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Player Avatar TSIF (99.96) Submitted: 10/28/2010 2:29:38 PM : Underperform Start Price: $15.00 WGBSD Score: +6.67

This one is only intermittantly pickable due to crossing pick thresholds. It's cycles between $1.30 and $1.60 are well above it's intrinsic value. Here's my pitch from last month when I closed it at $1.31.

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WaferGen Biosystems has seen some highs and lows this past year. From a peak of $3 per share in April down sharply to about $1 a scant three months later in July. The past few months it's making a steady climb upward. If it approaches $3 again then I'm down 100 quick cap points for my anti-market call.

I generally avoid downthumbs on sub $5 equities unless I believe the current valuation is scandelous. IN this case WaferGen has a net negative book value and a $68 Million Market cap. Sometimes a potential product is so good and has so much promise that a radical market cap "may" be warranted. IN my years of investing I have seen several that looked very tempting to get in on the ground floor and make my millions. So far, I haven't found ANY that suceeded when the deck was stacked in this manner. $1.5 Million in cash (more since July offering), negative $0.12 book value. P/S of 55! Insider bought $1.5 Million dollars worth in July at $1.20 so they believe.

What do they do? "WaferGen Biosystems, Inc., a development stage company, engages in the development, manufacture, and sales of systems for gene expression, genotyping, and stem cell research for the life sciences, pharmaceutical drug discovery, and biomarker discovery and diagnostic products industries."

Sounds good, but sounds like others in the field that were promising, (HCLS). Genetic Biology and Stem Cell research have been a growing field the last few years. I don't doubt that someone can command high prices for productive tools. I do doubt that a company that has made no money in three years, and has issued stock each year, can get a $68 Million "real" market cap with a potential of returning value to stockholders for several years at best. If they really can command $500k per machine and they get a few sales then they might survive. 6.5 Million shares in a stock incentive plan in the last four years is already dilutive.

16 August 10Q: "The Company expects to continue to incur substantial costs for research, development, and manufacturing scale-up activities for at least the next year. The Company will also need to increase its selling, general and administrative costs as it builds up its sales and marketing infrastructure to expand and support the sale of systems, other products, and services. "

Proponents on other boards cite a revenue up over 500%. That's true...but when you double a dollar things happen fast, but still don't generate anything to get excited about.

"For the three months ended June 30, 2010, revenue increased by $362,976, or 527%, as compared to the three months ended June 30, 2009"

"For the six months ended June 30, 2010, sales and marketing expenses increased by $408,763, or 129%,"

The $6.8 Million offering in July should carry them another 9-12 months. With their ability to raise new money, they may have promising products, but it's too early to tell and way too early to invest.

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