Energy and biotechnology.
They’re two very different market sectors. Fields that share very little, if any overlap in terms of operations or strategy.
That hasn’t stopped BPH Energy Ltd [ASX:BPH] from pursuing an interest in both fields though.
Despite their tiny size, BPH has split its focus. Holding a stake in both an oil and gas explorer and several biotech start-ups.
And it is thanks to the latter that BPH is trading 18.75% higher today. A modest rally on the back of a new deal for a fascinating piece of brain-monitoring technology.
Making headway in the US
The team behind this breakthrough is a small outfit known as Cortical Dynamics Ltd. A private company which is aiming to commercialise a Brain Anaesthesia Response (BAR) monitor.
BPH currently has a 16% net interest in Cortical, giving investors exposure to this unique opportunity.
As for the device itself, well it’s a complex and intricate system. The BAR monitor is designed to read and report on a patient’s brain activity. Measuring the electrical signals in a more direct manner than other devices.
According to Cortical, this results in better outcomes for the patients and lower costs for hospitals. Providing a more reliable and effective service for such delicate operations.
Now, thanks to this new deal, Cortical’s BAR technology will be put to use by Philips Healthcare North America. A subsidiary of the massive Dutch conglomerate of the same name: Koninklijke Philips NV [NYSE:PHG].
Under the terms of license deal, the BAR monitor will now be incorporated into Philip’s own monitoring system. Bridging the two together to hopefully provide better patient outcomes.
Needless to say, it’s an incredible step for this small firm. Landing a key deal with one of the biggest brands in the med-tech industry.
And for BPH shareholders, it means there may be further upside to their investment.
Thinly spread capital
While today’s result is certainly cause for celebration, the long-term direction of BPH is a slight concern.
This is a microcap stock that is trying to diversify itself like it’s a multi-billion conglomerate. That is certainly ambitious, especially considering the stark contrasts between their chosen markets.
Because of this, I can’t help but wonder whether BPH has spread itself too thin.
Diversifying certainly can be a good thing, but it can also be a burden. If one venture holds back the other, then it may stifle or sabotage future growth.
I’m not suggesting it is a guarantee, but it is definitely possible.
This is a factor that is especially important given the broader market conditions.
We’re in the midst of some seriously volatile times. Focusing their efforts on one venture may be the better course of action. Though, at this point, only time will tell.
That’s why, for investors we recommend considering a different approach. Our lead editor, Greg Canavan, for instance believes value is the key to a good stock right now.
He’s even found three deep-value stocks that he believes could be set to soar in the coming months. Companies that are perfectly poised to reap the rewards of a gradual economic recovery.
Check out Greg’s full report, including the details of these three stocks, right here.
For The Rum Rebellion