We’ve seen quite a few ads from Jim Pearce at Personal Finance about his favorite “self driving cars” idea, so it’s time to feed the Thinkolator and get some answers for you, dear Gumshoe readers.

The basic backdrop for this is, of course, pretty well known — cars are becoming smarter and smarter, self-driving cars and the baby steps toward real self-driving cars (like Tesla’s autopilot) are getting a lot of press, and car sales are at record highs so everyone in the auto business has money to throw at the next big thing.

But what is it that Pearce says is the “one small company” that owns the patents and software on this “Auto Intelligence” network that will be the foundation for the self-driving car revolution? That’s what we’re here to find out today.

Here’s a little taste of the ad, just to get your juices flowing:

“Get Your Piece of the New Billion-Dollar Internet of Cars

“Earn 8,840% As The ‘Next Cisco’ Builds The Essential Network That Will Connect Self-Driving Vehicles…

– In the 1990’s Internet companies like Cisco shot up 74,034% when they created the network that connected computers…

– Today, one small tech company is building the vital network that will connect SELF-DRIVING CARS…

– And this innovative little company just locked up a new round of contracts – including a groundbreaking partnership with General Motors.

So who is it? Well, we’ll need a few more clues… let’s dig in…

“I’m about to tell you how you can get rich by investing in an unexpected company that’s building the critical parts for the self-driving car network….”

We all know, of course, that anyone who tells you you’re going to get rich because of one stock investment is not acting in your best interest. That’s not the way to approach a stock, you need much more of a balance of optimism and pessimism in order to have a fair chance at making a rational investment decision.

But still, man, that gets you excited… right? After all, if we didn’t each harbor at least a little lust in our greedy little minds, well, we’d just do the rational thing and put our investment savings into a global index fund every month. Where’s the fun in that?

More about this little company…

“Self-driving cars are already driving thousands of miles on America’s roads each and every day.

“And the network that they’ll rely on is already worth billions of dollars…

“… an exclusive syndicate—a group of elite auto manufacturers—just wrote a check for $3.1 billion just to buy a half-finished prototype of this self-driving network…..

“But there’s more to this story.

“…. their $3.1 billion prototype is still missing the key ingredients that’ll ignite this revolution…

“Because all those essential features are locked up by one small company.”

OK, so that’s some pretty compelling logic — there’s one key technological component of this “network” of “auto intelligence”, and one company has it sewn up. The reality is almost certainly not that black-and-white, since it never is with intellectual property and emerging technologies, but we’ll keep reading…

“THIS ESSENTIAL NETWORK connects all self-driving cars – it’s impossible to drive without it, and it’s being built today…

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“ONE SMALL TECH COMPANY owns the patents and software – they collect royalties from all competitors and will earn more from everyone (even Google!) when the network expands…

“IT’S SET TO HIT A TIPPING POINT SOON – shares of this company are expected to ignite when new contract partners are announced” ….

“It’s impossible for self-driving cars to work without this vital network.

“As General Motors CEO Mary Barra says: ‘You need embedded connectivity to make autonomous work.’

“And it’s being constructed right now by one small technology company.

OK, so that’s the sum-up for “why” you want to buy this company. How about some more clues so your friendly neighborhood Gumshoe can tell you what it is?

We’re told that BMW, Ford, Volvo, Toyota, Nissan, Mercedex, GM and Audi have all “signed contracts to put Auto-Intelligence in their upcoming cars”

The big deal with GM is, according to the ad, about upgrading their OnStar network and taking more advantage of the data it provides…

“A brand-new contract is set to turn this collection of 7 million individual OnStar cars into a living-breathing real-time Auto-Intelligence network.”

And Pearce says that VW is also partnering with them on this “network”…. and that there’s a third partner in this “groundbreaking arrangement” that they haven’t yet announced. He says that part of his rationale for investing is that he expects this third partner to drive a lot of interest, with more national headlines and stories.

There are other catalysts for the growing “revolution” in autonomous cars as well, of course, including both technological and regulatory changes — and Pearce cites one of those regulatory changes as critical…

“On February 4th, 2016, the highway safety division of the U.S. government ruled that AI software could legally be considered the “driver” of a car.

“That’s right, for the very first time in history, the U.S. Government has officially recognized computer software is a person.

“This isn’t a sci-fi movie and it isn’t hypothetical.

“In fact, the U.S. Government is now willing to let this new “person” get into your car and drive it for you.

“From a legal standpoint that is hugely significant.

“Notable scholar Bryant Walker Smith of the University of South Carolina School of Law says, ‘This letter will one day be in a museum.'”

I’d say that those regulations so far have been flexing gently to permit early autonomous cars, but that the full regulatory framework for self-driving cars is going to evolve over at least five years and more likely much longer… just like the cars themselves, and the (mostly state) traffic laws and regulations are going to have to evolve. There’s a good short piece on this from Wired if you’d like more of the story… and, of course, I’m sure more people saw the story about Google’s self-driving car hitting a bus a few weeks later than saw the story about the new regulatory flexibility coming from the NHTSA.

So now, finally, we get to talking about this “one small company” who Pearce claims is the keystone to building this “auto-intelligence” future. Some clues for the Thinkolator…

“This small company holds 18 key U.S. patents and 6 E.U. patents.

“And with 28 more U.S. patents pending, and 24 more in the E.U., they’re an unstoppable force in this industry….

“Current contracts are slated to bring 250% growth in sales over the next four years—and that’s just from current contracts, not the new ones being signed weekly.

“They also have a patent for “Systems and methods for detecting obstructions in a camera field of view.”

“Virtually all carmakers will need to pay a royalty in order to use it…

“After all, it’s hard to make a self-driving car that can’t avoid obstacles!

“In essence, they have a total monopoly on the key technologies fueling the self-driving car revolution.”

Pearce compares the potential of this company to Cisco, which created much of the routing and communications technology that allowed computers to talk to each other and helped the internet to explode….

“The Biggest Profits Didn’t Come from the Computer… They Came from the Network….

“This principle is STILL true today. That’s right—even though it’s been a while since the Internet revolution began, the network approach is still working…”

Pearce says that we’re in a three-phase adoption cycle for self-driving cars… and that Phase 1 is “right now” as features are added to cars one at a time. He says this “one small company” is putting those features into cars now, and has locked in contracts with 90% of major auto manufacturers to install some features.

And he says that we’re about to enter Phase II, in just a year — that’s when the “Auto-Intelligence” technology goes to widespread adoption, and he thinks this “network-enabled mapping software” (first time he’s used that term, I’m not sure what it means — perhaps that’s a reference to the souped up OnStar deal with GM) will be worth at least $6 billion… and that very little of that is reflected in the stock price of his secret company.

So that’s where he thinks the “biggest money” will be made, in the early frenzy to get this technology into lots of cars… though he also goes on to say that “Phase III” over the next decade as the technology gets into every car and becomes ubiquitous faster than most people expect.

There’s quite a bit more chatter in the ad about the vast market potential, most of it based on the huge time savings enabled when self-driving cars help erase traffic congestion or the lives saved because computers are better at avoiding accidents than people are (with a quick plug for the senior citizens who will get to keep their independence and mobility for far longer with self-driving cars). Which I mostly agree with, and I expect that smarter roadways and smarter cars should give us a fighting chance of improving a lot of lives.

But that’s about all when it comes to “clues” about our secret little company… so we’re ready to feed the Thinkolator.

Waiting now.

And just about there.

Aha! This is our old friend, MobilEye (MBLY).

MobilEye is a pretty young Israeli company, and they are almost exclusively focused on safety systems for cars that use monocular cameras and their associated image processors. So far, that has mostly been lane departure warnings and collision avoidance alerts — though other capabilities continue to be built in to each generation of their system (called EyeQ), including traffic signal reading, pedestrian avoidance, etc.

And no, they are not really yet the owner of any leading proprietary “network” of car-to-car communication technologies — they are really specialists in camera-based detection and the fast processing of that visual data… including wired-in systems that turn that data (you’re too close to the car in front of you) into action (tapping your brakes for you).

But they are indeed partnering with GM to try to develop a better mapping and traffic system, which will help with more precise location of cars and create more data that helps to support self-driving cars… including data compiled from GM’s OnStar systems. That’s pretty early days, from what I can tell, their actual revenue-generating business is almost entirely focused on the cameras (mounted behind the rearview mirror) and improving iterations of their collision avoidance, pedestrian avoidance, parking assistance, and “stay in lane” warnings.

Will that end up being “the essential network?” I have no idea. I would suspect that there will be a lot of competition, both from other automotive suppliers (both startups and established auto electronics firms) and from the other self-driving cars firms like Alphabet/Google (GOOG). I’d guess that the conservative stance on this would be to value MobilEye based on their camera-based systems and the potential thereof, and that’s probably what the analysts are doing.

And those analysts do indeed have some impressive forecasts — they’re predicting that MobilEye will grow earnings by 50% a year for the next five years, with specific estimates of 68 cents in earnings this year and $1.06 in 2017, and that growth will come mostly from the top line (so they’re predicting big 40%+ annual revenue growth as well, not just increased efficiency). MobilEye is not a manufacturer, they’re essentially a fabless semiconductor company, so their margins might not change all that dramatically as their volume bumps up (STMicroelectronics (STM) does their manufacturing, by the way).

So although MBLY is extremely expensive based on most current metrics — well over 50X expected earnings for 2016, 35X 2017 earnings — it’s also quite reasonably valued IF you think the growth will really materialize. Paying 50 times earnings for a company that’s growing earnings at 50% a year is certainly not outlandish… unless the growth fails to materialize, or the company stops growing after a year.

Thankfully, a more pessimistic analysis is easily at hand — so you can pretty quickly get more than one perspective on the stock. Andrew Left at Citron Research mounted a short attack on MobilEye last year (meaning, he sold the shares short and published very negative analysis about their prospects), which is part of the reason the stock flopped. You don’t have to agree with him, and his tone and aggressiveness certainly put some people off, but he has been right about some disastrous and overvalued stocks in the past. Left remains short and very negative on MBLY, which a price target of $11, and released an update a couple weeks ago.

So there are two perspectives for you — Jim Pearce thinks MBLY and its collision avoidance camera systems and visual processing technology will be key to self-driving cars, Andrew Left thinks all of these advanced driver assistance systems are quickly becoming commoditized and MBLY is far from being in a control position in the market (even in the camera-based systems where they’ve established a lead). Probably the truth is somewhere in between, as is usually the case… and though MBLY has certainly put together some earnings growth (finally), it’s also valued as if that earnings growth will continue to explode upward for at least several years.

I’m not sure where the likely pitfalls might be, so I’ll exercise my favorite right as an individual investor: not taking a position either way.

And that’s a valuable right for all of us. As Warren Buffett famously said, there’s no such thing as a called strike in investing — you can choose whether to swing or not, waiting for the fattest pitches that you like and understand, and the only penalty is the opportunity cost of missing out on what might sometimes be a hot investment. You can pay that opportunity cost all year and still not lose a dime of your actual money or be called out… you won’t find many other penalties like that in the investing world.

Personally, I’m quite convinced that electronics, driver assistance, autonomous driving and other trends in automotive manufacturing will continue along the current path, and that we probably will have a substantial number of autonomous or nearly autonomous cars on the road within the next five or ten years… but I’m not entirely sure that there will be one key winner, or that I could reliably pick that winner today. My first reaction to skimming through this info again today is that I’d feel much more comfortable with the big, more diversified and more established auto electronics companies (NXPI, VC, etc.) than with a very high-priced and specialized company like MobilEye.

We’ll see how it turns out… and it’s your money, so if you’ve got an opinion I’m sure we’d all be delighted to hear it — just shout it out with a comment below.

Disclosure: I own shares of Alphabet/Google, I am not invested in any of the other companies mentioned above, and won’t trade shares in any covered company for at least three days after publication per Stock Gumshoe’s rules.