technology opportunitymedia.angelnexus.com/pdf/tao/tao-september-2015-398.pdf · 2018-02-16 ·...

September 2015

TechnologyOpportunity

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September 2015 Issue

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In this Issue:

• Securing 110% gains on Adept

• A look inside the Apple iPhone 6s

• Two new stock picks

• Company news & portfolio updates

Sell Adept for 110% GainsBack in June, we recommended a tiny industrial robotics company by the name of Adept Technology Inc. (NASDAQ: ADEP).

At the time, shares were trading at ~$6.15 a share. The stock had been absolutely hammered by Wall Street, and investors obviously weren’t particularly bullish on the company at the time.

The market was so bearish on Adept that we even saw pushback from a number of our own tech-minded subscribers on the recommendation. Some of you may remember, for instance, the following question from Peter B. featured in the May Issue.

“How could stock in a company like [Adept Technologies (NASDAQ: ADEP)] prosper in such an environment when a large portion of their business is industrial robots?”

http://media.angelnexus.com/pdf/tao/tao-may2015-2ed.pdf


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Clearly, there was a lot of doubt surrounding Adept, but this is actually what made the stock such a good buy in the first place: The bears had driven the price down.

After enough due diligence, though, poring over press releases, 10-Qs, and conference calls, we realized there was a ton of hidden value here. In fact, Adept was one of our favorite stocks, and we made that perfectly clear:

Last month, we wrote this about Adept:

Of all the stocks in our portfolio Adept has some of the most compelling near-term catalysts on the horizon. The company is clearly about to ramp up production in anticipation of increased sales, but the market has yet to take notice with the stock bouncing around in the mid $7.00 range.

We’re up 16.59% on Adept already, but my gut feeling says it’s just the beginning for the tiny robotics company. If you’re not in this already, the stock is still incredibly cheap compared to the highs in 2014.

At less than $7.25 a share, now is as good a time to get in as any.

Well, as it turns out, we were spot on with that call — especially the part about near-term catalysts: On Wednesday, September 16, Adept Technology was bought out by Japanese electronics company OMRON Corporation at a 65% premium for $200 million.

To be quite frank, the sale does seem a bit premature, and we’d have preferred to have held this company for a much longer period of time... but we’re not complaining.

All said and done, the acquisition puts us up 110.2% in just three months. That’s a major win.

Sell Adept Technologies (NASDAQ: ADEP) at market for a 110.2% gain.

Touchy-Feely: How to Play the iPhone 6sDuring Apple’s product reveal this month, the company announced a number of under-the-hood improvements for the iPhone 6. Most of these product tweaks were trivial, with the exception of one that deserves our full focus: a newly touted technology called 3D Touch, which Apple is calling the “next generation of multitouch.”

This month, we’ll be taking a look at Apple’s new 3D Touch, its predecessors, and the underlying technology that makes it all possible. Specifically, we’ll be covering the two leading companies in haptic, or touch-based, communication.


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What is 3D Touch?

As the name implies, 3D Touch adds an extra dimension to your touchscreen device: Rather than simply knowing where your fingers are, the device can now tell how much pressure you’re putting on the screen.

By adding this additional dimension of input, 3D Touch allows users to execute a variety of functions simply by pressing their screens with a bit more force. These functions could include zooming in on a photo, opening applications, having added control while playing a video game, etc.

In the simplest terms, 3D Touch is somewhat like having two buttons on a mouse: tapping the screen lightly is the equivalent of a left-click, while pressing the screen with force is like right-clicking. All in all, it’s a way to provide developers with more design options and users with a greater level of control.

But it’s important to note that Apple’s 3D Touch is, for all intents and purposes, its own branded version of pressure-based feedback. The company does not have the IP to monopolize this technology and wasn’t even the first company to put it in its phones.

Prior to Apple’s product reveal this month, Chinese smartphone maker Huawei announced the Mate S, a flagship smartphone with “Force Touch” capability. During the reveal, Huawei showed off its new tech by using the Mate S as a scale to weigh an orange on stage.

This fact is important to remember because it tells us that 3D Touch, Force Touch, or whatever you want to call it is not OS specific. Both iOS and Android developers will now be building off this technology, forcing virtually all OEMs to eventually follow suit.

How does it work?

3D Touch measures pressure by using an array of microscopic sensors embedded in multiple layers of a device’s display (we’ll get to who makes these sensors in just a moment).

According to Apple, “The technology behind 3D Touch starts with the display, which recognizes the pressure you apply.” Specifically, pressure is detected by capacitive sensors and strain gauges, which measure deformities created when you push on the glass cover.

Hong Tan, professor of electrical and computer engineering at Purdue University, gives us a little more detail:

http://images.apple.com/media/uk/iphone-6s/2015/dhs3b549_75f9_422a_9470_4a09e709b350/films/feature/iphone6s-feature-uk-20150909_1280x720h.mp4

http://images.apple.com/media/uk/iphone-6s/2015/dhs3b549_75f9_422a_9470_4a09e709b350/films/feature/iphone6s-feature-uk-20150909_1280x720h.mp4


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Strain gauges are basically those materials that when you bend them, you change the electrical signal that comes out. When you press on the screen, you cause deformation. Even glass will bend.

But the top layer of the iPhone 6s isn’t just any old glass; it’s a pliable sheet that’s been specially produced by glass manufacturer Corning (NYSE: GLW), a company already added to our portfolio last year.

By using this pliable glass sheet, Apple can indirectly measure the distance between the glass and an underlying grid of strain gauges positioned behind the LCD display.

More accurately, 3D touch is measuring the distance between capacitive sensors embedded in the LCD display and the strain gauges underneath. It all gets a little confusing once you start to dive into it, but the image below should help you visualize what this looks like from inside the phone:

In addition to being able to measure force, 3D touch can also provide physical feedback — as if you were pushing a button — through what’s called a taptic engine. In short, this taptic engine responds to you pressing down on the screen with a “fake click.”

Professor Hong Tan, an expert on haptics, explains: “The force sensors will do the sensing, and then the Taptic Engine will give you the proper feedback. When you add the two together, you can create a very convincing button-clicking experience without moving parts.”


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Haptic Suppliers

If we take a step back and look at the overall haptics market, there’s little doubt we’re going to see substantial growth over the next five to 10 years. Forecasts tend to vary greatly due to what researchers choose to define as haptics, but virtually every report you will come across reads highly bullish.

According to a recent report from research firm MarketsandMarkets, for instance, the haptics technology industry is expected to reach $29.84 billion by 2020. This represents an estimated CAGR of 25.39% over the next four years.

According to Lux Research, overall market size for haptics is expected to grow 1,600% between 2012 and 2025. Lux uses a more narrow definition of haptics, but the growth is present regardless:

In terms of market penetration, the proportion of force-sensitive smartphones is expected to rise from 3% this year to 19% by 2016.

By 2017, ~30% of all smartphones are expected to include a form of 3D touch. The average consensus among analysts for added revenue is $6 billion to suppliers over the next two years.

As for Apple’s 3D Touch suppliers, the two companies to watch right now are Analog Devices, Inc. (NASDAQ: ADI) and TPK Holdings Co. (TW: 3673).

Due to the lack of an ADR for TPK Holdings, though, we’re only going to be discussing Analog


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Devices. We will, however, also be looking at a potential Android/PC supplier in the pages that follow.

Analog Devices, Inc. (NASDAQ: ADI)While we’ve yet to see an actual teardown of an iPhone 6s, we can be fairly certain, based on forwarded information from Barclays, that Analog Devices has established itself as a key supplier for the iPhone’s 3D Touch capabilities.

According to analyst Blayne Curtis:

We believe ADI has secured a win at AAPL with a high accuracy converter to drive 3D touch in upcoming iPhones and iPads. Our colleague Jamie Yeh laid out details around this technology as it relates to TPK (Jan-7 note, Feb-10 note), but in short we believe AAPL plans to extend “Force Touch” (launched with the Apple Watch and new MacBook) to the rest of its product line. ADI is known to have the best converters in the industry and this level of performance is needed to compensate for high levels of screen noise. Just like in capacitive touch, the larger screens will require multi-chip solutions (likely 1-chip for iPhones and up to 3-chips for a 12” iPad; ASPs $1.50-2.00/chip). Eventually, these multi-chip solutions are likely replaced by more advanced, higher ASP single-chip solution, and longer-term, we see the potential for the converter enabling 3D touch to integrate the 2D touch function into a single super chip. Net net, this transformative win for ADI could drive $0.80+ in incremental EPS in CY16 (see Figures 1-3) with a multi-year roadmap and potential to suck in other content over time.

In other words, ADI is the prime candidate to provide Apple with efficient and accurate data converters — computer chips used to translate analog signals (in this case from your fingers) into digital information (0s and 1s).

As Curtis points out, Analog Devices is known for providing highly accurate chips, which will be essential to making 3D Touch work. The company also offers the industry’s largest range of analog-to-digital converter products, micro-electro mechanical systems (MEMs), and a variety of internal electronic components.

While Apple is a big win for ADI, the company certainly does not rely on consumer electronics. Its products are used in a wide range of applications, including, but not limited to:

• Industrial process control


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• Factory automation

• Instrumentation and measurement

• Energy management

• Optical systems

• Aerospace and defense electronics

• Automobiles

• Medical equipment

• Wireless infrastructure and networking equipment

Even prior to rumors from Barclay that Analog Devices was about to secure its spot in the iPhone 6s (and likely future models), this was already a stock worth owning.

As for the key statistics, ADI boasts a healthy profit margin of 21.7%, 18.6% annual sales growth, $709 million in income, a 2.78% dividend yield, $3.0 billion in cash (minus debt), and a forward earnings multiple of 17.4.

In short, ADI is a financially sound and well-diversified tech company with a major catalyst ahead of it. It’s fairly priced when compared to peers and is trading relatively cheaply after a hefty sell-off from June through August.

We rate Analog Devices Inc. (NASDAQ: ADI) a buy under $62.00. Our one-year target is $72.50.


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Synaptics Inc. (NASDAQ: SYNA)For those who have been with us since 2013, you’ll recognize Synaptics Inc. (NASDAQ: SYNA) as familiar territory. We closed out our position in the company last year for a 38% gain during a month of major portfolio trimming, but with the haptics market moving ahead in full force and a recent sell-off, SYNA is well worth revisiting.

Synaptics designs and manufactures human interface solutions for mobile computing, communication, and entertainment devices. Most notably, the company creates chips used for processing touchscreen movements in mobile devices.

Synaptics provides critical components for touchscreens to just about every major mobile device manufacturer out there with the exception of Apple. The company’s clients include Google (NASDAQ: GOOG), Amazon (NASDAQ: AMZN), Blackberry (NASDAQ: BBRY), Nokia (NYSE: NOK), Samsung (KSE: 005930), HTC, LG, and Sony.

While it’s easy to frame the lack of a relationship with Apple as a negative, our position on the stock is just the opposite. Apple is notorious for using its heavy weight to burden smaller companies with exclusivity, but this won’t happen to Synaptics as primarily an Android supplier.

While Synaptics is not expected to benefit directly from Apple’s 3D Touch technology, the company is pretty much guaranteed to see a major indirect boon as Android device and PC makers follow suit. After all, the company holds over 1,500 issued or pending patents, providing it with a firm foothold in haptic technology.

A number of these patents are, as you might expect, directly related to pressure-sensitive touch. Synaptics first began pioneering in the world of force touch back in 2013 with the introduction of its branded ForcePad technology for notebooks.

The technology has yet to gain major traction, but as is often the case with consumer tech, the market tends to follow the leader (Apple), even if it’s a few years behind the times.

Taken straight from the company’s blog:

ForcePad detects the amount of pressure that the user’s finger(s) exert on the touch surface, delivers responsive feedback and added a new way of control and usability for users... We’ve also seen similar technology recently demonstrated in a major influencer’s new smartwatch and shipping on their latest laptop. There is no doubt in my mind that their adoption of force touch technology will accelerate its proliferation in more and more smart devices.

And believe it or not, Synaptics might not only be enabling force-touch on products that


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compete with Apple, but it could also be doing it much better.

According to a recent piece from Patrick Moorhead on Forbes:

Synaptics is already on the way to delivering their second generation of ForcePads to OEMs and enabling far better user experiences with their second generation technology. This new technology adds direct sensing technology, is far more precise and also 35% thinner. The technology in the ForcePad can actually be as thin as 1mm if it has support from the chassis. The new ForcePad also allows for much larger touchpad sizes and a variety of materials other than glass. The ForcePad in its second generation allows for far more creative design of the touchpad and some of the thinnest notebook designs ever, which can also be used with mice, keyboards among other devices. It also supports haptic feedback, which means PC OEMs can actually deploy touchpads better than what Apple has without having to be an Apple product.

What we would eventually like to see from Synaptics is force-touch not just for notebooks but for smartphones and tablets as well. We expect the company to branch in this direction eventually, but even if it doesn’t, the stock is looking mighty cheap right now:

In the past year, Synaptics has managed to increase its top line by a whopping 52%. The company trades at a forward earnings multiple of just 9.74, which is quite cheap.

The stock trades at just $75.00, with an average analyst target of $96.25.

Margins are nothing to brag about at 8.1%, but the company is profitable, and earnings are up 125%.

Buy Synaptics (NASDAQ: SYNA) under $77.00. Our one-year target is $92.50.


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Portfolio Snapshot and Updates

Applied Materials, Inc. (NASDAQ: AMAT)

Snapshot:

Applied Materials is an American manufacturer that supplies various equipment, services, and software to semiconductor fabricators — among other technology-based industries — to enable the manufacture of a wide range of electronic components.

Updates:

No company news or updates this issue.

Atmel Corporation (NASDAQ: ATML)

Snapshot:

Atmel is a semiconductor manufacturer that makes microprocessors and microcontrollers used in machine-to-machine (M2M) communication. This expands from the connected home all the way to vehicles that communicate with each other.

The list of markets Atmel is currently going after includes industrial automation, energy management, smart homes, building automation, connected vehicles, mobile electronics, and wearables.

Updates:

In late August, Atmel CEO Steve Laub announced that he would be delaying his long-planned retirement.

Apparently the company needs “more time to complete a review of its strategic options,” and Laub is hanging around a little longer to make sure everything goes smoothly.

This strategic review was news to us, which, on top of circulating rumors about a potential buyout exit, is quite telling. We’re currently down 17% on Atmel, but with an acquisition, that could change in an instant.

I know some of you are hurting on this one, but it’s in our best interest to hang on for now.


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CalAmp Corp. (NASDAQ: CAMP)

Snapshot:

CalAmp Corp. provides wireless communications solutions for various applications worldwide. It offers solutions for mobile resource management, machine-to-machine (M2M) communications, and other emerging markets that require connectivity. Its M2M and MRM solutions enable customers in energy, government, transportation, and automotive markets to optimize their operations by collecting, monitoring, and reporting business-critical data from remote and mobile assets.

Updates:

Big news for CalAmp, as the company recently scored an OEM partnership agreement with Toyota Industrial Equipment (TIE) to be its fleet management solution.

Not to be confused with Toyota Motor, TIE is a division of Toyota Industries Corporation, which was spun off from the larger automaker decades ago. With a market cap above $16 billion, though, and as the largest forklift supplier in the world for the past 12 years, TIE is no small fish.

While it’s still unclear exactly how much this deal will contribute to CalAmp’s top and bottom lines, the company’s comparatively low $600 million market cap is quite compelling.

For additional perspective, we can consider CalAmp’s current deal with Caterpillar (announced in 2013), which brought in $7 million last quarter (and it’s still growing). Caterpillar is approximately three times the size of TIE, so if you wish to speculate, this could add somewhere around $9 million to the top line on an annual basis by 2017. Of course, this is an incredibly rough estimate.

In other news, CalAmp announced the date of its second-quarter earnings release and conference call: Thursday, October 1, 2015.

As always, we’ll be giving you our take on the quarterly in the following issue. For those who don’t wish to wait, you’ll be able to listen in starting at 4:30 p.m. (EST) right here.

http://investor.calamp.com/phoenix.zhtml?c=80120&p=irol-IRHome


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Corning Inc. (NYSE: GLW)

Snapshot:

Corning Inc. manufactures high-quality ceramic and glass material for consumer and industrial applications. The company is best known for its incredibly durable Gorilla Glass, commonly found in consumer devices such as smartphones and tablets.

Updates:

No significant news surrounding Corning this month, minus added analyst coverage from Vijay Bhagavath of Deutsche Bank. Bhagavath rates Corning a “Buy” with a price target of $21, calling it a “solid capital return story.”

Our target is a bit higher, but we can at least agree on the latter.

Fabrinet (NYSE: FN)

Fabrinet provides foundry services to optics OEMs. In short, the company has high-level expertise at putting together optical components for other optoelectronic companies using its precision process technologies. The company’s technologies and systems include materials and process analysis, optical and electro-mechanical assembly, fiber handling and alignment, packaging, and various testing services.

Updates:

Fabrinet released its fourth-quarter results on Monday, August 17, sending shares up 7% on the day. Let’s take a look at the 10-Q and earnings call to see what the market liked about this quarter/year.

First, we saw great execution in the company’s optical communications business, which turned in a very solid quarter, increasing 34% year-over-year and 8% sequentially. This was driven by significant growth in datacom, which now accounts for 37% of revenue.

The non-optical segment performed nicely, too, after a disappointing third quarter. The segment is up 17.5% year over year and 11% sequentially.

For the year, Fabrinet reported a profit of $43.6 million, or $1.21 per share. Revenue was reported as $773.6 million.


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As for outlook, the company expects its per-share earnings to range from $0.41 to $0.43 for the current quarter and revenue in the range of $206 million to $210 million.

We also got some confirmation of the long-term revenue goals for Fabrinet West, the company’s newly built 74,000-sq.-foot Silicon Valley facility:

So the contribution from revenue from our Fabrinet West operation in the September quarter is still going to be pretty de minimis. I don’t think it’s certainly going to be anything that we’re likely to call out when we do this call again a quarter from now.

As we look longer term into the opportunity that we believe that facility holds, I don’t think there’s any change there about our expectation that this is going to be a critical component of our longer-term growth strategy, especially as it relates to transferring products from that NPI facility here in the US, to volume production in Thailand. So looking out on a longer-term basis -- and again, that longer-term contribution is still probably more of a 2017 event than it really is a 2016 event. We’ll wait and see as we get a little further into this.

But I still think the expectation there is for ultimately this operation to be measured in tens of millions of dollars on a quarterly basis.

Lastly, Northland Capital has initiated coverage on Fabrinet with an “Outperform” rating and a $25 price target. While largely superficial, we always welcome this kind of additional institutional attention.

Fanuc Corporation (OTC: FANUY)

Snapshot:

Fanuc Corporation is a leader in industrial robotics, with a product lineup that includes factory automation systems, laser cutting, motion control, and compact motors. Fanuc serves a wide range of industries including aerospace, agriculture, construction, metal forming, and automotive manufacturing.

Updates:



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Intel Corporation (NASDAQ: INTC)

Snapshot:

Intel Corporation designs, manufactures, and sells integrated digital technology platforms worldwide. It is the single-largest provider of semiconductors by revenue. It operates through PC Client Group, Data Center Group, Other Intel Architecture, Software and Services, and “All Other” segments.

Updates:

This month, Intel announced that it’s getting into the driverless car market in a very specific way: cyber security. Specifically, Intel Security has set up the Automotive Cyber Review Board (ACRB) with the intention of codifying “best practices and design recommendations for advanced cybersecurity solutions.”

While still vague, Intel’s creation of ACRB addresses the largely unserved market of automobile cyber security. Gartner predicts that by 2020, the number of connected passenger vehicles on the road will be about 150 million, which bodes well for any firm getting a head start in this market.

International Business Machines. (NYSE: IBM)

Snapshot:

IBM is an American multinational technology and consulting corporation, with headquarters in Armonk, New York. IBM manufactures and markets computer hardware, middleware, and software. The company provides infrastructure, hosting, and consulting services in areas ranging from mainframe computers to nanotechnology.

Updates:



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InTEST Corp. (NYSE: INTT)

Snapshot:

INTT is a semiconductor capital equipment company, which means it manufactures machines used in the production of electronic components.

The semiconductor capital equipment industry can be divided into two classes: front-end and back-end. The front-end involves silicon wafer and computer chip fabrication. The back-end involves assembly, packaging, and testing.

InTEST works on the back-end of this cycle, providing automatic test equipment (ATE) used by semiconductor manufacturers to test their integrated circuits and wafer products.

Updates:


Iridium Communications Inc. (NASDAQ: IRDM)

Snapshot:

Iridium is a global communications provider. The company offers the world’s most extensive voice and data service through a fleet of next-generation low-orbit satellites. It is currently launching the NEXT satellite constellation to serve the machine-to-machine (m2m) communications market.

Updates:

Iridium has entered into a global partnership agreement with MiX Telematics (NYSE: MIXT), a provider of fleet and mobile asset management solutions. The relationship extends MiX Telematics’ offerings to include “a reliable, cost-effective and complimentary global satellite communication alternative, to terrestrial solutions.”

While we can’t know for sure exactly what this will add to Iridium’s top and bottom lines, the partnership certainly reaffirms our thesis on Iridium as a standout service provider in Internet of Things, namely in machine-to-machine (M2M) communication.

According to MiX:


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We’re pleased to be partnering with Iridium, a business that’s synonymous with market leadership when it comes to technology innovation, including M2M and satellite communications. Our global leadership position in the premium fleet space and Iridium’s global business strategy represent a strong alignment.

At a market cap of just $182.35 million, MiX is a relatively small catch, but again, the deal further establishes Iridium’s footprint in M2M, which is exactly what we want to see.

iRobot (NASDAQ: IRBT)

Snapshot:

iRobot is an American robotics company that serves the consumer, medical, enterprise, and military industries. iRobot’s product functions range from home cleaning to telecommunication to various military operations. iRobot currently generates the vast majority of its revenue from its Home Robotics division.

Updates:

Last month we shared with you that iRobot had received a $9.8 million order from the U.S. Marine Corps for 75 of the company’s small, unmanned ground vehicles.

Adding to this recent defense order comes a $4 million purchase from the U.S. Navy and a total of $7.2 million in orders from various U.S. and international customers.

Units sold include iRobot’s compact and expandable 110 First Look, the man-portable 310 SUGV, the multi-mission 510 PackBot, and the heavy duty 710 Kobra.

In the past two months, it seems iRobot has really stepped up its game in its Defense and Security segment. It’ll be interesting to see if this vertical will continue to rebound, but we’re not counting on it just yet due to the cyclical nature of this vertical.


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For now, iRobot’s home robotics segment remains the company’s greatest and most consistent asset.

Micron Technology Inc. (NASDAQ: MU)

Snapshot:

Micron is best known for producing many forms of semiconductor devices. This includes DRAM, SDRAM, flash memory, and SSDs. Its consumer products are marketed under the brands Crucial Technology and Lexar. The company was named one of the Thomson Reuters Top 100 Global Innovators in 2012 and 2013. It is ranked among the top five semiconductor-producing companies in the world.

Updates:


NXP Semiconductors N.V. (NASDAQ: NXPI)

Snapshot:

NXP specializes in near-field communication (NFC) technology. NFC allows for wireless communication between devices at very short distances with increased security. The technology is being used in public transport, event ticketing, home health care, patient identification, interactive museum exhibits, contactless credit cards, and as hotel keys, just to name a few markets.

Updates:


Oceaneering International, Inc. (NYSE: OII)

Snapshot:

Oceaneering International provides engineering services and hardware primarily to customers operating in marine environments. The company’s services are marketed to oil and gas


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companies as well as the aerospace and construction industries. The company receives the bulk of its revenue from ROVs and Subsea Products.

Updates:


OPKO Health, Inc. (NYSE: OPK)

Snapshot:

OPKO Health is a mid-stage biotechnology development and medical diagnostics company. OPK has a deep drug candidate pipeline spanning from kidney disease to cancer treatments. It also provides a revolutionary diagnostic test known as the 4Kscore, used in prostate cancer screening. The company’s proprietary diagnostic technologies allow doctors to keep blood-based tests in house rather than outsourcing to outside laboratories.

Updates:

After missing second-quarter expectations last month, OPK’s stock has retreated from the $13.00 range to around $10.00. Some of you may be worrying about the dip, but don’t fret.

For one, the recent sell-off has sparked heavy insider buying by those in the know:

CEO Phillip Frost bought 59,600 shares earlier in the month at an average price of $10.09, while Vice Chairman & CTO Jane Hsiao bought 20,000 shares of OPK stock on Aug. 25 at the average price of $10.82.

This follows OPKO licensee Tesaro’s FDA approval of Rolipitant, a $1 billion annual market opportunity, earlier this week. Commercial launch is planned for the fourth quarter, with OPK receiving up to $110 million in milestone payments, plus double-digit royalties.

We’re still up 12.33% since our initial recommendation on OPK. Now is definitely not the time to sell.


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Rubicon Technology, Inc. (NASDAQ: RBCN)

Snapshot:

Rubicon is an electronic materials provider that develops, manufactures, and sells monocrystalline sapphire and other crystalline products for light-emitting diodes (LEDs), radio frequency-integrated circuits (RFICs), optoelectronics, and other optical applications. The company’s products include two- to six-inch sapphire cores for use in LED applications and into components, such as lens covers for mobile devices.

Updates:


Science Applications International Corporation (NYSE: SAIC)

Snapshot:

SAIC helps governments integrate technologies by providing full life-cycle services. This includes but is not limited to hardware engineering, program management, training and simulation, cloud computing services, software design, and logistics/supply chain support.

At its core, SAIC is a company that leases talent. The company has ~13,000 employees, 68% of whom are deployed to customer sites. Its value rests primarily in this talent base and the relationships it’s built with clients over the years.

Updates:

SAIC reported second-quarter earnings earlier this month, and the results were not particularly impressive.

Net income was recorded at just $22 million, putting profit margins for the quarter at 2%, with nearly $1.1 billion on the top line. This represents a 35% decrease in profit from a year ago.

Excluding capital spending, free cash flow for the quarter was only $16 million. Cash position has also shrunken considerably, and our price-to-book ratio (0.9) shows a slowdown in future revenue despite this quarter’s 15% boost.

We’re not going to cut this one short just yet, but be prepared to cut your losses on SAIC if we


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see another weak filing. If your stop-losses aren’t in order, make sure to get those in ASAP.

TCP International Holdings Ltd. (NYSE: TCPI)

Snapshot:

TCP sells LED lighting solutions for business and consumer markets. This includes Internet-connected lighting solutions that can be controlled straight from a smartphone. The value proposition for TCP and its technology is energy efficiency and savings through automation. The company should also benefit from its early positioning in the growing Internet of Things industry.

Updates:


Vishay Intertechnology Inc. (NYSE: VSH)

Snapshot:

Vishay Intertechnology is the world’s number-one manufacturer of infrared optoelectronic components. The company offers a broad range of optoelectronic components (both visual and non-visual), including optocouplers, optical sensors, transceivers, LCD displays, infrared emitters, etc. Vishay targets a wide customer base across various industries including the automotive, aerospace, consumer, industrial robotics, telecommunications, renewable energy, medical, and computer hardware markets.

Updates:

According to a press release earlier this month, Vishay’s manufacturing facility in Tianjin, China is now fully operational and its product lines are back in operation. The factory had shut down following the Tianjin Port explosion on August 12, but clearly the damages were minimal.

We’ll likely see a hit in the next quarter on the top line due to the temporary shutdown, but with everything back in order this quickly, there’s little reason to worry.


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Technology and Opportunity Copyright © 2015, 111 Market Place, Suite 720, Baltimore, MD 21202. All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Technology and Opportunity does not provide individual investment

counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment. Neither the publisher nor the editors are registered investment advisors. Subscribers should not view this publication as offering personalized

legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question. Unauthorized reproduction of this newsletter or its contents by Xerography, facsimile, or any other means is illegal and punishable by law.

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