I have always believed investing in companies that ride the wave of change or bring about the paradigm shift; with an eye on the long term growth prospects of the company.
In the last 30 odd years that I have been investing, I have had my share of good fortune and misfortune. However, what’s important is the fact that I managed to secure my financial future and live today to talk about my strategy of investing in companies that ride the wave of change or bring about a paradigm shift. Some of these companies─ like Intel, Dell, Qualcomm, and Cisco─ have grown to be huge enterprises and have made their early investors over 10,000% or more since their inception.
A while back I wrote a post about my 14,000% profit experience with Intel during its growth phase from early 80’s to the end of Dot.com era in the year 2000. Here’s the link to that post…
I’m one of those old timers that invested in Intel during its early days as a company… in the early 80’s. I recall buying some shares for a total cost of $1,000 dollars. I had to liquidate all my position in Intel during the Dot Com bust of 2000… around May of that year. However, it was not all that bad, because I managed to sell pretty close to the all time high and I remember bragging about my good fortune and fortitude to have stayed the course to make over 14,000% profit… for a net gain of over $140,000 dollars including dividends and the stock splits.
The past performers in my portfolio have served well. However, these companies like Intel, Dell, Qualcomm, Cisco, and Microsoft are past their hyper growth phase and are now too big and are just slow earnings growth vehicles. No disrespect to these fine companies… it’s just that they don’t fit the “hyper growth” company model any more.
One of my stocks holding now, besides an options income portfolio, is Microvision. I believe Microvision has the makings of the next 50,000% profit producer in the next 5 years or so.
On Wall Street, you often hear terms like “top dog” or “first mover” in the context of a growth stock presentation to institutional clients. It’s quite interesting really…
A "top dog" is a company that dominates its industry... and a "first mover" is a company with a technology or product so revolutionary that it disrupts an existing industry and creates an entirely new one.
On the rare occasion that you find a company that is both─ both a top dog and a first mover ─ the chances are pretty good that you've found your next big winner...
Just think of eBay in the online auction market... Amazon in the online retail market... Netflix in the DVD-rental market… and Cisco in the router market… etc.
These companies redefined the way business was done, launched entirely new industries, and continue to dominate those industries to this day. And you don't need me to tell you how handsomely they've rewarded shareholders along the way.
In order to find companies that will deliver truly life-changing investment returns, you have to find growth companies early in their life cycle and truly believe that they are indeed the ones to ride the wave of change or bring about the paradigm shift… with potential of sustained long term growth.
Before we talk about Microvision as the growth company of the future with a 50,000% profit potential, let’s first consider…
Is now really a good time to be buying growth stocks?
The fact is; it takes guts to make money in this market.
But here's some good news…
For one thing, our current economic conditions bear a striking similarity to the economic downturn of the early 1990s. And Morningstar reports that during that recession, “growth” stocks more than doubled the return of "value" stocks.
For another thing, "growth” stocks can excel even if the broad market continues to stumble. In fact, the analysts expect better profit prospects for growth stocks than for value stocks.
Money for nothing...
We have to be realistic in our expectations when searching or investing in growth companies. The purpose of looking at the great companies listed above is not to show that growth investing is an all-win situation. Far from it!
The purpose of the illustration is to demonstrate how well great companies perform over a long period. If you can identify just one great company early, and then hold on for the long term, you can do pretty well for yourself.
Growth investing is highly volatile, and it will fray the nerves of those individuals with a low risk tolerance. Having said that, all investors should devote a portion of their portfolios to growth stocks. For those traveling in the fast lane, an allocation of 30% of their portfolios might make sense. More conservative types should allocate at least 10% in order to provide a little juice for their investments. I'm somewhere in between, so I devote about 20% of my portfolio to growth.
Microvision: Growth Stock with 50,000% Profit Potential
I believe Microvision has the makings of the next 50,000% profit producer in the next 5 years or so.
In order to become a very successful, profitable and huge company [in terms of market capitalization] you need the following pre-requisites:
Management: with expertise, vision, support network, past record, communicative and persuasive skills and a will to succeed.
In my opinion, we have the best possible management with all the pre-requisite attributes necessary for managing Microvision at this stage of the company’s growth. Here’s a link for your review…
Financially Sound: with money to support on-going operations, R&D expenditures, product development and commercialization.
According to the latest annual report for period ending December 2009, Microvision had $45.7 million in cash and short term cash instruments. Looking at the financials, the company is burning about $11 million per Qtr. At this rate, the company has about 4 Qtr worth of cash… assuming no additional revenue from product sales or contract payments.
Since we already have a SHOWwx product lunched in the US, Europe and the Asia Pacific region… I would venture to say that most R&D expenses have already been incurred [almost $300 million to date] and net profit from sales could reduce the cash burn by 3-4 million dollars per Qtr. That would stretch the available cash reserves to 7 Qtr or so. It’s ironic, but the investors of the past have funded this massive R&D undertaking to-date. However, the current investors will reap the benefits and are assured the company has cash to fund the on-going operations, product development and embedded PDEs commercialization.
Here’re some links…
Disruptive Technology: that can bring about massive shifts in “technology paradigm” and “social paradigm”. Each of the five products that Microvision is offering has the potential to cause massive paradigm shift in its own space of product applications.
Microvision’s core technology [PicoP Display Engine] is weaved into five product offerings and each of the product line has the potential of generating billions in revenue:
Vehicle Displays: for automobiles.
Wearable Displays: a see-through, high-resolution display platform that enables lightweight and fashionable eyewear displays for mobile devices. Microvision’s Color Eyewear platform allows mobile users to access their personal content and services while keeping their vision of the outside world free and clear, letting mobile users stay on the move.
Pico Projector Displays: brings big screens to small devices. The Pico Projector or “PicoP Display Engine” can be embedded in mobile phones, laptop or similarly-sized mobile devices to enable upto 100” full color projection display [with DVD resolution] for applications such as streaming video, digital TV, high resolution photographs, and surfing the net.
Standalone Laser PicoP Projector SHOWwx:
Military Displays: are used across various branches of the U.S. Military including the U.S. Army, and U.S. Army Reserve.
Laser Bar Code Scanner: features a patent-pending, low-cost, shock-resistant, mechanical/magnetic laser scan engine.
Competitive Advantage: Microvision has over 115 U.S. Patents issued and 79 Patents pending to protect its intellectual property… giving it a huge competitive edge.
Technologically Feasible: Microvision has five different products in its portfolio. Each product has been demonstrated to be technologically feasible… with some being offered commercially.
PicoP Display Engine technology is based on the proven and mature silicon MEMS laser scanning mirror technology… as demonstrated by their commercially marketed “ROV” bar code scanner system.
The company recently launched the world’s first laser based PicoP projector SHOWwx in the US in March of 2010.
Microvision has teamed-up with Asia Optical, a global leader in optical component solutions and contract manufacturing, speaks highly of the technological feasibility of the PicoP product. This collaboration focuses on leveraging Asia Optical experience in high-volume design and manufacturing to create a compact, manufacture able and affordable PicoP Display Engine product for Microvision customers. Ultimately, it is expected that PicoP Display Engine will be incorporated into a variety of applications and products in the automotive and mobile consumer electronic products.
The development agreement with Vodafone and Motorola is big for the following reasons…
The deal with the top tier cell-phone companies [Vodafone and Motorola] validates the Microvision technology and its business model.
The deal with Vodafone and Motorola are not exclusive [at this stage] and possibly is the beginning of a relationship that can easily grow into these companies taking equity interest in MVIS… or a possible buyout in the future. As the company [MVIS] has indicated, they are talking to several other large mobile phone and consumer electronics firms.
The top tier cell-phone companies [like Vodafone and Motorola] see value in announcing the relationship with Microvision at this stage of the product development… meaning that the product is within the spec for an embedded device for the cell-phones… and on schedule for early introduction in 2011.
Microvision launched the standalone PicoP projector SHOWwx in the US in March of 2010 and is on schedule to deliver the embedded unit for commercial production in early 2011.
Market Size: The market for PicoP Display Engine is huge. The potential markets are automobiles, mobile phones, smartphones, laptops, PDAs, iPods, iPhones, Pads, digital cameras, camcorders, personal mobile TVs, and the fashion eyewear.
Here are some world-wide statistics...
New autos: sales for 2007 … 49 million units
New Mobile Phone Sales: for 2007… 1.15 billion units
New Laptop Sales: for 2007 … 207 million units
New “PDA’s, iPods, iPhones, Digital Cameras and Camcorders”… over 300 million units
New Eyewear Sale: for 2008… 1 billion units
Personal Mobile TV/Projectors… new market opens up with potential 1 billion units
Technology and Business Partnerships: Microvision has partnered with the biggest [financially], the most respected [for over 100 years] and the best in the business to design and manufacture its PicoP Display Engine for the automotive and consumer electronic markets.
Now what we need is a few more commercial business partners and OEM agreements for the PicoP Display Engine and Wearable Display product line. I am sure it will happen soon and when it does happen the MVIS stock will run up the charts as we have never seen before.
Microvision has the potential of being the “Top Dog” and the “First Mover” in the global PicoP projection market…
When investing in technology, always look for the “killer app”—yes, the software program, piece of hardware, product improvement or whatever—that makes the product stand out.
Take Internet browsers for example. Now, for a while there it took everyone some time to figure out what exactly an Internet browser was. Today, many of us can’t imagine what life was like before we had Google. These days, if you need information on any topic under the sun, you simply “Google” it! What would we ever do without Google?
When looking to buy the latest tech stock, investors [you] need to scrutinize the product and the unique ability it offers to its users. Google is a great example of a “killer app” that revolutionized the Internet.
So what’s Microvision’s “killer app”?
It’s the “Disruptive Technology”; that can bring about massive shifts in “technology paradigm” and “social paradigm”. Each of the five products that Microvision is offering has the potential to cause massive paradigm shift in its own space of product applications.
What makes Microvision’s PicoP Display Engine technology as "Killer app" in simple terms?
1. Always in-focus image that needs no adjustment when on the move or when moving to change the projected image size… due to inherent feature of laser projection.
2. Longer projection periods per battery charge… by switching-off the laser light source during periods of dark picture segments.
3. Cool to the touch and no waste heat generated… due to modulating lasers as light source.
4. Large projected images [up to 100”] in widescreen aspect ratio of 16:9.
5. High resolution image [848x480] at 10 lumen brightness… with pathways to high definition images at 20 lumens or more brightness.
6. Dramatic cost reduction [with huge profit margin improvements] as the laser light technology matures and economies of scale are achieved.
7. Small physical size that starts out small and gets even smaller from one generation to the next.
The PicoP Display Engine can be embedded in hundreds of different products representing a huge market share for entire product line-up. It has the potential of adding billions of new dollars to Microvision—expanding what I like to call the “halo effect” from the PDE to the rest of Microvision product line of applications that are currently under development.
Yes, investing in technology can get complicated. Many advisors compare the stock price to the company’s earnings and cash flow, and then look at earnings growth trends and the company’s debt levels in comparison to its competitors. This is some in-depth analysis for the average investor!
Well, Microvision has very little earnings and cash flow from current sales; so you have nothing to analyze. Consider yourself in good company: Billionaire Warren Buffet doesn’t invest in technology because he doesn’t understand the fundamentals of the business. That is why he has missed out on billions of dollars in potential profits from the likes of e-bay, Google and Apple. So, if you’re waiting for revenue and current cash flow from your Microvision investment, there is none for all analytical purposes.
But that will change in the next Qtr when the earnings report will show increasing sales of SHOWwx projector from the US, Europe and Asia Pacific region.
When it comes to emerging technology from companies with small capitalization, don’t do what Warren Buffet does. Do your own DD and then take a small position in Microvision for its emerging technology and huge profit potential in the next 5 years.
Is Microvision ready for prime time SHOWwx time and worthy of your investment dollars, consider this…
Five years from now in 2014, the stock could easily trade in the $300 to $500 range.
Here’s an educated projection…
• Worldwide Market Size: 2 billion units [cell phones, laptops, smartphones, iPods, iPhones, iPads, camcorders, digital cameras, gaming devices, and mobile TV/Projectors etc.]
• Worldwide Market Size: 1 billion units [wearable see thru displays]
• Market Adoption Rate: 10%... 300 million units
• Microvision Market share: 15% of 300 million units… 45 million units
• OEM price: $90 per PicoP Display Engine
• Revenue: $4 billion
• Net Profit Margin: 40%
• Net Profit: $1.6 billion
• EBITDA: Earnings Before Interest, Tax, Depreciation and Amortization: $1.5 billion [with operating expenses at $100 million]
• Interest Expense: $0 million
• Interest Income: $20 million
• Tax: $220million
• Depreciation: non cash and very small
• Amortization: non cash and very small
• Net Operating Income: $1.3 billion
• Earning Per Share: $13 on a fully diluted basis [100 million shares]
• Price Earning Ratio: 30 for a hyper growth company
• Price Per Share: $390 per share
In my book, the “Risk” is insignificant [may be 2% per year interest in treasury bills as the lost opportunity] as compared to the potential of making over 100 times your money in the next year 4 to 5 years.