Radical Technology Profits, edited by Michael Robinson over at Money Map Press, is one of the newsletters that, like Breakthrough Technology Alert or the many other competitors, aims to get in early on technology and biotech stories — and also like most of these letters, they pitch their ideas by selling a big picture story that weaves some little company’s product into a larger and more easily identified trend that sounds entirely plausible.
Which isn’t to say that they’re all bad ideas — far from it, I’m sure these kinds of “breakout technology” newsletters all have some dramatic winning picks in their portfolio. The problem is that they all sound like great ideas, and given the bleeding edge nature of most of the technologies they pitch, and the small nature of many of the stocks, the assumption has to be that the major winners will make up for the large number of failures.The smaller the stocks are that you count on for world-changing returns, the more diversified you need to be — or, I suppose, the more expert and prescient you have to be, though it’s dangerous to start thinking that you can predict things well enough to have a concentrated portfolio of small cap technology names.
But I’m not here to lecture you on how to think about investing in breakthrough technologies — I’m here to try to figure out who Michael Robinson is teasing in his latest ad as the beneficiary of this latest breakout trend. Here’s how he puts it in the email I received today:
“I’m going on record to say that this technology is so overwhelmingly transformative, that I’m comparing it to the internal combustion engine. It will change the way you do everything now and in the future. It’s now creating the Fourth Revolution in the industry. I kid you not, it’s that big.”
So, no shyness there. What is the technology? Here’s more from the ad:
“The End of Disease May Soon Become a Reality Thanks to MEMS
“If that name sounds high tech that’s because it is.
“And if you want to live a long and healthy life, without the fear of disease…
“You’ll want to watch this short presentation to the end because…
“MEMS are the Only Existing Technology That Could Eradicate the Dangers of Disease, Add 30 Healthy Years to Your Life…
“And Cost Less Than $50
“And here’s where it gets really exciting for someone in my line of work.
“Today, the patents for the MEMS set to end disease….
“They’re controlled by one tiny, unknown company.
“They Have Been Cleared By the FDA”
You can see the whole presentation if you like here (or read the transcript), it’s a very long one and Robinson talks about how MEMS technology can allow for tiny sensors, powered by body heat, that are implanted under your skin and can alert your smartphone (which will then call your doctor) about changes in your body chemistry that indicate the pending risk of a heart attack. Among many other things, like smart cities with pollution and light sensors all around, and smart arrays of MEMS chips underground to track seismic activity and help to find oil and gas reserves..
So which company is it that he says controls the patents to all this MEMS stuff? After giving examples of a few pharma companies whose stocks skyrocketed on the back of multibillion dollar drugs to address some of the same diseases that can be helped by MEMS technology, he starts to throw in a few clues:
“A Tech Company 1/30th the Size of These ‘Big Pharma’ Titans, Developed a MEMS Technology That Could End All Heart Disease.
“And it Controls the Patents.
“There is a very simple way for you to get a slice of this company’s patent profits for less than $9. So you’ll be able to cheaply get in, on the ground floor…”
Now, the examples he gave right before that were Pfizer and Bristol-Myers Squibb — so keep that in mind, the stock might not be that tiny. To be 1/30 the size of those titans you’d be talking about a stock with a market cap between $2 billion and $7 billion. Roughly speaking.
Some more clues:
“First Off, They Produce the Lion’s Share of All MEMS Devices.
“Currently, they can produce 4 million devices a day. That’s more than anyone else in the world. And their production capabilities are growing exponentially each year.
“Which is why the companies that turn to them for MEMS technology are a who’s who of Silicon Valley and the Fortune 500 companies.
“Apple, Blackberry, Dell, Bosch, Continental, Delphi, Delta, Denso, Ericsson, Hewlett-Packard, Hitachi, HTC, Magnetti Marelli, Motorola, Nokia, Philips, Samsung, Seagate, Sony, Western Digital, and Cisco…”
“They Have Also Captured and Secured Total Market Share Domination For All Major Operating Systems.
- They have an astounding 75% of the Apple/iOS market.
- 31.4% of the Android market.
- And 54.4% of the Windows Operating Systems market.
“That’s over 4 times greater than the next closest competitor.
“So when a company is developing a MEMS health technology, and they want to ensure it is scalable across all operating systems both mobile and computer…
“They only have one clear choice.”
And they have a strong patent pipeline, we’re told:
“While this one company controls the Patent Pipeline for the most important MEMS breakthroughs for ending disease…
“Medical MEMS form just one block of their entire 800-patent portfolio.”
So … dominant position in MEMS chips for current mobile phones and tablets, strong patent portfolio with 800+ patents, largest producer of MEMS chips with capacity for four million chips a day, and a stock price under $9. This can only be …
ST Microelectronics (STM)
I know, sorry — this is a big one that you’ve probably already heard of. And it’s been quite weak over the past decade, thanks in part to Asian and US competition (Texas Instruments, all the analog chip makers, etc.) and in part to the weak European economy and currency issues. But it’s probably still the largest European chipmaker, and it was one of the pioneers of MEMS technology and does indeed have the capability of producing four million chips a day, and they do claim 800 patents. There’s quite likely a STM chip in your phone or your car right now.
The MEMS chips, including their medical sensors and other cutting edge products, are a relatively small part of the business, but one that’s growing. That division was less than 20% of sales last year, but the resurgence in growth there is probably a significant reason why the shares have recovered a bit recently. This is a big semiconductor company that might arguably be reasonably priced if you believe the analyst estimates about next year, and if you’re comfortable with their solid dividend (almost 5%), but they also are coming out of a really rough patch — they lost $2 billion last year, tough for a company with a market cap of only $7 billion. There’s a pretty good FT article about them here if you’d like more perspective.
And that’s about all I know about STM — they get teased every now and then as a MEMS pioneer and major patent holder (they’re in a big patent fight with Invensense (INVN) right now, among others), and I agree that MEMS is a huge growth industry, but I don’t know how their patent portfolio will hold up or how long it will be before MEMS chips make a big impact on STM’s bottom line. Most of the companies that are using sensors enabled by STM’s chips are either small or don’t widely publicize the connection, from what I can tell, and most of the early stage research breakthroughs that get trumpeted in this area lately are from not-yet-public little biotech companies.
STM is certainly an industry leader, with a big business in chips for smart phones and tablets and lots of other products, but my impression is that they’re not terribly nimble and they haven’t been very profitable in recent years. If you’ve an opinion to share on this one, feel free to spit it out with a comment below.