De-teasing Gilder’s “Don’t buy 5G Stocks, Buy 15G Instead” pitch

by Travis Johnson, Stock Gumshoe | April 29, 2020 2:18 pm

Checking out George Gilder's latest "Gilder's Moonshots" pitch for 15G ("it's three times better than 5G!")

Today’s ad that we’re finally covering, after tons of requests, is for Gilder’s Moonshots, which is the latest publication launched in George Gilder’s return to newsletter world. Here’s the headline from the ad:

“‘Don’t invest in 5G stocks or even buy yourself a 5G smartphone… until you’ve heard about this chance to triple your gains on the same tech revolution…’— America’s #1 Futurist, George Gilder”

George Gilder was a well-known “futurist” and newsletter writer in the 1990s, and his Gilder Technology Report, which I think was published by Forbes[1], became one of the most visible cheerleaders of the dot-com bubble. Gilder has an admirable ability to assess trends and envision the future, though that hasn’t always meant that he’s right, or that he has made lots of money all the time — during that bubble, as he’ll now readily admit, he was focused more on the exciting “telecosm” ideas he was sharing and on the bright future than on the financials of those companies, and he almost went bankrupt when the stocks crashed and his newsletter subscriber base shriveled almost to nothing as the bubble popped… there was an interesting “where are they now” piece on him in the Wall Street Journal about 15 years ago,[2] when he was still really digging out of that 2001 hole, and plenty of coverage of him after the crash (including a fun “Madness of King George” bit in Wired[3]), but after that he disappeared from our part of the world for a bit, mostly writing books and seemingly more or less in retirement[4] (he’s 80 years old now), until resurfacing with a new newsletter and beginning to rebuild a public profile last year.

He has been a lightning rod for controversy for decades, both in investing and on lots of social issues where he has been outspoken, and newsletter publishers LOVE that stuff — anyone who can inspire either love or hate comes in with a free marketing audience. There’s a reason that newsletter pundits so often cultivate that image of someone who goes against the grain, is hated, or stands out as a bit crazy — and it’s the same reason that professional athletes get outrageous tattoos or dye their hair wild colors: it gets attention, and the people who attract more attention make more money.

So Gilder has now partnered up with one of the divisions of Agora[5] to get the newsletter going again under his “Gilder Press” name. He started with a bunch of free commentaries, as most newsletter folks do to build their brand awareness and mailing list, then launched a monthly newsletter at an entry-level price for a mass audience, and now we’re seeing a push for the real publisher money train with an “upgrade” newsletter at a dramatically higher price — essentially following the “upgrade you until it hurts” model that most newsletter publishers have perfected (start with a free sub, upgrade you to a $99 basic newsletter, then pummel you with ads until you succumb to the $5,000 newsletter or a “lifetime” offer). This particular ad is for Gilder’s Moonshots, sold for “half price” at $2,500 a year (no refunds or trial period, so if it doesn’t match the advertised hype you’re left with the tepid guarantee, “if you don’t earn 1,000% on something, and you’re disappointed enough to call and complain, we’ll give you another year free!”).

The ad starts with getting us all hot and bothered about how brilliant Gilder was in his soothsaying — we hear about many of the products and trends he envisioned, and with a bit of “what if” imagining that could have gotten you rich if you connected those trends to a particular public company early on (though they don’t say that Gilder actually made those recommendations… which means he didn’t, they’re always very clear about claiming past success but murky about showing “backtested” or “could have” possibilities):

“Ronald Reagan[6] quoted George more than any living author… and bought copies of his book to give to every member of his cabinet.

“In the decades since, anybody listening to George’s uncanny forecasts has had the chance to rake in tech gains of 4,132%… 3,781%… 3,453%… and 4,234%.

“Soon after he predicted today’s smartphone — a full 14 years early — anybody who owned Apple could have picked up a 34,250% gain.

“When he called the rise of streaming TV, you could have picked up another 31,706% return on company that appeared years later — Netflix.

“Today, however, this visionary is here to talk about what he’s convinced could be his biggest — and most controversial — stock market revelation yet.”

In general, it strikes me we should take Gilder’s “big picture” future prognostications seriously, he clearly has a knack for imagining the extrapolation of technology developments into the future, and the adoption of those new technologies… but not jump immediately into believing that the stocks he likes will always be super-profitable or become the best way to invest in those future developments. He’s been talking for a couple years now about how blockchain[7] will be the structure of the next internet, and how that will fuel the disintegration of the power players (Alphabet, Amazon, etc. — his highest-profile recent book was Life After Google: The Fall of Big Data and the Rise of the Blockchain Economy, published about two years ago), and that might be true, dominant leaders have certainly been “disrupted” out of existence in the past… but those companies are certainly chugging along nicely right now.

And don’t get too sucked in by the many charts in Gilder’s latest “presentation” that claim 4,000%+ gains if you sold his recommendations at “peak gain” in 2000 or 2001 — after all, by all accounts he didn’t sell those recommendations anywhere near those bubble peaks, or tell his subscribers to sell. (They are honest about this in the ad, saying things like “These are just examples, of course, not pulled from your newsletter track record” … but, of course, our eyes are greedily drawn to the charts of 34,000% gains on Apple, and we begin imagining ourselves swan-diving into Scrooge McDuck’s Money Bin).

But that’s just my sentiment going in… let’s see what he’s actually talking up in his ad… which, as with so many newsletter pitches, takes the form of an “urgent presentation” with Gilder being interviewed by Laissez Faire publisher Doug Hill and analyst Bob Byrne[8].

“George will show you why — even as the mainstream pours into overhyped so-called “5G” stocks like Samsung, Apple and T-Mobile — “15G” could be the real shortcut to wealth in this tech revolution.”

And this is largely a pitch to invest in smaller, more speculative stocks that are exposed to advancements in telecom and tech — they start buy putting up a straw man and saying that all the top lists of 5G stocks like Qualcomm, Apple, Samsung and the like might do OK with 5G, but the real gains will come from other ideas… more from Gilder:

“… if you’re only looking at household-name 5G stocks, you’ll miss out.

“That’s why I’m urging anybody who will listen to look at what I call ’15G’ stocks instead. They come with a little more risk, granted.

“And I wouldn’t want anybody to invest more than they’re comfortable losing.

“But if you really want to invest in the cutting edge, this is where you’ll find it. With the “15G” companies that nobody’s talking about… yet.”

So we’re looking for little fellas here… more from the ad:

“Even now, the top of the 5G market is crowded with the companies that still have a lot of their news priced in.

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“I’m talking about companies like Apple, Broadcom, American Tower, Crown Castle, Texas Instruments, T-Mobile, Qualcomm, Cisco, Verizon and Charter Communications. I doubt there’s a name in the bunch you haven’t heard.

“Even if you set out to buy just a single share in each of those 5G giants, it would set you back roughly $1,634. For just one share of each name.

“Meanwhile, the six ’15G’ companies I want to show you are different. They’re still off-radar. And their tech is so new, almost nobody’s talking about it yet.”

And yes, the “15G” term is just made up as a way to illustrate that he thinks they have “triple the potential” of the 5G stocks you’ve heard of… get it? Three times five is 15? I know, it’s as silly as the old pitches we saw for “801(k) plans” because they were “twice as good” as 401(k)’s, but apparently those shorthand illustrations still work… the questions here at Gumshoe HQ tend to pile up whenever a pundit (or his copywriter) invents a new term.

Interestingly, Gilder even gives us a little glimpse behind the curtain — he talks about the publishers bringing him out of retirement, and what they’re spending on helping him rebuild his newsletter empire…

“I’ve joined forces with one of the biggest financial research organizations.

“And they’ve backed me with over $5 million to build a new research team of 11 analysts, researchers and general detail hounds…

“So I’m finding more opportunity now than ever. That’s how I came by the six “15G” moves I’d like to show you today.”

Just goes to show you how much publishers are willing to spend to get a well-known name that they can leverage[9], I guess (you’ll see a lot of them even using celebrity spokespeople who aren’t involved in the actual newsletter content, too, whether that’s the CNBC “Shark Tank” folks like Robert Herjavec, or Bill O’Reilly for the Oxford Club[10]) — though $5 million isn’t so much for the Agoraplex, which has hundreds of editors and marketing experts to throw at any new letter they can dream up.

But anyway… we do finally get into some hint-dropping about the six stocks he’s recommending, so let’s dig in and ID them. The first stock is the one that gets by far the most discussion and teasing, so we’ll start there:

“… one of the problems very few investors know about is that, while 5G signals are fast and can carry a LOT of data, they don’t travel very far.

“So we’ll need a lot more nodes and other devices that can extend those signals. And this first company I’ve uncovered does exactly that.

“Going all the way back to 1996, they’ve been making the internet more mobile and accessible with their proprietary tech, ever since the first “G” cellular network. Yet not one American in 10 has heard their name….

“One of the big reasons for that is because this first “15G” company has been hiding in the shadows, letting giants like Verizon license and rebrand their technology.

“It’s a bit like Intel or Qualcomm, back when nobody knew who they were either. Even though their chips were packed “inside” America’s most popular laptops and phones.”

OK, so we could already start guessing here… but let’s get the rest of the clues first.

“… this company also has deals locked in with AT&T, T-Mobile, Uber[11], Barclays bank, Bell, DHL and more….

“… for as little as $6 a share — is like getting backdoor access to the biggest names in the industry, but for a fraction of the price.”

And later, he adds:

“… the first ’15G’ company I told you about has started to move the needle. I’ve seen at least one source call it ‘the next Cisco.

“Another high-profile source just named this as a company that’s ‘finally in the right place at the right time’ and has said it’s sitting ‘in the middle’ of this whole communication revolution.

“I’ve said the same for months now, calling this ‘one of the best-kept — and undervalued — secrets”’out there for anybody who would listen.

“Back in October, it was still just a $456 million company. Now it’s closing in on $600 million. And it’s trading over $1 higher, even with all the volatility.”

OK, so that tells me this “new” ad that Gilder’s publisher is generating so much excitement over is actually using pretty old data — this is just another pitch for Inseego (INSG), which has exploded since the March downturn and is now a $1.3 billion company (but yes, it was at $5 and a $450 million market cap in October).

I’ve covered Inseego a bunch of times, it has been teased by several different newsletters over the past year — Ian King[12] was the first one I saw on this stock, with his “Fluorescent Sand” ads that hinted at INSG… Jon Markman[13] was not far behind, and he did call it the “next Cisco” when teasing it back in June[14]… then the Oxford Club folks put on a huge push for it as the “linchpin device for 5G” over the past six months or so[15], behind David Fessler[16]’s name.

I’ve been generally optimistic about the short-term opportunity for INSG (though I certainly didn’t expect it to double this year), but skeptical about the long-term potential. Here’s a little more from Gilder about why he likes them, starting with his stories about being at the Consumer Products show in Las Vegas and seeing their device everywhere:

“At the Nvidia booth, they were showing off HD games that streamed live from the cloud to a smartphone — using one of this company’s devices…

“Just a few feet away at the Verizon booth, they had smartphones uploading data-intense 3D scans of entire landscapes — again using this same little company’s device, behind the curtain.

“And over at the Sprint booth, when they took the wraps off their connectivity bundle for remote work — again, you couldn’t help but notice the bundle centered around this small ’15G’ company’s mobile technology.”

And that’s because Inseego (which is mostly partnered with Verizon on this) and NetGear (with AT&T) were pretty much the only companies distributing those 5G “hotspot” pucks that were needed to demonstrate high speed in Las Vegas. That won’t be the case forever, but they’re the first wave and those companies are the survivors of the router/puck business. Inseego used to be called Novatel Wireless, in case you’re wondering why a longtime pioneer doesn’t sound familiar — they almost disappeared when demand for “hotspot pucks” evaporated in recent years and that business was commoditized, but reorganized and pushed into 5G with Verizon a couple years ago to try to take advantage of the next big wireless upgrade — getting attention at first because Verizon’s initial 5G rollout was largely a “fixed wireless” product, sending 5G signals to homes and businesses as a broadband competitor, not a mobile service.

Here’s what I wrote about Inseego when I was covering them last Fall for Fessler’s tease:

Analysts do have some hope for Inseego because of their 5G “MiFi” router and hotspot business, probably largely because of their sales pipeline through Verizon as that company’s fixed broadband service rolls out to more cities, but the expectation is still quite tepid compared to David Fessler’s forecasts — analysts see revenue growing about 20% next year, leading them to profitability (at $8, the stock trades at about 170X 2020 earnings expectations… but a more reasonable 30X 2021 earnings forecasts), with another 20%+ revenue burst after that (though there are only a few analysts making forecasts for this small cap company, and those earnings expectations have moved out by about a year since we first covered the stock last summer, so take that with a huge grain of salt).

If those forecasts turn out to be right, then there’s reason to think that $5 is a reasonable price to pay for the potential that Inseego’s 5G router business could have some strong growth for a couple years if they can grab a decent market share in an emerging business, like their predecessor Novatel Wireless did with 3G and 4G “hot spot” pucks using their MiFi brand 10-15 years ago. But I’d hesitate to assume any big picture 5G opportunity for Inseego beyond that point, there’s so much competition in 5G gear that will emerge, no one is sure what will be popular or successful, and I’d just be guessing at this point about who might “win.” Which makes the stock now, at $8, a lot more worrisome than it was last summer… particularly because the big earnings growth expected for 2020 at that time has now been pushed out to 2021.

There are, of course, other companies that make this stuff — and it’s not just Huawei or other verboten Chinese suppliers (though most of these companies use contract electronics manufacturers like Foxconn, which does a lot of its assembling in China[17]). The most direct competitor right now is probably the larger Netgear (NTGR), whose Nighthawk routers and hotspots are similar to Inseego’s MiFi products (so far Netgear has partnered up most closely with AT&T, Inseego with Verizon) — Netgear is already profitable and has a broader line of business, but also had a huge drop in revenue in 2019 and is expected to grow revenue at less than 1% a year over the next couple years.

And as you might imagine, expectations have changed a bit, helping those shares lift in price — the revenue forecast lurched dramatically higher about a month ago, when they announced that they were getting a huge revenue surge from the “stay at home” orders for the coronavirus[18], leading to heavy orders for their 4G and 5G “MiFi” hotspots that are needed to provide internet access in places without broadband or existing WiFi networks (a lot of schools sent these products home to make sure kids without home WiFi could still do schoolwork, for example). They have boosted capacity, so they’re trying to take full advantage of this new surge in demand and they haven’t reported their first quarter results yet (that will be May 6), but the preliminary number they’re giving for that quarter is “in excess of $52 million” (which had been the consensus forecast), and the second quarter is expected to come in around $80 million, about 30% higher than had been expected.

Those are huge surges, and that has driven the company to new 10-year highs, well above where I ever expected to see the share price, though I remain somewhat skeptical in the long term just because Inseego has ridden these upgrade waves before — as Novatel Wireless they were a dot-com darling when they went public in 2000, then rode the 3G surge from 2004-2007 and again had a few moments of enthusiasm in 2010 with the initial 4G rollouts in 2010-2014, but it has mostly been a lost decade for INSG until this 5G enthusiasm really kicked in. Gilder sees a lot of opportunity for them in offering mobile hotspots to turn 5G into WiFi signals, and maybe that’s how it will work, I imagine he’s got a better handle on how commercial adoption of 5G will work than I do… I’m still a little hung up on the idea that they’re offering a commodity product that will pretty rapidly fall in price or become unnecessary as more 5G-enabled devices roll out, but maybe I’m just being stubborn — he pegs this one with a “potential 985% return over time.”

It should be interesting to see what they say about the sustainability of this revenue surge on their conference call next week, analysts have been slow to catch up with the company and seem to still be holding back on any big upgrades, they call it a “buy” but the average price target is still down around $10, 30% below where the stock is trading. I’d be really cautious about chasing this kind of surge into earnings, but I’ve also been too skeptical about this one all the way along so you probably want to follow your own counsel on Inseego.

And what’s the second stock? Let’s get to the clues…

“This is a company that makes, among other things, the ‘brains’ for self-driving cars.

“I’m not sure your viewers know this, but your average self-driving car generates a whopping 4,000 GB in a day….

“you’ll need somebody to make the sensors that can collect all that roadway information and process it in real time.

“Our second ’15G’ company has mastered it. But they’re so off-radar right now, almost nobody’s heard of them. And their shares are also still dirt-cheap.”

OK, so it sounds like maybe they make the nerve endings, not the brains… if we’re extending that metaphor, sensors are what provide the input, the brain is what processes it. Brains would be the beefy processors like those sold by NVIDIA and AMD, but we’re being teased with something different here.

More from the ad:

“Advanced Driver Assistance… (ADAS) tech is what they call the sensors that can watch blind spots and give collision warnings for both bumpers….

“They alert onboard computers to pedestrians and cyclists… auto-direct lane changes and parallel parking… manage brakes in bad weather… and much more….

“And between automation-assisted driving and self-driving cars, the ADAS market is absolutely exploding….

“This second “15G” company I want to tell you about — and they’re also completely off-radar for American investors — secretly dominates this AI-powered field.

“… actually the most advanced sensor innovator in the world.

“Especially when you’re talking about vision- and audio-sensing technology, which is exactly what you need in self-driving cars….

“Recently, they locked in a major deal with a top automotive customer for their ADAS technology. They won’t tell me who.”

And apparently this company uses one of our favorite business models, licensing and royalties — meaning they don’t actually build the sensors, they just innovate, patent stuff, and collect royalties from companies who want to use their technologies. Here’s how they put it in the ad:

“Just like the first ’15G’ company George told you about, this second one also does big business by quietly licensing their patented technology to big brands.

“I’m seeing proof that they’ve made deals with Intel and Bosch[19], two of the three top power brokers in self-driving cars… their AI-powered sensors are also showing up in all kinds of other new-to-market devices, from smart security cameras and smart TVs to drones[20] and VR headsets… wireless cell towers, too. As well as tablet computers, wireless motion detectors, smart speakers and smartwatches….

“And at least a dozen different brands of smartphones, including four of the “Galaxy” models from Samsung.”

OK, so it sounds like they’re in almost everything. And apparently there are hundreds of licensing partners…

“…they also have deals in place with over 100 other partners, including Dolby, Korg, Microsoft, Tower Semiconductor and ARM… to name a few.

“Even better, they have 375 companies licensing their designs, including Broadcom, Fujitsu, LG, Nokia, Intel, iRobot, Toshiba, Samsung, Yamaha, Sharp and Texas Instruments.

“ALL those companies pay ongoing royalties to keep using those designs. It’s almost like they’re collecting ‘rent’ on those products. Or reselling the same inventory to repeat customers, again and again.”

And a couple hints about the size and price….

“There was a time when you could have gotten in for as little as $3 a share. But those days are over. Already, this company’s revenues are up 10%.

“The share price has been on the move.

“But there’s still room to get in at a good price if you act quickly….

“Just on the smart-car tech alone, if this little company were to grow as big as Aptiv, one of their top smart-car systems technology developers, that’s a leap of 22 times today’s market cap.”

This must be the tech IP company Ceva (CEVA)[21], which did indeed post 10% revenue growth back in the September quarter (though it’s a lot higher than that now, closer to 30% last quarter). They are in the licensing business, they’re the right size (1/22 of Aptiv (APTV)[22] would be the $700 million neighborhood, right where CEVA sits), though it’s nowhere near $3 a share (“there was a time” when it was, though, back in 2003 — over the past decade it has bounced around between $15 and $45). And CEVA does have more than 400 licensees now, mostly chipmakers who are licensing its signal processing designs, particularly for bluetooth, and AI processors.

This one may be worth a look, it’s always been an appealing-sounding idea because of the basic magic of the licensing and royalties business (lots of people paying for the same technology, bringing huge gross margins), but I haven’t thought to take a look in a long time.

And it turns out we haven’t missed all that much, at least so far — it has grown over time, and has been a fairly steady cash generator, but they haven’t turned that into a particularly impressive return for shareholders. It’s an oddity of the numbers on a given day, but I was amused to see that their Return on Equity was coming up as 0.1% — which seems somewhat emblematic of their inability to turn those licensed technologies into a much larger business. CEVA has been a decent stock to buy when it’s a little beaten down, but not one you want to chase during good times — you can buy it today for less than an excited trend-chasing shareholder might have paid in 2011.

CEVA is small, so there isn’t a lot of analyst coverage — but those anlaysts do expect them to be profitable. The guess is that adjusted earnings will come in at 46 cents this year, a drop from last year’s 59 cents, but that they’ll rebound to 75 cents in 2021 on the strength of revenues that will climb from $87 million in 2019 to 103 million next year. The downside of an extremely high-margin business like licensing (gross margin is 90%) is just the reverse of the exciting upside — that a small drop in revenue can also bring a dramatic drop in earnings. They had a great fourth quarter, largely because of good volume in cellular phone sales, which are still their biggest revenue driver, but I don’t really have a guess as to what the impact of this “Great Cessation” for the coronavirus will have on their year.

Pretty much any semiconductor company you can think of licenses something from CEVA, but that doesn’t mean CEVA always soars higher when the chip stocks do well — here’s how their stock price has done over the past decade, compared to a few of their licensees, the semiconductor index, and the Nasdaq 100… that’s CEVA in blue down there at the bottom:

[23]

Not terrible, but certainly below average. If it’s going to make fortunes for somebody because of 5G or AI, well, you’ve clearly still got time to get on board. They break down their business into a little USA Today-style infographic here[24] if you want just a quick look at the business, it looks like the big driver has been the shipment volume for bluetooth devices that use CEVA licenses.

Moving on, what’s the third stock?

“They’re making incredible strides by merging artificial intelligence and network security. This could erase a huge concern a lot of telecom customers have with 5G.

“So far, this third firm has deals with Microsoft, Symantec, Ericsson and more.

“I expect them to dominate this new territory.

“And yet again, shares are cheap — about $8.”

(They also say “you can get in for under $5,” so perhaps some further evidence that this presentation is mixing in some older data)

So what does this company do? According to Gilder it’s all about improving network security for those millions of new 5G devices.

“This third American company has a solution.

“It’s also little known to most Americans. That’s because most of what it does happens behind the curtains. And also because its approach is so new.

“They innovate network security.

“That’s not the new part — lots of companies focus on cybersecurity[25].

“What’s new is that this firm’s proprietary security technology uses an AI engine to get smarter as it protects your system.”

And apparently this is also not a “name brand” company…

“Like the other two companies, this firm also resells its products through better-known brands like Microsoft, McAfee, Symantec, Ericsson, to name a few.

“Owning shares in this small firm is practically like cutting yourself in on the global marketing push that all those bigger companies are sure to launch.”

AI for cybersecurity and network security is not a new or unique “edge”, as far as I can tell, lots of companies say they’re teaching machines how to learn to provide better security… but which one could this be?

For this one, Thinkolator points us with some certainty (though less than 100%) at A10 Networks (ATEN), which is actually sill in that “below $8” area (where they’ve been for most of their life as a public company). A10 positions itself as a leader in secure application delivery across platforms, building in firewalls and DDoS protection across various networks and partnering with most of the telecom and cloud companies. Their recurring revenue has been growing steadily as they move to more subscription licensing, but we’re not talking about blockbuster growth by any means — top-line revenue has actually declined for a couple years in a row (I’m just pulling this info from their latest Investor Presentation[26]).

A10 doesn’t really have any analyst coverage, and they’re still quite small (market cap is now closing in on $600 million, revenue about $200 million) — if Gilder is right about their potential to grow quickly then there could be some positive surprises, since the licensing model means they can ramp up sales quickly if demand increases, but there’s no sign yet of that growth actually hitting the income statement. They report next on May 7.

And we get a few (much more limited) clues for the other three stocks… what might they be?

“A ’15G’ Company That’s Built a Fortress for the Cloud — Faster networks will mean an explosion in cloud storage — and cloud security. The average top 10 cloud security stock has listed for as high as $514 a share. You can now get this one for less than $20. Even though it’s got better profit margins than all five FAANG stocks and the best cloud protection platform online.”

This one I probably can’t be at all certain about for you, there are so many “cloud protection” stocks, including some that have been hyped in the past, like Crowdstrike, but pretty much all the cybersecurity companies (McAfee, Sophos, Kaspersky, VMWare, Symantec, CloudAware, Palo Alto Networks, Proofpoint, Qualys, and dozens of others I’ve never even heard of) offer something that they claim is the best cloud security product or service. I’ll throw out a wild guess here in Cloudflare (NET)[27], a 2019 IPO[28] that’s generally considered more of a content delivery network operator but which is, like most such companies, also tied in with security. They outline their view of cloud security here[29].

And yes, their gross margins are better than most of the FAANG stocks (not Facebook, which still has an extraordinary 80%+ gross margin), though not their actual profit margins (since they’re not profitable). Not a great match, but an interesting company if you’re into researching in that area — analysts are mixed on the appeal of NET right now, but they do see revenue doubling between now and 2022. You can see their latest investor presentation here, they’ve grown quickly and have pretty impressive scale already — I’ve looked at them in the past and opted into semi-competitor Fastly (FSLY)[30] instead, mostly because of the valuation difference, but all of these “clean up, speed up and secure the internet” companies, who are to some degree following in Akamai’s (AKAM) footsteps, are in a pretty good place given the increasing traffic demands.

Next!

“The ’15G’ Firm With the World’s Best Antennas — You’ve heard of Skyworks, Texas Instruments and Qualcomm. But this tiny firm has what they don’t — the world’s first RF antenna for capturing the entire bandwidth of 5G signals. And it does it with half the power draw. This small-cap is extremely well-positioned to grow, enough to quintuple the shares.”

There are plenty of big companies working on antenna technologies, including folks like Murata (MRAAY), and lots of little private companies innovating in the antenna space, and this sounds like a pitch for the actual little mobile antennas but it could also apply to the base stations and antennas and match up with CommScope (COMM) or Laird (LARRF), among many others. He could also be hinting at the RF filter companies, I suppose, since folks tell me he’s been on the Akoustis (AKTS) bandwagon along with Jeff Brown[31], Chris Woods and others (and maybe Resonant (RESN)[32], who knows), but those aren’t really “antennae.” I’ll have to leave you to guess at that one, but anyone in this business has to face the gigantic leaders like Broadcom (AVGO)[33] or Qorvo (QRVO)[34] (or, perhaps, get acquired by them if they have products that are strong enough to worry the giants).

And one more…

“The ’15G’ Company That Safeguards the IoT — Your home could soon have hundreds of devices connected to the insecure internet. This company has the technology to comb those mini-networks nonstop, looking for “glitches” and threats. This is very small player that’s growing extremely fast. And they’ve got piles of cash — up to 40% of their market cap is matched by funds in the bank. It still lists under $10 a share.”

That could be “deep packet inspection” company Allot (ALLT), which did have a ~40% cash pile when the market cap has dipped down to the $200-250 million neighborhood, when the shares were well below $10 last year (and in March of this year), but the scenario is slightly different now with the stock back to about $11. You can see Allot’s latest Investor Presentation here[35]. They are growing pretty steadily, with much of that growth coming from overseas markets (they did a big deal in India[36] not long ago), and they seem to be close to the break-even point — they are expected to become profitable probably next year if the pace of revenue growth keeps up, and it can be appealing to buy steady growers who are just becoming profitable, even if investors are a little skeptical because of how disappointing their first few years were after a high-profile IPO in 2010.

So those are the six we can name, or at least a few we can name and a few we can guess at… but Gilder also hints at some other “bonus report” stocks for subscribers, so let’s see if we can solve any of those puzzles.

The first one is a microcap stock with some kind of artificial intelligence connection… from the ad:

“I recently discovered a company out of San Jose, California. They’ve got a $24 million market cap, so we’re talking really small.

“They focus on voice-driven sensors for ‘hands-free’ devices. An example would be the TV remotes with a microphone so you can just tell it which shows to load up.

“These devices need to hear in noisy rooms. They also need to process different types of voices and accents. This company’s special chips can “learn” how to overcome those barriers, using AI.

“They also make smart voice sensors for animal trackers, elder care and countless other uses. Their devices all have low power demand and, with this company’s proprietary ‘toolkit,’ device-makers can program the chips without using a single line of code….

“The company has already secured contracts with the Department of Defense[37], smartphone makers, military contractors and — recently — cut a deal with China’s e-commerce giant, Alibaba.”

This one is very likely QuickLogic (QUIK)[38], which I don’t otherwise know much about. They’ve been trying to shift to a “subscription” model (like pretty much everybody else), partly spurred by their recent acquisition of SensiML and its software platform. There’s some appealing potential for growth there, you can see the optimism in their Investor Presentation[39], partly since they’re so tiny and do have a lot of relationships with much larger customers, but they haven’t really proven it yet and the company has a long and extremely disappointing history with investors so you can’t blame folks for being skeptical. Might be worth watching, I haven’t thought about this company for years and des;ite the the stock has had some moments of revival and enthusiasm along the way when business picked up (the chart has certainly been on a downward trend for 20 years, but they have had a few moments when the market cap jumped bak up above $200 million… it’s currently about $35 million).

Hard to imagine that the company is making or selling anything that’s genuinely unique or critical with that tiny market cap — if they held any sway over their customers most of those big partners could buy them out without breaking a sweat — but tiny companies with some potential are always fun to follow even if you have to suspend your disbelief a little.

What else?

“We also talked how blazing fast ‘internet everywhere’ would ratchet up need for security. Two of my favorite companies right now have unique approaches to that problem…

“The first one specializes in RFIDs.

“If you’ve ever used Apple Pay or Google Wallet, or paid for a toll using E-Z Pass, you’re using a kind of RFID technology. But it’s used everywhere, to track inventory, runners in a marathon, credit cards with chips — it’s a long list.”

OK, RFID stocks have been touted as the next wave of both mobile payments and the Internet of Things since the first time George Gilder was famous… but what’s new about this one?

“… this company has figured out how to transfer the identity tied to these tags.

“Let’s say a factory makes a bike and loads it on a truck, headed for a retail shop.

“The bike could have an RFID tag that ties it to the factory… then transfers that ownership ID to the shop… until you buy the bike, and it transfers to you.

“They can do that by tracking the ownership using something else I talk about a lot, blockchain.

“5G adoption is going to push blockchain use to front and center. This company could make a fortune as they do.”

Blockchain and RFID have been talked up together for at least the past few years, since RFID’s primary business case is tracking inventory and blockchain can be one way to record that tracking data in a secure way. And there are some blockchain platforms that have been experimented with in RFID, from what I see in my browsing, but my guess is that Gilder here is actually pitching the most visible “pure play” RFID company, Impinj (PI)… which does talk some about blockchain, though their primary business is the actual sale of RAIN RFID tracking chips and sensors and the connection through the “Impinj platform.”

The stock had a rough 2018 thanks to a dip in revenue, after high hopes had built after their 2016 IPO and big run in 2017, but seems to be coming back a bit now — they’re not yet profitable, but they’ve gotten onto a better track for revenue growth. At least until this coronavirus crisis kicked the economy in the teeth. They just reported a couple days ago, with strong “beat” earnings and a profitable quarter thanks to a pre-shutdown order surge, so the stock has bounced nicely but nobody really knows what the rest of the year will look like (like most companies, they pulled their guidance). You can see the transcript of their conference call from Monday here[40] if you’d like to get the latest from the company.

And one more…

“The second company is hidden behind the branding for just about every bank in America.

“If you’ve ever made a mobile deposit, chances are you’ve used their product. But you still probably don’t know who they are.

“Mobile banking is obviously another industry that could explode with ubiquitous, fast internet.

“All I need to say is that this second company is growing faster than Apple, Google or Amazon.

“But you can still get in for less than $10 a share.”

That one’s pretty well got to be Mitek Systems (MITK)[41], which does indeed specialize in providing the engine for those “mobile deposit” apps that banks use for those of us who still depend on the occasional paper check. This is probably a good time for them, since you’d assume customers are relying more and more on mobile deposit given the closure of bank branches… but it still seems to me a fairly low-potential business, given the ubiquity of the product and the fact that if Mitek got too expensive their customers, particularly larger banks, have plenty of other options[42]. Maybe I’m too cautious on that front, it is true that their transactional revenue (they call it “transactional SaaS”) is growing faster than the rest of the business, up almost 40% year over year, so maybe they’ve got more leverage than I imagine.

They do offer other products and services to banks, including some identify verification services that are probably growing in importance (that’s about a third of revenue, 2/3 is from the mobile deposit “platform”), and they are profitable and according to their last Investor Presentation[43] they were expecting revenue growth to continued to be strong at 15-20% this year (that was before the coronavirus, we’ll see what they say when they report earnings tomorrow).

MITK trades at about 20X adjusted earnings (for 2020), with the few analysts who cover the stock expecting earnings growth of about 10% this year and better than 20% net year, so if you like the positioning and the longer-term outlook that’s fairly reasonable.

And this is already a crazy-long piece for you on this wild Wednesday, so I’ll leave you there — not a lot of “brand new” ideas, and most of those are teased using 2019 or January 2020 data, which is frustrating when a newsletter is selling itself based on that “urgency” and not offering refunds for folks who find their “reward” is an outdated “special report”… but that doesn’t mean they’re terrible investments. Have any favorites in the bunch? Any ideas you prefer that are small-cap names with some 5G potential? (or “15G”, if you prefer) … let us know with a comment below. Thanks for reading!

Disclosure: I currently own shares and/or options on Apple, Crown Castle, Amazon, Alphabet, Fastly, Intel and NVIDIA among the companied mentioned above. I will not trade in any covered stock for at least three days, per Stock Gumshoe’s trading rules.

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