There are lots of different “story” pitches you can make about a stock, but one of the most compelling ones is the “next big thing” that will destroy a product that we already know and love, and that is extraordinarily profitable.
And, not coincidentally, a product made by the company that has the most popular stock in the world — when you write about Apple and their products, you get attention … a fact which has not, I’m sure, gone unnoticed by Nicholas Vardy. He’s pitching his “iPhone killer” idea to potential subscribers of Global Stock Investor. The letter is “on sale,” as every letter seems to be almost all the time, for about $100 a year.
But this “iPhone killer” idea? Let’s see if we can’t sniff it out for a price that’s a bit more free-ish, shall we?
Here’s the enticing pitch from Vardy:
“Invest Today in the ‘iPhone Killer’ and Watch As the Company Expands Production, Revenue And Your Profits by as Much as 8X…
“Secret new technology makes Apple’s phone look as ancient as dial-up ….
“It’s not often I get this excited — but I’ve discovered a company set to release a secret technology that blows away the iPhone.
“And it’s got Apple sweating. Because as advanced as the iPhone and the iPad are, Apple would give their eye teeth to get screens this vivid, battery life this long, and functionality they can only dream of.
“But the competition’s beat them to it.”
OMG, you think, even if I can’t buy the stock I must have this phone, right? So what is it? What is this advanced secret technology?
Here’s some more from the tease:
“But a few years back, this company started experimenting with fusing carbon — an organic compound — to LEDs. They called them OLEDs, or Organic Light Emitting Diodes.
“Everyone else ignored OLEDs. Why?
“Some 75% of the energy produced by them was wasted as heat. But this small company believed in the process, and licensed or registered over 1000 issued and pending patents.
“But in a recent stroke of genius, they perfected a process called ‘phosphorescence’ which enables OLEDs to produce the same amount of light, consuming 75% less power! This means they have incredible applications in a whole new generation of flat-panel screens.”
Vardy doesn’t mention it in his tease (probably because it would make it too easy to sniff out the company), but these phosphorescent OLEDs are commonly referred to as PHOLEDs.
So how does this company make money?
We’re told that this screen is going to be in new Droid phones, but not in the iPhone. And that the company will be earning big royalties. Here’s how Vardy puts it:
“…this company is going to ride the new Droid phones to record revenues. Production is about to ramp up from 5 million units per quarter…
“…to an amazing increase of 90 million per quarter, or a 1600% jump!”
The royalty thing is apparently key, we’re told that it’s the mainstay of “their ultra-lucrative business model” … here’s the explanation for the Droid business:
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“Fundamentally, it’s a high-recurring revenue, high-margin business.
“In the case of the Droid iPhone killer, they get paid a royalty of about 2%, based on the prices of a mobile phone’s screen. Which amounts to about $30. So, with an increase of 85 million units per month, even with 50% costs or discounts, it’s not unreasonable to expect an eventual corresponding revenue increase of some $1.27 BILLION per quarter – or 8-times the revenue they receive today!”
Vardy tells us, in fact, that the revenues are ready to ramp so quickly with more companies licensing their technology that this stock “could be like getting Microsoft stock in 1988.” Adjusted for splits, that would mean you bought Microsoft at a buck or two, not bad.
More clues for us? We’re told that they’ve nearly doubled their revenue in the last year, and that they have “0ver 30” agreements with manufacturers in Korea and Japan.
And we’re told about some more of the applications for their technology that might catch fire:
“Solid state lighting — no more light bulbs or irritating fluorescent replacements!
“Organic Vapor Jet Printing, a dramatic development that allows solvent-free technology in high-resolution direct printing
“Ultra-efficient solar panels, which have gotten attention of the green energy crowd.”
And then, finally, one last clue:
“… last February, the U.S. Department of Energy honored them for their innovations. Along with the U.S. Department of Defense, they’ve entered an agreement for a variety of customized technology prototypes.”
All that, and it trades on a US exchange. So who is it?
Toss all that info into the mighty, mighty Thinkolator … and we find that this must be …
Universal Display (PANL)
Which makes me mad. Not because of anything to do with Nick Vardy, but because I owned this stock years ago and gave up on it far too early — this is why I strive to be a patient long-term investor, because too many of the stocks I give up on or sell for better opportunities turn into world beaters years later, when I’m no longer even paying attention.
Universal Display may or may not turn into a real world beater, but their stock has certainly been on a tear — the company has been around for a long time, losing money hand over fist every year since the mid-1990s, and the stock has bounced around quite a bit on news of research deals, grants from the government, or sexy convention demonstrations of the flexible video screens that get everyone so excited about their OLED technology (even if no one is completely sure how they wo