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Mad Scientist Stock Has Potential, says CEO Buy Signal
By Michael Brush
Exclusively for InvestorIdeas.com
June 28, 2007
A gander at what’s going on in labs working for the tiny Washington, D.C.-based Nuclear Solutions (NSOL) brings back memories of high school science fairs.
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At this table, a guy sporting a white coat and goggles thinks he has developed a way to create miniature, nuclear batteries. Over there, someone shows off detectors that can sniff out nuclear material right through metal – like the metal used in shipping containers.
Behind this tangle of glass beakers strung together by glass tubes and rubber hoses, a student proclaims that research first developed in Germany under Hitler has helped him figure out how to turn old tires into diesel fuel – at a plant in New Jersey, of course.
And in the back, a bunch of Russian geniuses haven’t turned in a project and they don’t plan to. So they are hanging around doing nothing, but they will be busy soon.
Believe it or not, all of these are science projects that supposedly have money making potential at Nuclear Solutions, according to its filings. (Those Russian scientists have signed on as advisors but they are in “stand by” mode, waiting to be told exactly what to do.)
All of this seems rather silly and speculative on first read. And yet, a recent flurry of insider buying at this $31-million market cap company makes you stop and think that maybe one or two of these science projects might actually hit, and propel this penny stock a lot higher.
Nuclear think tank
In essence, tiny Nuclear Solutions is a kind of think tank where people are encouraged to develop ideas that seem far out – I suppose because those are the ones that can surprise you the most by coming out of left field to solve a problem. So naturally, you’re going to read about stuff that seems so whacky, it’s tempting to turn the page.
But because of the insider buying, I wouldn’t. Though Nuclear Solutions hardly has the same track record, you might think of it as a miniature 3M (MMM) -- that is before the Six Sigma consulting fad popularized by Jack Welsh sucked the spontaneity and creativity out of it.
Instead of Post-it notes, Nuclear Solutions focuses on developing more sober products and technologies that might be useful in areas like homeland security, defense, synthetic fuel production, nuclear cleanup, and nanotechnology.
The insider signal I am talking about is the $320,000 worth of buying by chief executive Patrick Herda at 69 cents a share, and at 52 cents, in May and June. The lion’s share of his purchasing was done at the lower price on June 21, according to InsiderScore.com. The stock recently traded for 56 cents. Herda is a Drexel University graduate who worked at private sector nuclear research before joining Nuclear Solutions in 2003.
Some words of warning
Before we get into the details of inventions now percolating at Nuclear Solutions, I’ll share a few words of warning. It cost $3.9 million to run this think tank last year and Nuclear Solutions has minimal revenue. You know what that means. The company says straight out it will have to do more financing, which could be dilutive and hurt the stock.
Another ding on Nuclear Solutions is that it has had a kind of identity crisis. It started in 1997 as Stock Watch Man, an internet e-commerce company. It changed its name to Nuclear Solutions in 2001 when it decided to try to develop a new type of nuclear reactor. In 2004 it set off on its new course.
Maybe the third time’s the charm? Insider buying seems to be saying so.
The science projects
Here’s a quick review of some of the projects and research brewing at laboratories where Nuclear Solutions has hired scientists to work for it. (Nuclear Solutions has no labs of its own.)
- Nuclear Solutions is developing a prototype of a nuclear weapon detector that sniffs out Uranium 235 and Plutonium 239 – used in nuclear bombs – by detecting the small disturbances to gravity that these dense materials create. The company has a license agreement that will let a New Jersey firm called I.P. Technology sell the product to police and fire companies in the U.S. Nuclear Solutions will be paid $9.7 million over ten years, and an 8% royalty.
- The company is using nanotechnology to develop “nuclear micro battery technology” that may be able to supply long-lasting power for computer chips, tiny motors, remote sensors, implantable medical devices, and other defense and aerospace gadgets. The technology works by drawing energy from an embedded radioactive material such as tritium, a radioactive isotope of hydrogen.
- Nuclear Solutions is developing a way to clean up water contaminated with tritium, a byproduct of nuclear weapons research and development. The U.S. has about six billion gallons of water polluted by tritium. Japan, the UK, France and Germany also have this problem.
- A division called Fuel Frontiers is working on developing synthetic fuel plants that convert materials such as used tires, municipal waste, biomass, and other stuff into diesel and synthetic ethanol. A division of the Shaw Group (SGR) is helping to develop plants, including a proposed 52 million gallon waste-to-ethanol plant in Toms River, NJ.
- Another division called Liquidyne Fuels is developing bio-ethanol plants.
- Nuclear Solutions has 24 scientists in Russia -- who are experts in several fields -- in “standby mode” until they are given projects. Those projects may involve work on alternative and renewable fuels.
The game plan for all of this research is to develop ideas to the point where they can be sold or licensed to governments or the private sector. The company is looking for partners that would help it sell to the homeland security and defense sectors. It wisely has management and board members with experience working in administrations of both the major political parties.
The bottom line : Nuclear Solutions’ products “are generally early-stage, theoretical or commercially unproven,” as the company says in its filings. That doesn’t sound too encouraging. But the flip side is this stock could catch fire if one of these ideas does work out. Few people are watching this company, and a concrete development could capture the imagination of other investors who aren’t yet paying attention.
Disclaimer
At the time of publication, Michael Brush did not own or control shares in any of the companies listed in this column. Mr. Brush is an independent columnist for this web site.
For more on Insiders Corner disclosure, see the disclosure section in About Insiders Corner: http://www.investorideas.com/insiderscorner/. InvestorI deas.com Disclaimer: www.InvestorIdeas.com/About/Disclaimer.asp . InvestorIdeas is not affiliated or compensated by the companies mentioned in this article.
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