is profitable and produced an adjusted earnings per share of $0.21 in the first quarter.
It is interesting to compare Power Solutions International Inc (NASDAQ:PSIX) against a competitor with a much bigger public profile, Westport Innovations Inc. (NASDAQ:WPRT). Westport has yet to make a profit and in the last quarter revenue actually declined.
Westport’s main focus is on larger engines for trucks, heavy plant and railway engines. Despite the unfavourable comparison with Power Solutions International Inc (NASDAQ:PSIX), many investors see a bright future for Westport Innovations Inc. (NASDAQ:WPRT). With a growing number of refilling stations, the trucking industry could see a significant migration from diesel to natural gas this year. And this should translate into significant sales for Westport’s new 12-liter engine.
With general market momentum on its side, Power Solutions International Inc (NASDAQ:PSIX) has prospects for significant growth and may surprise its better-followed competitor.
The robotic spine-tingler
Mazor Robotics Ltd. - American Depositary Shares (NASDAQ:MZOR) makes robotic guidance systems and complimentary products to carry out spinal surgery. The Israeli company has a market capitalization of $200 million and was first listed on the NASDAQ in May.
Revenue more than doubled to $4.9 million in the first quarter of 2013 as compared to $2.4 million in the first quarter of 2012. The increase was due to the sale of just six systems. The company reported a net loss of $10.5 million, but this was largely due to a fair value financial adjustment and on a non-GAAP adjusted basis this fell to a loss of only $0.4 million. On the basis of its successful NASDAQ listing, the company will receive a second tranche investment of $7.5 million from institutional and accredited investors.
This is an exciting company in a very early phase. The next big thing? Who knows, but if you are looking for a highly speculative punt, this must be a candidate.