Stansberry and Associates is circulating yet another teaser for Rob Fannon’s Phase I Investor newsletter.

http://www.stansberryresearch.com/PRO/0801DILNEW5k/EDILJ222/200801DIL-NEW-5K&o=1437066&u=13991150&l=841553

$1,000 buys you a three month trial run and access to Fannon’s special “Double Your Money in Three Years” report with the details on “two backdoor plays to the cosmetic boom”.

The clues as to the identities of the two cosmetic firms include:

Company #1
• Has no debt on their balance sheet
• Had “record breaking profits in 2007, with highest ever quarterly sales and year-over-year growth of 60%
• “In Feb. 2007, this small equipment supplier entered into a 10-year exclusive collaboration to commercialize home-use light-based devices for treatments of wrinkles, age and sun spots, cellulite, acne and hair removal.”

Company # 2
• “offers a laser-based alternative to the traditionally invasive liposuction procedure” The device is FDA approved and has been featured on EI, Access Hollywood, and Montel Williams.
• Had revenue growth of 70% in 2007
• “offers five main cosmetic systems primarily used for anti-aging procedures, vascular lesions, hair removal and cellulite reduction”

I’m fairly confident that Company #2 with the liposuction device must be:
Cynosure (CYNO: NASDAQ)
The Food and Drug Administration approved Cynosure’s Smartlipo ™ device in October 2006. Their 70% revenue growth was recorded in the third quarter of 2007, and can be confirmed at in this corporate news release.

http://money.aol.com/news/articles/_a/cynosure-reports-record-revenues-and-net/n20080212074609990005

And the five main cosmetic systems include Accolade™, Affirm™, Cynergy™, Elite™, and Smartlipo™.

But the best match I can find for Company #1 satisfies most, but not all, of the clue criteria. I suspect the solution is:

Syneron Medical Ltd (ELOS: NASDAQ)

Syneron, based in Israel, reported in a February 12, 2008 press release

http://www.easyir.com/easyir/prssrel.do?easyirid=256C4E86057F2703&version=live&prid=360291&releasejsp=release_43

“Revenues for the fourth quarter of 2007 grew to an all-time quarterly high of $38.1 million”. The same press release refers to the ten year agreement (signed in February 2007, as per the teaser ad clue) with Proctor & Gamble for the marketing distribution of home use equipment to approve skin appearance.

But the teaser ad’s reference to “year-over-year growth of 60%” is contradicted by the Syneron 4th quarter 2007 presentation.

http://media.marketwire.com/attachments/EZIR/71/405473_81Conferencecallpresentation.pdf

Slide 3 of 17 in the presentation has a text box showing year-over-year sales growth of “only” 21%. So if anyone has a solution that meets all the criteria, chime in. But based on the other match-ups, it’s likely that the overstated year-over-year sales growth in the teaser ad is the result of “promotional mathematics.”

Before rushing to by either of these stocks, however, be aware that the same ad touts how another cosmetic treatment company, Palomar (PMTI), had their stock rise by 800%, conveniently neglecting to mention that the stock dropped back down to a 52 week low earlier this month. One analyst’s suggested explanation for the Palomar drop was that the public backs away from discretionary spending on cosmetic treatments when the economy is suffering, which, if accurate, would tend to support a wait-and-see approach for these Phase I picks.

Good investing.

Palomar also peddles home lighting-device cosmetic treatments. Doesn't bode well for the business.