Frank Curzio is out with a teaser campaign about a “tiny $6 company” that he says is going to revolutionize the device industry… and it’s a deadline-laden spiel for his pricier Curzio Venture Opportunities service ($3,000/yr, no refunds), so I guess we’d better look at this one now, before he “closes the door” on the offer at midnight tonight.
I know you’d never spend $3,000 just to learn about a secret stock tip… right? I like Frank Curzio, he offers a genuinely entertaining and free podcast (Wall Street Unplugged) and he often has interesting ideas… but deciding about whether or not you want to subscribe to something for $3,000 a year (remember that “no refunds” bit?) should never be done in the heat of the moment, with a deadline for a supposed “10X your money” opportunity breathing down your neck.
So let’s dig into the clues he provides, get you some answers, and then, after you already know the name of the company and have had a chance to do some research on your own, you can make your own decisions about whether you feel like subscribing to Frank’s letter (we do have a few reviews from his subscribers here, but not many just yet).
Ready? OK, here’s the basic spiel from the ad:
“By this time next year, every single smartphone, tablet, smartwatch and auto display system you own will be obsolete. The year after that, nearly 40% of the world’s population will be using this replacement instead. Early investors stand to make 10x their money or more… with almost ZERO RISK.”
Really? 10X your money with “almost zero risk?” Um, no. Not unless you define “risk” a lot differently than I do. Anytime you’re talking about a huge opportunity, there must be a meaningful risk — if not, then you’re either uncommonly prescient or you’re misunderstanding the opportunity. Most of us can’t reliably see into the future.
Some more hyperbole for you from the ad:
“… a tiny company you’ve likely never heard of has developed something that goes far beyond ‘disruptive technology.’
“It’s created something so revolutionary, it could soon take over one of the biggest markets on the planet… in one fell swoop.
“What this company is doing will be like the advent of personal computers… or the shift from landline phones to mobile phones.
“Except MUCH BIGGER.”
Really? Bigger than personal computers and bigger than mobile phones? That conjures up daydreams about picking the next Microsoft (MSFT) or Intel (INTC), or the next Apple (AAPL). So what’s the story?
Glass. This has something to do with display glass, and something that will supplant Gorilla Glass, the dominant heavy-duty glass from Corning (GLW) that has dominated the display market since Apple chose it for an early iPhone.
More clues from Curzio:
“12 months from now, your phone will look, feel, even behave completely differently… and it will be because of this tiny company’s breakthrough….
“… each new version of Gorilla Glass has produced an even stronger and lighter material.
“But as the durability increases, the surface toughness decreases.
“That means the glass loses its ability to resist scratches….
“That’s where this tiny $6 company comes in.
“Its proprietary technology SOLVES this problem… producing ultrathin glass that’s 20 TIMES more scratch resistant than anything else on the market.
“Not only that, this new glass is 20% more resistant to breaks.”
OK, so ultrathin, scratch-resistant glass. What else?
“… this tiny company is conducting secret tests of its technology with one of the world’s largest smart device makers….
“I can say with a very high degree of certainty that this tiny $6 company is about to make a big announcement regarding these tests.”
And apparently investors are watching…
“In just the past few days, the stock has already started ticking up.”
Any more clues?
We do get a bit about the investors who are already on board…
“The company’s largest shareholders are aggressively buying up shares right now.
“Nearly every one of this tiny company’s largest shareholders increased its stake last quarter.
“That bears repeating: Nine out of 11 of the largest shareholders just bought A LOT MORE of this small company’s stock. (And the other two maintained their positions.)
“The CEO and chairman of this company added to their positions as well.”
And one last bit that includes a key clue:
“Potentially FIVE BILLION devices the world over could be replaced with this new tech in the next few years.
“These markets combined add up to a $1 billion-plus revenue opportunity for this relatively unknown company… with a current market cap of a mere $150 million.
“That’s nearly 900% more than it made all of last year…
“And over 300% more than it made in the last four years COMBINED…”
And his forecast, just so we can come back later and look at it?
“My most conservative estimate is that you could double your money over the next 12 months, if you get in now.
“But if all goes as I think it will, you could easily make 1,000% or more on this investment.”
OK, that’s about all the Thinkolator can handle for one day… so what’s our stock? This must be… Intevac (IVAC)
And, I should note, I’m not the first one to provide that answer — a few readers have been discussing this one, and they came to the same conclusion.
Intevac has historically been mostly an equipment supplier to the hard disk drive (HDD) market, with a thin film deposition device that provides protective films for hard disk equipment. This new product of theirs, designed for mobile phones and other handheld screen devices, is called optical diamond-like carbon (oDLC), and Intevac’s white paper introducing the technology does claim that adding this coating to glass does increase ‘breakage strength’ by 20% (and give 20X the scratch resistance).
I don’t know much beyond that about the technology, other than that Intevac is obviously hoping that they can get a major producer to use their technology, which would lead to sales of their thin film deposition equipment. They have an investor presentation here from a conference back in January that provides some overview.
What doesn’t match precisely is the ownership stuff — several of the institutions and funds that are major shareholders have not added to their position, though a few have added and, on balance, fund ownership is up a little bit. And there was one insider purchase earlier this year, the Chair bought $31,000 worth of shares in early February at $6.23 (not far from where the shares are now), but the CEO has not been buying — I suppose it’s technically accurate to say that the CEO has been acquiring more shares, as have most of the insiders, but they haven’t been buying them. I guess the optimistic slant on the story would be that they’ve been selling only some of the shares they’ve been given by the company, so insider ownership is gradually increasing.
Intevac is pursuing several other applications of its thin film technologies and equipment, including advanced chip packaging and solar photovoltaics, but their major market remains hard disk drives and their secondary business, night vision equipment for the military. They do say that they see a $1 billion revenue opportunity over the next five years in their thin film businesses ($500 million for display covers, which is what Curzio is talking about, plus $250 million for advanced packaging and solar and $200+ million for HDDs), and they also think that their advanced photonics/night vision business has $1.4 billion in revenue opportunity (though they’re not as specific about the timeline for that).
They appear to be in a pivotal year at the moment, with 2017 bringing their first profitable year since 2010… and clearly they’re hoping for growth to drive that profitability higher and help them dig out of the hole they were stuck in, presumably because of softness in the HDD business over the past decade or so. If you’re interested in the company, I’d urge you to spend some time reading their materials, and read through the conference call transcripts (the most recent one, from late January, is here).
The company is talking up the potential of oDLC with their customers, including one “top five handset maker,” and I don’t know when they’ll have news about orders for that customer or other potentials — this is a capital equipment business, so orders are huge but may be lumpy or hard to predict, they’re only talking about selling five to ten of their thin film VERTEX tools in 2018. That means the core “Lean HDD” systems and their ENERGi solar ion implant systems are likely to be more important so far, and they probably make up the lion’s share of the $64 million order backlog that they announced at the end of 2017.
The stock has been weak of late, mostly because the guidance they gave in January was that half of their backlog of solar equipment (ENERGi) would be pushed from 2018 into 2019 — meaning that they’ll still book the revenue, but won’t do so this year. In that conference call, the CEO also indicated, when asked about the handset manufacturer, that he’s “hopeful that there will be more press on this as we move out in the quarter.” The initial handset application will probably be a back coating for a glass-backed phone, which they say provides more flexibility for adding vibrant colors.
This isn’t a replacement for Gorilla Glass or for other display technologies, what they’re really trying to do is sell another layer of protection to cell phone makers — an extra thin film on top that protects all the other stacked thin film technologies that now comprise a modern display.
I have no idea what the potential is, but it’s relatively low cost and this is a relatively small part of the financial consideration for any handset maker, so it’s easy to see it either being a quiet winner or a quiet loser — I do have a hard time seeing a 10X opportunity here, but if they can generate meaningful growth in revenues again for 2018 and trade at a bit more optimistic valuation of 2X sales (which they’ve often reached before), it’s certainly possible to imagine that there’s room for the stock to double in price. The sales for 2018, we’re told, are likely to be back-end loaded after what will probably be a very light first quarter, so there may well be plenty of time to think it over unless there really is a dramatic announcement from a handset maker.
My guess, and it’s just a guess, is that any new application will ramp up slowly in one or two handset models and we won’t know this year whether that test inspires more models to be designed to use this additional thin film coating, or whether it becomes a competitive advantage and other companies need to order those VERTEX machines from Intevac. I also don’t know what competing technologies there might be out there for these thin films, so the risk might be relatively low because of the fairly steady level of business from their HDD and night vision customers, or because the company has some financial flexibility (no debt, and $35 million in cash), but I’ll leave you there to do your researchification.
What do you think? Sunny days ahead for Intevac? Think there’s “almost no risk?” Know about other protective film makers that compete with them? Better or worse technologies? Feel excited about their relatively steady government contracts for night vision equipment? Have a better idea to share with your fellow readers? Just let loose your questions and answers in the happy little comment box below. Thanks for reading!
P.S. In case you’re wondering, yes, we have covered Intevac before — Louis Navellier pitched it while the stock was popping last Summer, when it was around $11 (down from $14) and trading at about 22X expected 2018 earnings. Those earnings estimates for 2018 have now fallen by more than 50%, and the stock has similarly dropped from $11ish to $6ish… as seems often to be the case with small companies aiming to restart growth, the optimism has now been pushed out a year, with 2019 earnings estimated at 79 cents/share for a forward PE of 7.5. That’s from just a couple analysts, since this is a small cap stock, so apply however many grains of salt you like.
Disclosure: I own shares and/or call options on the following companies mentioned above: Apple, Intel. I will not trade in any covered stock for at least three days, per Stock Gumshoe’s trading rules.