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2014/05/22

Class Q Shares Now Available!

In January of 2010, Warren  Buffett did something he had previously denounced...
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Class Q Shares Now Available!
By Christian A. DeHaemer | Thursday, May 22nd, 2014
Christian A. DeHaemer

In January of 2010, Warren Buffett did something he had previously denounced...

He created a new class of shares for his holding company, Berkshire Hathaway (BRK).

Back in 1983, Buffett was asked why he never offered “cheap” shares of Berkshire. As a response, he wrote in his letter to shareholders:

Splitting the stock would increase that cost (transfer costs), downgrade the quality of our shareholder population, and encourage a market price less consistently related to intrinsic business value. We see no offsetting advantages.”

Then he changed his mind and offered Class B shares of Berkshire.

Of course, when he offered the B-Shares, he made the stock easier to buy and sell for the vast majority of investors.

It was great news in the investing world because it allowed regular folks to buy into Warren Buffett's company. Previously, unless you had over $100,000 to plunk down on one share, you were cut out of the deal.

But it wasn’t the first time a broader class of investor was given new access to a once off-limits type of asset...

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For most of the stock market’s history, it was impossible for American investors to buy into the kinds of innovative, early-stage American companies that are truly the engines of growth.

Consider that small and midsized businesses drive over 70% of American GDP. They provide 80% of the new jobs every year...

But for over 180 years of Wall Street’s history, it was impossible for this type of company to access public investment capital — and just as impossible for the average investor to seek out and invest in these companies.

Unless you were in private equity, you never even heard of these companies.

Then, a quiet revolution occurred — with the advent of what I call "Class Q shares."

Now, those American companies that never went public are able to. And regular investors can buy America’s best innovative companies as easily as they can buy Wal-Mart (NYSE: WMT) or GE (NYSE: GE).

It’s a major coup for regular folks who want access — but you never hear about it.

For a small example of stocks that offer Q-Shares, consider a company called Anika Therapeutics. It’s a company I recommended to subscribers of my service Technology and Opportunity back in August of 2013.

This company specializes in the manufacture and sale of a very specialized type of human tissue repair product based off of one single substance called hyaluronic acid (HA).

HA occurs naturally in the body and is found everywhere from your skin to your joints to the soft tissue separating your organs. In short, it’s kind of like a combination lubricant/healing agent that your body produces naturally.

Anika manufactures HA and uses it in a variety of therapeutic products — mostly used for arthritis ailments. According to the Arthritis Foundation, arthritis affects 1 in 5 adults, making it one of the most common chronic pain problems in the world.

And Anika is a tiny company, with a market cap under $700 million. It makes a small number of products based off of just one main ingredient — but it could completely revolutionize the world of arthritis pain treatment.

That’s because HA tends to treat the symptoms of arthritis, not just block or prevent the pain.

It could be a cure...

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That makes Anika a very unique company with a lot weighing on just one product stream.

If 1 in 5 Americans buys Anika’s products, the company would be worth 50 times what it sells for today. Even if a tiny percentage of arthritis sufferers try Anika’s treatments, the company could be an easy 10-bagger.

Simply put, at this stage, it’s beyond a penny stock (it sells for over $45 a share and has been in business for over 20 years), but it's still not S&P 500 material. Which is why it issued Class Q shares.

In short, companies that issue Q-Shares tend to be on the small side. The average Q-Shares company has a market cap of less than $2 billion.

They also tend to be hyper-focused innovative companies: drilling down into one specific problem.

And, perhaps not altogether surprisingly, they’re overwhelmingly based in America.

That’s because despite “common knowledge,” America is still the best place in the world for innovative companies to start and thrive.

As for Anika, it’s up almost 100% since I told my subscribers about it last August.

I recently completed a full report on Q-Shares and why I think this small, misunderstood segment of the stock market could soon vastly outperform regular stocks.

In fact, for reasons I reveal in my write-up, Q-Shares tend to rise after regular stocks hit new highs.

Click here for the full story.

All the best,

Christian DeHaemer  Signature

Christian DeHaemer

follow basic@TheDailyHammer on Twitter

Since 1995, Christian DeHaemer has specialized in frontier market opportunities. He has traveled extensively and invested in places as varied as Cuba, Mongolia, and Kenya. Chris believes the best way to make money is to get there first with the most. Christian is the founder of Crisis & Opportunity and Managing Director of Wealth Daily. He is also a contributor for Energy & Capital. For more on Christian, see his editor's page.

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