“The Secret Penny Stock that Supplies Apple”

By Travis Johnson, Stock Gumshoe, January 25, 2010

Well, the folks at Stansberry are now releasing the penny stock newsletter that they’ve been testing for a few months — and of course, they’d like you to subscribe. The editor is Frank Curzio, who used to run a similar newsletter at TheStreet.com focusing on stocks under $10.

So just as a warning, both Curzio and the Stansberry folks routinely use the term “penny stock” to mean anything with a relatively low stock price of under $10 or, sometimes, under $5. Some of the stocks they’ve teased as “penny stocks” in the past have been billion dollar companies, so they aren’t necessarily the minuscule micro-caps that you might picture when folks tease “pennies” (and yes, for most of us at least, that’s probably a good thing).

But given that, the launch of this newsletter is riding a pretty big wave of promotion — so I imagine the stock will show that attention (and as I type this morning, it already has — up several percent so far). And no, I don’t imagine that it’s an accident that this promo is coming out at the same time that everyone is talking up Apple’s new product announcement for later this week, this tease comes rolling in on a wave of investor interest … despite the fact that the shocking news that the teaser hints at has really been public for well over a year.

What Curzio’s publisher is teasing is a penny stock company that supplies a part for Apple’s iPhone — here’s how the ad puts it:

“This tiny company beat out several giant blue chip firms (including Texas Instruments and Qualcomm) for the exclusive contract, which is estimated to be worth several billion dollars.

“The new deal gives this small company exclusive rights to supply Apple with a vital new component of the newest version of the iPhone… by far the hottest and fastest selling mobile phone in the world. (USA Today recently called these phones “the fastest-growing consumer electronics product ever.”)

“Of course, a deal like this is absolutely huge for this penny stock, which we believe could be worth several billion dollars in as little as a few years from now.

“‘It’s a great blessing for a company to get a design win like this,’ says Greg Quirk, product manager for TechOnline.com.”

And of course, it’s an Apple product, so the suppliers are top secret — no one is supposed to know that these fabulous gizmos weren’t extruded whole from Steve Jobs’ ear.

Some examples are given for suppliers who got parts into other hot Apple devices — particularly Synaptics, which invented (I think) and supplied the scroll wheel for the ipod, and several others, mostly semiconductor companies that made one of the many little chips in each device.

Here’s some more on the secrecy behind the tease:

“Apple is doing everything in its power to keep the identity of this small company a closely guarded secret.

“As tech journalist Jonathan Brickman writes, ‘Apple won’t disclose it.’

“Why all the secrecy?

“Well, no one knows for sure, but one of the reasons could be that this company’s new component is so good that it’s currently being used by the military for several state of the art defense applications.

“In other words, we speculate the technology is so advanced—and unlike anything else on the market—that Apple is doing everything it possibly can to keep it a secret from competitors.

“Apple has even required the supplier to keep quiet about the deal. In fact, you won’t find the words ‘Apple’ or ‘iPhone’ written anywhere in this small company’s annual report. “

So what is the part that this top-secret company is making? The teaser calls it the “power amplifier,” and apparently the company behind it has created products so advanced that they’re also used in several military programs, and in the Large Hadron Collider Project at CERN (the “big bang” reenactment).

So … that’s the basic background, the implication that if the iPhone continues to grow dramatically in sales, this supplier will reap gazillions — and you, after buying in at today’s low low price, will be able to finally retire to that yacht on the Riviera.

Almost makes you want to take apart your own iPhone, eh?

We get a couple more clues about this company, for your sleuthing pleasure:

“For example, another remarkable thing about this company is its fundamentals. It has no debt… over $130 million in cash… and owns several other profitable operations, including components businesses for the mobile Internet, wireless networks, and the U.S. military.

“Plus, there’s more you’ll learn about this company that makes it an even better investment than Frank initially thought…

“You see, since the Apple deal, this small firm has been quietly locking up deals with the competition as well…

“For example, this company also signed a deal with Research in Motion to supply the “power amplifiers” in the newest version of the Blackberry, the #2 phone on the market right now!

“And that’s not all… it signed similar deals with Palm, Sony, and T-Mobile, makers of some of the best selling phones on the market.”

So, we toss that big ‘ol pile of clues into the mighty, mighty Thinkolator … and after a wee bit of cogitating, I can tell you that this company must be …

TriQuint Semiconductor (TQNT — you can get a free trend analysis for TQNT from MarketClub, one of my advertising partners, by clicking here)

And yes, the long weekend of promotion has done wonders for the shares so far — up about 7% as of Noon today.

TriQuint is reportedly the supplier of the power amplifier chip in the new iPhone — but of course, the “new” 3G iPhone has been around for a long time, and this news was known 18 months ago. It was a surprise, but it was a surprise that was revealed by the iPhone dissectors back in the Summer of 2008.

Incidentally, a report on this dissection of the iPhone that revealed the surprise inclusion of TriQuint’s chip was published in many places, but one of them was the online Oregonian newspaper, with an article that you can read here if you like. That article is also quoted in a couple places in the teaser, including the quote from the journalist, Jonathan Brickman (his name’s actually Brinckman, but that’s not quite enough of a switch to throw the Gumshoe off the scent).

And yes, that article came out in July of 2008, when TriQuint shares were … well, right about where they are now. They did get a bit of a boost from the iPhone news at the time, then collapsed dramatically when the market swooned (you could have bought shares around $2 if you’d had nerves of steel and unshakable faith), and then showed a steady but impressive recovery, the stock climbed up about 300% from the lows until October of last year, when the then-$8 share price took another tumble to about $6 on reduced guidance.

So that’s where we stand now, the newsletter promo is clearly helping the stock a bit, but it closed a little below $6 on Friday and is around $6.30 as I finish up my musings this afternoon.

And in case you’re wondering, yes, the other clues do match as well — they do have a bit over $130 million in cash and no long term debt, and they are currently marginally profitable but analysts see them doing better in the year to come, with a forward PE ratio of about 12. They also do a lot of military contracting, largely in radar and communications technology, as well as networking chips and foundry work for semiconductor fabricators (that’s what they did for the products that went into the CERN collider, totally different than their iPhone power amplifier chip).

This is a competitive sector, and I certainly don’t have the expertise to tell you whether the chips from TriQuint are better than those from RFMD or Anadigics or any of the other providers who work on similar kinds of products — it could easily be that they won deals as much because of their willingness to be flexible on design (or cheaper) as because of the preeminence of their technology, but I don’t really know. They are looking at the smart phone market as a key for their growth, since smart phones and data transmission can apparently bring in significantly more chip revenue per phone than simple power amplification for phone calls, and according to the company the handset market currently provides better than 60% of their revenue. You can see a recent investor presentation, as well as their SEC filings and other background info, on the TriQuint Investor Relations page here if you’d like to learn more.

So is this going to be up 200%? I have no idea — they had a rough time late last year when they disappointed investors by downplaying 4Q guidance, but the stock did recover a bit two weeks ago when they then upgraded that same guidance by a bit on the back of a stronger-than-expected quarter. They did also say that they expect the first quarter to be seasonally weak, as usual, so if revenues are going to soar thanks to the iPhone one imagines they’ll be soaring a bit more gradually — their power amplifier is obviously not the “heart” of the iPhone, advanced though it may be, but I haven’t seen any reliable indicator of how much these parts sell for … the phone breakdowns I’ve seen put most of the RF power chips at somewhere just over a dollar (by way of comparison the display might be $20, the camera module $10, etc), and the overall iPhone 3GS cost to manufacture has been estimated at just shy of $200, but probably no one outside Apple really knows for sure.

And yes, TriQuint has lots of other business — their chips for handsets supply the sales volume, but the margins are probably substantially higher in the military products (10-15% of revenue), which also probably lead to technological innovations filtering down to civilian use. The semiconductor stocks in general seemed to get a little bounce this morning from the bullish Intel article in Barron’s over the weekend (along with some related optimism from the hard drive companies, etc.), and the smart phone revolution is clearly here and will clearly help drive demand for more advanced chip sets, but I can’t tell you whether or not TriQuint will be a big winner as a result. It’s not an unknown stock or a particularly tiny company (market cap of just under $1 billion), though it may be somewhat overshadowed, at least for non-insiders, by better-known competitors including, among dozens of others, RFMD (which is about the same size) and Infineon (much larger).

And the stock, with that forward PE of 12, is probably priced for decent performance, not for dramatic growth, so if Curzio is right about their prospects the shares could certainly see a boost — will they be up 200% in a year or two? You tell me — toss your comments in the ring by using the handy dandy box below.

As for Curzio’s newsletter itself — I’ve written about his early picks for Stansberry once before, but that was in the Irregulars-only Friday File last month, and we haven’t yet seen any reviews from subscribers — if you were one of the early subscribers to this one, click here to share your Penny Stock Specialist thoughts with your fellow investors.


Related Gumshoe Articles

Leave a Reply

26 Comments on "“The Secret Penny Stock that Supplies Apple”"

avatar

john  p Kandra
Guest
0
john p Kandra
January 25, 2010 2:03 pm

I bought options in tqnt be fore they took off then nov last year the chart i watched didnot look to good so I bought 20 puts feb 7.50 and I just sold them last week for a nice profit , and thats the way you have to play this game

john

LOBO
Guest
0
LOBO
January 25, 2010 2:20 pm

Do we know about the huge silver vein under the Great Wall? Is it REALLY going to explode?

Mark Wall
Guest
0
Mark Wall
January 25, 2010 2:26 pm

I suppose your sources are good but a $200 mfg. price seems highly unlikely. Anything over 10% of retail would be suspicious, although that may be the case for a short period after introduction of the product.

Hans
Guest
0
Hans
January 25, 2010 2:51 pm
The latest issue of The Economist has on page 61 (Asian Edition) a nice breakdown of the manufacturing costs of various smartphones. For the iPhone the numbers are: Integrated circuits 91.38 Display 34.65 Mechanical 17.80 Camera 9.35 Battery 5.07 Other 11.82 Total 170.07 Of course there are further costs; Marketing, Patents, Research,design etc. Incidentially the mfg costs for the smartphones listed by The Economist (Palm pre, iPhone, ToshibaTG01, Motorola Droid are all around 170 bucks.
George M.
Guest
0
George M.
January 25, 2010 4:28 pm

Do we know who the company that Frank Curcio is alluding to “the only NASDAQ listed poker firm with poker software in Massachusetts . . .” that is set to breakout with the vote for legal online gambling in the US coming this June?

Also supposedly talked about in the new issue of Penny Stock Specialist . . .

mark
Guest
0
mark
January 25, 2010 9:49 pm

I think the poker software company referred to must be Gigamedia (GIGM) though it might be Cryptologic (CRYP).

roccsteady
Guest
0
roccsteady
January 25, 2010 11:30 pm

Why not Skyworks, and Korean mfger. Advanced Wireless Semiconductor for candidate to supply AAPLs new iPhone? Forgetting the financials, they fit, as described in Nov 13 2009
AppleInsider.com

FL
Guest
0
FL
January 26, 2010 12:06 am
I was pretty shocked when I read the ad for this new newsletter! At least parts of it are researched or represented very poorly and make me wonder how professional the overall research behind these ads is: It also took me only a few minutes and Google to find out that the actual article in the Oregon newspaper was published a long time ago and it was fairly easy to figure out the company. While I cannot research and assess most of the claims in the teaser ad, I used to work for one of the cited suppliers, Infineon Technologies.… Read more »
Jeff
Guest
0
Jeff
January 26, 2010 7:24 am

I saw this on Dow Jones yesterday: Shares of TriQuint Semiconductor Inc. (TQNT, $6.39, +$0.52, +8.86%) rose Monday ahead of Apple Inc.’s (AAPL, $203.08, +$5.33, +2.69%) fiscal first-quarter results. TriQuint sells radio-frequency semiconductors to Apple for its iPhone. As such, analysts said the company stands to benefit as Apple is expected to post high numbers and unveil a new tablet device or iPhone design on Wednesday.

Randy
Guest
0
Randy
January 30, 2010 7:35 pm

I found this “teaser” myself, and ended up here through a google search to check the valitidy of the sales pitch. I have never invested a stock in my life. I am interested in learning more about this. Do any of you guys know of any good newsletters, info, or places to free paper trade, and what is a good place to buy stocks?

Joseph
Guest
0
Joseph
February 1, 2010 12:32 am

Randy, Buy em when their cryin, sell em when their yellin. Use Etrade to buy and sell domestic and foreign securities as well as futures and options.

John
Guest
0
John
February 7, 2010 11:56 am

Are you sure that LG Display (LPL)isn’t the one we’re talking about here as Apples “secret supplier”?

SHERRY HITCHCOCK
Guest
0
SHERRY HITCHCOCK
February 7, 2010 8:18 pm

WHAT ARE TURBO CAP?

who noze
Guest
0
who noze
April 17, 2010 2:47 am

Ebeware when placing orders w/disc. brokers of hidden cost once u sart w./e trade there is a cost tos every which way unless u have a 25thou acct.lnter text right here!

David
Guest
0
David
April 17, 2010 10:36 pm

I am subscriber to their products and yes the stocks are GIGM and TQNT I own both and TQNT is working out well GIGM is stagnant

TheMoneyGeek
Guest
0
May 14, 2010 2:53 am

Be careful with Apple suppliers like TriQuint whose revenues and profitability depend heavily on their continued supplier status, especially when it represents a sizeable chunk of TQNT's overall revenues. Since Apple recently bought a semi-conductor company, certain parts could be "insourced" and TriQuint (or related suppliers) could be dropped at any time. That's likely what will happen with TQNT's stock price if that occurs. I stress that I have no specific knowledge or information to that effect, just cautioning about the perils of investing in companies which have a revenue base heavily concentrated in a few customers.

JohnWilson
Guest
0
July 20, 2010 5:02 am

I found this "teaser" myself, and ended up here through a Google search to check the validity of the sales pitch. I have never invested a stock in my life.

madpennystocks
Guest
0
madpennystocks
January 13, 2011 5:10 am

That's a good plan for investor. I really appreciate now.

longbeachboy
Irregular
0
January 9, 2016 1:18 pm

I know this is an old article, but I th up nk 2 companies we should be looking at are Poet Technologies and Anadigics. Poet stands for Planar Optic Electronic Technology using Anadigics Gaas Gallium Arsenide. Basically mounting optics onto a silicone chip to increase power while allowing a cooler running chip. This allows for a ten fold increase in processor capacity and battery life could go for several days. Just think how that could play out on an I watch! Tony Blevins of Apple is on board as well as Global Foundries former CEO.

Gravity Switch
Admin
11
January 25, 2010 2:40 pm

The most recent estimated teardown price I saw was here, for the 3Gs at about $179: http://www.isuppli.com/News/Pages/iPhone-3G-S-Carries-178-96-BOM-and-Manufacturing-Cost-iSuppli-Teardown-Reveals.aspx

Of course, that may not really reflect the prices Apple pays, or what it actually costs them to assemble, promote, or design.

mark
Guest
0
mark
January 25, 2010 9:50 pm

sorry I posted a comment rather than a reply; see my comment re the poker company.

mark
Guest
0
mark
January 25, 2010 9:54 pm

The price of GIGM is about right (today 2.88, so a $3 stock) and it has a subsidiary, Everest Poker, that is a sponsor of the WSOP. So it matches what the article mentions, though I do not know about the Massachusetts software connection.

Lee JG
Guest
0
Lee JG
January 26, 2010 3:07 pm

Gigamedia does have a small software group working in Cambridge, Massachusetts. I was in a golf tournament with a few of them about a year ago. Not sure what they work on.

joe murphy
Guest
0
joe murphy
April 9, 2010 2:11 pm

You are correct, as it is GIGM. I found the quote from the Penny Stock Specialist at this link:http://www.pokerpulse.com/conf/gigm2009Q1.php.

Boaz
Member
0
Boaz
February 5, 2010 4:28 pm

Isn’t Frank Curzio the guy who was in a stock-picking contest a few years back on CNBC with a monkey?…. and lost!

Pete
Guest
0
Pete
April 11, 2010 10:25 pm

Boaz Is that true?…..Well I'll be a monkey's Uncle LOL. I subscribed to his newsletter but cancelled……..nothing earth shaking there either!

wpDiscuz