Nest Wannabe Players Still In-Play

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This buyout of Nest Labs by Google Inc. (NASDAQ: GOOG) has created a boom for speculators looking further down and further up the supply chain of home automation systems. Any time a private company is bought for $3.2 billion in cash, you can understand why speculators come out of the wood work to buy up small-cap public stocks of peer companies.

24/7 Wall St. highlighted Echelon Corp. (NASDAQ: ELON), Lantronix Inc. (NASDAQ: LTRX) and Control4 Corp. (NASDAQ: CTRL) as huge gainers as result. Now, we are seeing big moves in a day-two reaction. One of the moves is down but two are up again.

We aware that secondary and tertiary strategies are nothing new. They can also end very badly, because some companies are so small that the investing community does not know of them.

Echelon Corp. (NASDAQ: ELON) is the loser, with shares down 10% at $2.75. Still, shares are up 22% in the past two days, even after the drop. Echelon develops, markets and sells energy control networking solutions that enable devices like A/C, appliances, electricity meters, light switches, thermostats and valves to be interconnected. The market cap is back at $120 million and the new 52-week high is $3.19. Revenue in 2012 was $134 million, and analysts expect a drop of revenue to $83.7 million in 2014 from $85.85 million in 2013.

Lantronix Inc. (NASDAQ: LTRX) is on the rise again. It designs, develops, markets and sells networking and communications products with a focus on the convergence of mobility with machine-to-machine systems. Lantronix shares were initially up 11% at $1.98 in our first look on Tuesday, but shares are up yet again by 19% more at $2.74 after hitting a 52-week high of $2.75 on the news. We now have 1 million shares traded by mid-day Wednesday. The market cap is still tiny at $40 million after the massive gain, and 2013 revenue was $46.6 million.

Control4 Corp. (NASDAQ: CTRL) is up big too, and it is a more known company. The company is into automation and control solutions for the connected home. It offers the Control4 Home Operating System that is embed in a range of its products that interact with various music, video, lighting, temperature, security, communications and other devices. Control4 shares were up 26% at $23.38 on our first look on Tuesday, but the stock is up another 19% at $30.50 on more than 500,000 shares mid-day. Its market cap is almost $700 million after the massive surge, and this was at $18.50 just two days ago. This company is at least now profitable, with sales for 2012 of $123.4 million. Expectations from analysts are $128.5 million in 2013 revenue and $150.3 million for 2014 revenue.

Sometimes secondary and tertiary plays live on much longer than other times. A $3.2 billion buyout may keep the volatility alive here for some time.

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