Mike Barrett has been an analyst for Dan Ferris’ Extreme Value newsletter over at Stansberry for several years now, and apparently he has also suggested several other high-return investments that ended up being recommended by other Stansberry newsletters.
And now he’s getting his own newsletter, with a pretty splashy teaser presentation to introduce it — the letter is called 10X Investor, and it’s being launched as a “model portfolio” that will be added to over time. They are apparently starting with ten investments, and will add new ones whenever they catch Barrett’s fancy (and Ferris’, I guess, they are working together on this), but it’s not a full-on monthly newsletter — in the absence of new recommendations, they only promise quarterly updates.
As is typical of most new services, they try to give the impression of a huge discount and special deal to entice new investors, so they claim it will have a $5,000 retail price but are effectively offering it for $2,000/yr and throwing in a one-year subscription to Ferris’ Extreme Value. No refunds, as is also typical of “upgrade” letters from most publishers, though they promise you can move your $2,000 to some other publication (for 30 days) if you don’t like this one.
They do not drop many hints about the ten stocks Barrett will be starting with, but they indicate that he’s looking for “intellectual property” companies that he can value based on his assessed probability of their eventual success in commercializing whatever their proprietary idea might be. That’s an unfairly brief description of the great predictive wisdom he claims with these 10X stocks, but it’s the general idea.
One specific stock does get the teaser treatment, however… so let’s see if we can name some names for you… but first, a couple quick notes from the ad “presentation”…
“For the first time ever, Mike has agreed to appear on cameraโฆ and give you the full secret of how heโs quietly outperformed some of the best investment analysts in Americaโฆ
“Including where he recommends you put your money right now, bull market or bear marketโฆ for what he believes could turn every $5,000 investment into $50,000 or more, without touching options, cryptocurrencies, or doing anything unusual.”
And his philosophy of finding new intellectual property-based investments:
“… if you want to make serious money in the marketโฆ the kind of money that can change your entire situationโฆ then youโve got to look beyond investing in stuff thatโs physical or well-known.
“Youโve got to invest in intellectual breakthroughs. In other words, new ways of thinking or doing things.
“… what Iโm talking about are companies that create things that NEVER existed beforeโฆ or do things within existing industries nobody ever imagined possible.”
The ad includes a bunch of fantastic-looking charts about the fantastic returns he has made, or might possibly have made, or could theoretically have made, from investing in some specific ideas that didn’t make it into Stansberry newsletters but were apparently picks that he made personally using this strategy… including Annovis Bio (ANVS) and Kodiak Sciences (KOD), both of which quickly surged (and then collapsed) as biotech ideas over the past year or so, and he was apparently also behind past Stansberry picks GrowGeneration (GRWG), Innovative Industrial Properties (IIPR), Silvergate Capital (SI) and, as past recommendations for Extreme Value, Constellation Brands (STZ), TFI International (TFII) and Starbucks (SBUX). So that’s the bona fides from Barrett at this point, though he’s been working on Extreme Value with Dan Ferris for years, and has been mentioned in a lot of those teaser pitches and helped identify a lot of those picks as well (the ones that have come up associated with his name in recent years were Waste Management (WM) last year, and CTS (CTS) and InTEST (INTT) earlier this year.
More on the strategy…
“Thereโs an entirely new class of tiny companies most people have never heard of beforeโฆ often with just a handful of employees.
“They donโt necessarily have a physical product. And in the beginning, sometimes they donโt even make money!
“Instead they create compoundsโฆ or business structuresโฆ or systemsโฆ or even minor componentsโฆ all of which might be worthless on their own, but which can launch billion-dollar industries overnight, or revitalize old ones….
“Often they have no productโฆ no revenueโฆ no PR department, nothing.
“That means most people have no idea how to confidently determine which have realistic potential to make you 5 to 10 times your moneyโฆ and which ones will end up being worthless…
“Thatโs because youโre not putting your money in a physical product per se, or even an online system or service โ something with a known history of sales revenue. At the very beginning, youโre simply putting your money into a really good idea.
“It might be years before that idea becomes reality, if ever.
“But long before that happens, the company that owns the intellectual property โ and its shareholders โ have often seen ten-bagger gains, faster than you can imagine. Becauseโฆ and this is importantโฆ the market is always forward-looking.
“The stock market is always looking for, and rewards, the NEXT big idea.”
Are you getting our free Daily Update
"reveal" emails? If not,
just click here...
So that seems to be the meat of it, really — finding stocks that are not fully appreciated as having a potentially valuable idea or business, probably without much of an income statement yet, and try to predict which ones will catch the fancy of other investors by generating some exciting news.
And while it always makes me feel a little squirmy to buy companies who don’t have revenue yet, that’s an important part of the strategy here:
“… you stand to see the greatest potential profit if you invest early, at the very beginningโฆ Even if the idea itself is still just a pipe dream and there arenโt any sales yet.”
The three kinds of “intellectual property” ideas he talks about are: “Enablers,” companies that have an idea that can add great value to an existing industry; “Consolidators” who can pull together existing products or information to create something new and powerful; and “Innovators”, who come up with something brand new that nobody has done before, often in technology.
And that’s what he’s teasing here:
“And as youโll see, thatโs exactly the type of company Iโm recommending you buy immediately.
“A small company that owns an incredibly valuable piece of intellectual property capable of revolutionizing the auto industry.
“And in the processโฆ it could create what CNBC estimates is a $7 trillion tech industry that will change the way you drive to workโฆ shop for groceriesโฆ take vacations, and more.
“Even the U.S. government is involved, with an estimated $135 million investment theyโre expected to make in this new technology by 2022.
“I think you could make 10 times your money if youโre willing to get in early.”
More teasing about this particular company from the 10X Investor portfolio…
“Mike has uncovered a very small new company who owns the intellectual property for a technology that could soon do for the auto industry what Apple did for computers.
“In short: This little company has figured out the missing technology for one of the most exciting and promising new industries:
“Self-driving cars.
“Itโs coming… whether you believe it or not. Sooner than you can imagine, I predict youโll get your Amazon Fresh order delivered to your doorstepโฆ in a car with no human passenger. And this company will help make it happen.
“As the autonomous car industry continues to growโฆ Mike predicts this little company has the potential to be worth AT LEAST 10 times more than whatโs currently reflected in the stock price.
“He calls it, ‘One of the most obvious ten-bagger ideas Iโve come across in my career. Itโs like buying Apple before they released the Macintosh, if I can make that comparison.'”
What else? That’s pretty much it by way of clues, other than the fact that the introductory emails call it a “A $9 ‘driverless car’ company,” and that Barrett Ferris “believe the little California-based stock theyโre recommending right now could end up being the most lucrative weโve shared in the 22-year history of our firm.”
So the only firm clues are that it’s a California company, it’s been right around $9 within the past few days (the ad started running on December 2), and it’s got something to do with autonomous cars. Can we get a solution from the Thinkolator?
Well, not a 100% certain one… but we can certainly provide a solid guess: This is most likely the LiDAR startup AEVA Technologies (AEVA), which is one of the half-dozen LiDAR firms that came public through a merger with a SPAC over the past year or so. LiDAR stands for Light Detection and Ranging, it’s basically like RADAR but with lasers, using a laser and sensors on a car to map the world around the car in real time, providing autonomous driving systems with the data they need to drive safely, avoid obstacles and be aware of their surroundings.
The name has come up several times here at Stock Gumshoe, I first covered it when Ian King over at Banyan Hill teased the stock before the SPAC merger was completed, almost exactly a year ago.
Like all of the LiDAR names, it has come down sharply over the past year as the excitement of these newly public technology companies led to pretty wild SPAC valuations and then, as the market moved on to other hot ideas, to disappointment as everyone started to realize that self-driving cars are a long way away… and that in addition to the half-dozen or so publicly traded LiDAR specialists there are also LiDAR projects at many of the major auto suppliers and nobody really knows which one will “win,” if any.
And, yes, it’s a California company… and while it has come down sharply in recent months, it has been near $9 for most of the past few weeks. If there’s another company that’s involved in autonomous driving hardware or software and matches those clues, it eluded your friendly neighborhood Gumshoe.
Surprisingly enough, most of the LiDAR or autonomous software companies are not particularly close to $9 in share price today — despite the fact that almost all of them came public within the last year via SPACs and started with a $10 share price. Most of them have fallen harder than AEVA, far below the $10 SPAC price and mostly down to the $4-6 range (That list includes AEye (LIDR), pioneer Velodyne Lidar (VLDR), Ouster (OUST) and Innoviz (INVZ)… Luminar (LAZR), the best “story stock” in this space, is the one exception — it has also collapsed but remains above the SPAC merger price at about $14).
Aeva was well into the teens during the enthusiasm for this sub-sector back in February, similar to most, but is now at $8.50-9, with a market cap of about $1.8 billion. Aevaโs founders come from Apple and Nikon, and they talk up a new and improved approach with โLiDAR on a chipโ for better performance and lower costs, with their product being called โ4D LiDARโ โ with the fourth dimension being current velocity, something they can process instantly to compute the movement of objects without rescanning (they say this is a big deal at providing more โinstantโ data on movement, I have no idea if thatโs true, and they also say, as do most of their competitors, that their sensors are less susceptible to light or weather interference).
They think their contracted projects in automotive, with production starting in 2024, will drive them to expand into other large markets (healthcare, consumer electronics, industrial and surveillance, etc.). Their most high-profile partner in automotive is Audi/Volkswagen, and their investor presentation indicates $286 million in 2024 revenue and $880 in 2025, about 80% from automotive and more than half from their existing partners. That would mean the company is currently valued at about 6X theoretical 2024 revenue, and about 2X 2025. That would be pretty appealing, if they can actually grow like that.
What has happened since their initial presentations for the SPAC merger back in February? They’ve closed a deal to have their 4D LiDAR used by Plus, the autonomous trucking company, with plans for global deployment “starting late 2022” and 100,000 vehicles using AEVA’s technology by 2025, so that’s a positive development, though still one that’s off in the future (and it’s their second trucking deal, they announced a partnership with TuSimple earlier this year). And they chose a manufacturing partner for their chips in Fabrinet, so they’re continuing to move toward becoming a real business, with several partnership investments by other collaborators within the auto supply chain. So far, they have not publicly said anything about their plan changing from the “illustrative timeline” they shared back in February for a few generations of samples being qualified over the next few years and available for commercial scale production late in 2023. I have no idea whether or not that’s going to be feasible, but it’s still their plan and they are not obviously off track at this point. That original plan, in SPAC deal Investor Presentation, would have them reaching positive free cash flow in 2024 and really hitting their stride in 2025 by hitting about $350 million in EBITDA that year, followed by five years that they think will allow them to 10X the business to $3 billion in 2030 Adjusted EBITDA.
If they get there, sure, that would generate some fantastic growth and strong returns… and perhaps AEVA will in some way stand out in an exciting way before they reach those revenue or profitability milestones, and create a big surge in the share price, as Barrett seems to expect. I don’t know what the odds are, but it’s obviously possible. You can review the company’s last conference call transcript here, if you’d like to get some more perspective from the company and the Q&A from analysts.
I don’t have Mike Barrett’s confidence about evaluating the “potential intrinsic value” of most intellectual property projects, so I usually defer to the filings to tell me who’s winning — which usually means I have to wait until companies have revenue, or at least firm orders, and can prove that someone will actually buy their product at the prices they envision, in perhaps enough quantity for the business to really move forward. 2024 is actually quite soon, at least in automotive terms (the cars that will be released in 2024 have mostly been designed, and are being tested right now, at least for the major manufacturers), so it continues to seem likely to me that all of the LiDAR companies will reach profitability and large-scale adoption much more slowly than they are currently projecting, but that doesn’t mean the stocks will necessarily fall. Some of the air has come out of the SPAC bubble, at least, so if you are convinced that LiDAR will be ubiquitous and that at least one or two of these companies will become major automotive suppliers as a result, making such a bet is cheaper now than it was a few months ago.
Personally, I find the LiDAR stuff fascinating, but haven’t been willing to bet on one of the companies at this point. They each have a bit of a niche to their business, and looking at any one of them can be compelling, but if you’re betting on the business I’d suggest at least taking a look at the major players and their plans and projections — they might all lose, but they’re unlikely to all win, and looking at the different models and technologies and partners might convince you which one to choose. They all raised quite a bit of capital, they’re all trying to take the lead, and you can roll your dice and take your chances. Here are the links to those SPAC presentations, just for your convenience:
Aeva (AEVA)
Ouster (OUST)
Luminar (LAZR)
Velodyne Lidar
AEye (LIDR)
Innoviz (INVZ)
And though it wasn’t a SPAC merger, I should probably throw in MicroVision (MVIS), which turned its focus to LiDAR last year
I’ve had my eye drawn to several of them over the past year, and I confess that the chip-based approach from Aeva and Ouster (OUST) makes more sense to me, as does the much lower-cost approach being pushed by Innoviz (INVZ), but, again, I don’t feel like I have enough comfort in my 2025 forecasts to think about risking money on any one of them yet, and we shouldn’t discount the market’s favorite pick in this space, Luminar (LAZR) or the company that really invented LiDAR, Velodyne Lidar (VLDR), even though they’ve been through an ugly fight between the founder and the Board of Directors. Maybe I’ll talk myself into one of these investments in the future… or maybe you can talk me into one today, so if you’ve got any thoughts to share on AEVA or any of the others, or any experience with Mike Barrett and his picks you’d like to mention, feel, free to use the happy little comment box below. Thanks for reading!
Spot on.
How does LIDAR work in dense fog? It doesn’t.
They are working on it though. Here’s a good article explaining it.
https://www.asme.org/topics-resources/content/system-helps-selfdriving-cars-see-fog
Nor does camera – radar & sonar or slow down.
People don’t see very well in dense fog either… that’s why there are so many fog related pileups… If they are working on fog technology as ronwill indicates… that should be an improvement over human error.
The helps explain why Waymo is testing its cars in Arizona.
And what about dense snowfall?
Neither does human eyesight, unfortunately.
UV-band does. Give it time.
How does a bat fly. In dense fog ?. Find bugs . It bounces its sonar off objects and gets a message back same as lidar
Signed up for the 10x product, already an Extreme Value subscriber. Happy with the picks, and looking forward to building positions in each…
How do you know that you are happy with the picks, it’s only a few days ago he pitched this particular 10 x product. Can you show us the list, maybe readers and Travis will analyze it
Would the recent SPAC launch of ARBE Robotics qualify to run in this heat of LIDAR thoroughbreds? Another 10X candidate in early phase production of advanced 4D LIDAR tech. website: https://ir.arberobotics.com/
My rather sizeable (for me) position in VLDR is down more than 60% which has been pretty disappointing, and their fighting on the board is ridiculous and surely not helping anything. My small position in LAZR is about even. I bought both with a long-term perspective, so we’ll see what they do I guess. Don’t think I’ll be diving into anymore Lidar companies since I’ve already got enough exposure in this space. Thanks for the info, Travis – great job as always!
I keep having to remind myself, I invested in RIVN (down by half) LCID, and NIO for the long term too, and they’ll go back up again. CRSP and CMPS arent doing any better either! Its my index’s that are upsetting, I was up over 6000. in gains after only 4 months, that was wiped completely out over the last 3 wks. Their’s been a few good ones lately that Id normally jump right into after researching, but I’ve got serious cold feet now!
Thank you Travis,
I looked into this over the weekend, but I came up with another company that has been in that $9.00 range recently. They also have a patent and just listed via SPAC. Arbe Robotics ARBE on the Nasdaq. I am also interested in this play as the driverless vehicles excite me as the cost savings could put a lot of extra money in people’s pockets.
Another for the pile, though theyโre headquartered in Israel (like Innoviz, and MobilEye before them), not the teased California.
I agree about the long-term potential of autonomous driving, though I think progress will be very gradual.
It would be a great idea to create a ETF for all LIDAR players – that way, we wont have to choose amongst specific companies. Are there existing ones in this space, not EV in general?
Serendipity. I just read the tease for this letter and turned to my trusty research letter, the gumshoe. I actually trust this letter more than any that want to charge 2500$/year on a 50 % discount!! I am interested in the technology, but does anyone else feel as though there is a big rush on self driving vehicles with not a lot proven safety? I just get this idea of a transport barreling up behind me and looking in the rearview to see no driver! I think I read that this co. AEVA was working on transports. I don’t think it is so much the driverless vehicles but the reaction of other regular drivers to this idea. I know where I live there are a lot of crazy unpredictable distracted drivers that change lanes on a dime with no warning. How is the software going to react to all the unpredictable drivers in the real world. Imagine as well the insurance the owners of driverless vehicles will be paying. That is my spiel. The technology looks interesting but I can see a lot of hurdles in its roadway. This is just me talking out loud, but I look forward to your reactions to this idea.
Travis’ analysis is very valuable. Thanks again to the Gumshoe
You’ve indicated: “I know where I live there are a lot of crazy unpredictable distracted drivers that change lanes on a dime with no warning. How is the software going to react to all the unpredictable drivers in the real world. ”
I think that’s the point…. humans are distracted and I’m guessing would have a much slower reaction time than software to sudden vehicle changes by others.
I recently rented a car in Iceland and while driving at night I was diligent as usual in changing to low beams when an oncoming vehicle approached. However, at some point I realized, and was very happy to know, that the high beams went on and off by themselves when oncoming traffic was approaching… and faster than my reflexes including returning to high beams after the passing the vehicle. I loved it!
One advantage a human may have over the software is if they are paying attention to the vehicles around them and can evaluate that a driver is distracted. I steer clear of drivers having a hard time staying in their lanes, etc. I’m guessing the software may be programed to do that as well, and if so, probably better than a human.
I recently saw a vehicle swerving well into lanes on either side. As I passed with caution a full lane away, I saw, as suspected, this guy was texting while driving and the infringements on the other lanes was obviously not fazing him in the least. It was so egregious, that I actually pulled off the highway and called 911. That guy was an accident waiting to happen and I didn’t want to see some horrific accident on the news later thinking I should have done something. I’ve only ever done that one other time with a drunk driver weaving dangerously in and out of traffic a number of years ago.
If those people that can’t drive without texting or drink without driving can be replaced by self-driving vehicles, I’m all for it.
TWO times in the past 5 years Iโve been rearended while sitting at a stoplight. By people, not robots. Letโs stop with the pretense that human judgement is so amazing. Canโt wait for the day self driving cars take over.
I would be wary of investing in anything Lidar. What is not mentioned here โ the elephant in the room โ is Tesla’s approach of vision-only self-driving supported by incredible AI and machine learning powered by their Dojo supercomputer. Elon Musk has described Lidar as a crutch and that companies pursuing it will be doomed. Clearly he has an incentive to say that, but a well-known champion of Lidar โ whose name unfortunately escapes me right now โ later agreed with him. Since then Lidar companies have been going public like crazy. In my opinion they had to go public and raise funds before Tesla reached any kind of milestone that would render Lidar obsolete. Tesla’s FSD software (their Full Self-Driving package) is seeing dramatic improvements every few weeks โ you can see for yourself on YouTube, just search for “Tesla FSD Beta”. If Tesla achieves the impossible with vision-only (and you’d have to be brave to bet against them frankly) Lidar is indeed doomed. Tesla will license their software to automakers (automakers will realize this is the cheapest option available to them), reap the revenues from a robotaxi network, and become a multi-trillion dollar company.
Could be, but much will depend on how far LiDAR prices fall โ cost and form factor were what kept Tesla from using it originally, but they have been testing LiDAR this year. Cameras, radar and lasers all have some challenges, perhaps weโll be using all three in a decade.
Not that I am an expert in physics, but with the speed technology is developing we might use none of these in a decade. New things and ways that we don’t even know about now will come up and develop.
Anything (to Date) that Ferris has pitched has been a “Dog with Fleas” IMHO. ATUSF?
Once again, a great dissertation. Thanks Travis. With the exception of the California component does Embark qualify? Very much more commercially focused but still ahead of the curve.
Iโd say itโs slightly more of a stretch. But certainly canโt be definitive.
Travis, thanks for all the great research you do. Iโve learned a lot about these emerging technologies from you. Iโm traditionally a dividend growth investor who needs more exposure to emerging technology. You have help me sift through the myriad of options to find a few areas and companies where that I feel comfortable investing.
Does life have a future?
AEVA is also a top pic at Early Stage from Investorplace (from Ex- Mc Call )guess belongs to Stansberry group, the main advantage is seen in the nw chip and that next year a lot of new self driving projects are coming.
Travis: Thank you for the subsector listing of competing LiDAR companies. All have great meaning, corporate purpose that I find compelling but little or no moat and an untested management teams in what is surely going to be a brutal tech competition. My circle of competence doesnโt extend to evaluating the advantages of one or the other. I think INTC, AAPL, AMZN or Google the Trillion Dollar trio may purchase or acquire one of these companies. It is exciting to think about the tech advances in car safety that is sure to follow the massive investments in this space and the amount on innovation taking place. George Gilder is quite impressed with the young founder of Luminar.
Fog and snow. how do the sensors work to keep you on the road in a white blanket of snow? Or from seeing the car stopped in the road in front of you in dense fog.
Is GPS accurate enough to keep the car on the right part of the road?
Lets see, if all vehicles on the road had a public locator transmitter, that didn’t get smashed in a wreak, in the fog, the sensors could possibly sense trouble ahead…
Amazing sometimes how fast people drive on the big highway when its foggy. Traveling by faith, I guess.
why beat around the bush? How is this not another gov’t plot to to remove John Q Public from the roads and businesses of Amerika ( have to change the name soon too) and push “infrastructure” money into lanes for self driving cars, where they will see all other cars- specially equipped- so theres no need for them to see you. Call me crazy, so what. Thats where I see the “big money” going. I don’t expect Stansberry, a little crazy himself, to ever be that honest about any of this.
I m no expert either but lazr seems to have the most Oem interest
I live on a dirt road and my backup camera is constantly covered with dirt. I don’t know how teslas vision technology could possibly work.
Thanks for helping discern truth. I only have a few hundred to buy stocks and I’m 67.i can’t afford to make serious mistakes. I appreciate your help as all these companies sell their help promising they are the best with superior knowledge. I paid for various types of help and feel overwhelmed and usually find information through the help like yours. I need simply to get truth from someone like you. Thanks again!