Christian Dehaemer is pitching his Crisis and Opportunity newsletter ($499!) by talking up a “Ghost Town Showdown” that he says indicates we’re on the verge of seeing big profits for the suppliers in the “driverless car” business.
So, naturally, we want to know what these “secret” stocks are — driverless cars have been teased before, of course, and they get a fair amount of press, thanks in part to the high profile projects or rumored projects from Google/Alphabet (GOOG) and Apple (AAPL) and Tesla (TSLA), among others, but it’s still early days yet.
Christian Dehaemer is talking up the potential of the suppliers who will make this autonomous car “revolution” possible, which is also not new or shocking — no one really thinks that Ford or Tesla or VW or anyone else will “own” the autonomous car or be the one big winner, but lots of pundits have opined that there could be some huge winners in the parts, equipment, chip and software supply chain as new advancements are made and adopted… kind of like the improvements in air bags and seatbelts that helped propel some suppliers in past decades.
The race for the automotive chip business has been a pretty widely-covered one, particularly because it was such a big reason for one of the larger recent acquisitions (NXP Semiconductor buying Freescale to become the largest automotive chipmaker by sales), so there are a lot of companies to consider… but we’re still curious to see who Dehaemer is pitching.
So let’s dig into the ad … this is how it starts, in case you want a taste of the hype:
“REVEALED: The Lucrative Truth Behind America’s Mysterious…
“Ghost Town Showdown!
“Michigan, Florida, and Virginia are spending tens of millions creating fake cities… in a battle to win the lure of a fast-growing $2.5 trillion industry
“Here’s how to claim your piece of the trillion-dollar prize BEFORE the mainstream catches wind… for just $6 a share.”
That’s a reference to the fake towns and suburbs, akin to huge movie sets, that have been built or set aside to test autonomous cars… and to the regulatory “light hand” that some states are offering in attempts to make sure that Alphabet and the big carmakers and insurance companies want to establish testing or research projects in their states.
Not that they necessarily need these “ghost towns,” of course, since driverless cars have been on the road for thousands of miles in California and Nevada (and in other places, but Google’s project that’s focused on CA is the most well-known and well-covered) during the first phase of development… but I guess we’ll always need “test tracks” of some kind… and, perhaps more importantly for Dehaemer’s purposes, the “ghost town” image does probably help to get attention for the newsletter and make the idea of driverless cars seem more “real” for folks who haven’t followed the news in recent years.
Dehaemer goes on to say that “Billionaires are staking their fortunes on this” and that these investments are “set to soar over the next few years whether the public is ready for it or not”… that doesn’t mean, if it’s true, that any one company you can pick today will be a huge winner, of course. One thing I find in almost all teaser ads of this kind is that there are a few missing rungs on the ladder — “this will become a multibillion dollar business” and “this company currently has a growing market share in automotive cameras or chips” does not automatically mean that “this company will get most of that multibillion dollars in the future” … or, even if it does, that the business will be profitable, or will be better than the market currently expects.
The current price of any stock already reflects what the broad market thinks will happen in the short term, so most of the time it’s either the long-term dominance of a company’s products or services (which is hard to predict, especially early on) or short-term market misunderstandings or overreactions by the market that make a stock attractive — to consistently do pretty well you need to not just pick good companies, but pick good companies who are currently (in your opinion, of course — this is all opinion and conjecture until the future happens) underestimated, on average, by the thousands of other investors who are considering the stock each day.
Being a big supplier to a large-scale manufacturer doesn’t mean you automatically get rich — one reason the automotive chip suppliers are all building up scale is that they see the increasing importance of electronics in the auto market (the average car probably has well over 100 computers now, many of them just to process a single task, and relies on over 100 million lines of coding), and they want to be able to offer stronger, more integrated suite of products and services to automakers so they can avoid the punishing margin compression that is part and parcel of life as a semiconductor seller.
So that’s the standard caveat for any semi stock: It’s not easy making money when the one thing that most people know about your business is that the products get twice as good and half as expensive every couple years, and it’s very hard to tell early on whether a chip will get a premium price and cause a company to soar