Micro Cap Stocks are Approaching Good Valuations

Since the February liquidity peak and so much cash on the sidelines, the Bitcoin 2nd bull market also killed micro cap stocks and penny stocks. It’s been a brutal bear market for those stocks below $10 or even worse for those below $5 or $1. These are not individual trends folks, this is a major macro event in the pivot to value of 2021.

However after 8 months of a micro cap bear market, there are a few companies that to my eyes look appealing again. For the autonomous driving space Israeli startup Foresight Autonomous Holdings, $FRSX, is such a company. I would also add that Lidar stocks are getting appealing again.

I believe FRSX will end up making a lot of money in China with their tech. China will roll-out self-driving vehicles faster than other areas in their tier 1 cities. They will also win the EV space with so much capital and innovation in that space.

So who are these Israeli technologists? Foresight Autonomous Holdings is a technology company developing smart multi-spectral vision software solutions and cellular-based applications.

Through the Company’s wholly owned subsidiaries, Foresight Automotive Ltd. and Eye-Net Mobile Ltd., Foresight develops both “in-line-of-sight” vision systems and “beyond-line-of-sight” accident-prevention solutions.

Foresight’s vision solutions include modules of automatic calibration, sensor fusion and dense 3D point cloud that can be applied to diverse markets such as automotive, defense, autonomous vehicles and heavy industrial equipment. So there’s some diversification here outside of just their core industry.

For smart city builders like China, this tech may be useful.

  • Eye-Net Mobile’s cellular-based solution suite provides real-time pre-collision alerts to enhance road safety and situational awareness for all road users in the urban mobility environment by incorporating cutting-edge AI technology and advanced analytics.
  • $FRSX is down over 50% in the last six months so are just a typical example of the micro cap bear market, that’s not even as much as the average for these types of speculative growth stocks.

For me $FRSX is a buy around $1.90, not at $3. I think the bear market could last until November and likely longer, this is because there’s too much cash and low interest rates favor companies with major cash flows or cash piles. Also so long as Bitcoin is hot, penny stocks are not.

This is because it’s an over-lapping key demographic of retail investors. This isn’t rocket science, but penny stocks have burnt a lot of new investors in 2021.

Intel going on an acquisition spree in Israel wasn’t by accident. Foresight is breaking the preconceived notion about stereo technology with its next-generation 3D stereo perception software to improve obstacle detection. The company’s vision solutions include modules of automatic calibration and dense 3D point cloud that can be used in diverse markets. The technology and software will allow the flexibility of placing cameras at different locations on the vehicle, seeing smaller objects far away and beyond with high-detection accuracy.

Foresight’s tech I believe has implications for:

  • Autonomous Vehicles
  • Drones
  • Defense sector
  • Smart city infrastructure
  • IoT city infrastructure
  • Automation in Agriculture Technology

The company’s technology — suitable for passenger cars, commercial vehicles, defense and agricultural equipment — is based purely on stereo camera technology and is intended to serve as the eyes of semi- and fully autonomous vehicles.

It’s concerning that this company was originally founded in 1977. They now have a potential partner with Wonder Robotics Ltd., a start-up company engaged in the design and development of drone autonomy systems, has started a proof of concept (POC) project and the evaluation of Foresight’s QuadSight® vision system. Their PR is POC and tech related, which I like.

Wonder Robotics products use a 3D sensor and proprietary algorithms to provide drones with 360-degree situational awareness, including during their descent and landing, verifying that the landing site is clear of obstacles, including low-profile obstacles, such as cables, and even dynamic moving obstacles, like people or animals.

Let’s say they strike out in autonomous vehicles, I believe they have enough commercial viability to find a product-market fit somewhere. This is not a total sham like $MVIS for example.

Main Features of Foresight’s Technology

  • Ability to detect any object — not only classified objects
  • Long distance — ability to accurately detect small objects at large distances
  • Harsh weather — operates in harsh weather and lighting conditions
  • Passive, non-emitting technology as opposed to active (less prone to mutual interferences)
    Cheaper alternative to Lidar

So for a speculative bet $FRSX is an interesting company to watch. The market cap is only around $200 million with a high in February of just over $11. When you don’t have revenue though it’s terribly high-risk speculation at best. Foresight ended the second quarter of 2021 with $52.3 million in cash, cash equivalent and short-term deposits.

Research and development (R&D) expenses, net for the three months ended June 30, 2021 were $2,436,000, compared to $1,876,000 in the three months ended June 30, 2020. They are pretty transparent considering their weird (pre launch) stage of go-to-market immaturity with their new tech.

Cash and cash equivalents and short-term deposits totaled $52.3 million as of June 30, 2021, compared to $43.9 million as of December 31, 2020. Due to these risks there’s no way I’d pay over $2 for this stock and I don’t advise you should either until there’s more clarity on their future.

Do note that I no longer share stock information for free, but on my paywall here. So if you have liked my stock coverage over the years that’s the place to get it. Until the bear market is over for micro cap stocks, I don’t advise you get into many names at all.

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