This ad from Ian Wyatt has been running for a little while, with some apparent variation, but he keeps aggressively re-pushing it as a “new” webinar, so our readers keep asking about it, and I haven’t covered the tease yet… so that’s our project for today. What are those top five stocks he keeps teasing?
Well, I sat through the webinar so you don’t have to (like many publishers, Wyatt seems to have been inspired by the time share industry… force people to sit through a two-hour seminar, and some of them will buy anything you pitch just to make it stop), and I sifted out the clues to feed to the Thinkolator… so we’ve got five answers for you.
You can go subscribe to his Million-Dollar Portfolio ($995, nonrefundable) if you’d like to, but don’t throw your money down just to learn some “secret” stock picks… that’s what we’re here for, to help you get answers so you can take the time to do your own research, and get rushed into a big commitment (or have your opinion about those five stocks biased by the fact that you just ponied up a thousand bucks to learn what they are).
The basic spiel is that 5G is coming, which we’ve certainly heard before from pretty much every tech pundit over the past two years… and that Wyatt has the best stocks you can buy for huge gains, since the “usual suspects” like Verizon, AT&T, Apple or Qualcomm won’t give you the big returns you might enjoy from smaller stocks.
He describes his ideas as “a handful of 5 undiscovered technology stocks that stand to reap a fortune.”
And the ad has been introduced in a bunch of different ways in recent weeks, but the two big picture pushes are that Apple will release its 5G iPhone later this year, sending a lot of attention to this sector again and increasing demand dramatically, and that President Trump is really excited about 5G and keeps talking about America “winning” the 5G race, so the government will keep pushing for a faster rollout of the technology.
And we’ve got five stocks (or maybe six) to take a quick look at, so I’ll jump right in.
The first one is teased here:
“One tiny company could be a secret supplier for Apple’s new 5G products. And shares could explode as 5G goes mainstream.”
And he also says it’s “The Top Stock Enabling 5G for Apple, Amazon and Samsung.”
So what other clues do we get?
“California semiconductor company with a brand new idea… created chips that weren’t made for a specific purpose, but were more like a blank sheet of paper…
“That was a novel idea when they IPO’d 25 years ago.”
This “blank sheet” chip is, we’re told, a “key component to any 5G device, being used in phones, towers and modems.”
And they’re a confirmed supplier to Alibaba, Amazon and Samsung
Then Wyatt goes out on a bit of a limb:
“May be an exclusive supplier to the new iPhone 12… could be a key component that allows Apple to launch and compete with Samsung.”
Once the tear-down articles are written when people take the new iPhone apart, surprising new components or chips that are found in the phones sometimes lead to stock prices surges — and Wyatt expects this stock to jump higher when that happens.
So what’s the stock? Thinkolator sez we must be looking at Xilinx (XLNX), the leading developer of Field Programmable Gate Array (FPGA) chips — essentially, programmable semiconductors that, unlike purpose-built chips, can be repurposed after installation.
You don’t usually see these kinds of chips in a phone, mostly because they are expensive — the typical evolution of technology tells us that FPGAs are used in new technologies when they’re first introduced, so that the company developing that new product can tinker with the settings to optimize the operation of the chips, but then once they’ve figured out what works best they quickly replace those FPGAs with chips specifically designed to meet their need… which are generally cheaper and smaller and more efficient.
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Apple did include a low-end FPGA in the iPhone 7 several years ago, though I haven’t heard of one being in any other model, and that FPGA was actually from Xilinx’s biggest competitor, Lattice Semiconductor (LSSC). So I suppose Lattice could almost be a match as well, though Xilinx is the one who will claim to have invented the technology… and Lattice is actually based in Oregon, not California. Both companies, incidentally, went public in 1989, so neither one had their IPO “25 years ago” (I know, 1989 was 31 years ago? I’m as shocked as you are.) There are really only three big players in the FPGA business, incidentally — the other one is Intel (INTC).
Xilinx is an interesting stock and they should be expected to have their highest potential during times of big technological leaps forward, so they have certainly been teased as a 5G stock before (most recently when Ray Blanco called them the “stock fo a lifetime” in January) — the argument being not that the chips will be in phones, but that they’ll be in all the base stations and networking equipment because that’s where the tinkering and adjusting will be taking place. I owned the stock a while ago and got stopped out at $100 last fall, but it is looking relatively appealing again recently, particularly if they can convince more people to use their FPGAs and other advanced chips in AI projects and data centers instead of just using them to bridge the gap before customized chips can be designed for particular applications.
The growth that had been expected for Xilinx has been pushed off into the future a bit, they were suffering from the loss of Huawei as a customer when that company was blacklisted, and in general are hurting with the pressure on US/China trade, but if you add on the slowdown across most businesses with the coronavirus the impact gets pretty dramatic, the expectation is that earnings will drop by about 20% this year on a 10-15% drop in revenue before resuming growth next year (and more important for the stock price, dropping by about 50% from the earnings that had been expected a year ago). If that works out as analysts expect, then you can justify the valuation now at about $90, but it’s not cheap and things are not going great right this moment so it will probably be quite volatile as we see how and when the business recovers.
I’d be quite surprised if either Xilinx or Lattice (or any other FPGA) is in the next iPhone, and I expect that if XLNX were in the latest iPhone they probably would not have dramatically guided down their revenue forecast when they reported their last quarter on April 22 (the stock did take a hit after that weak earnings report, but has now recovered, probably just on general improving chip sentiment — though the new curbs on Huawei a couple weeks ago punished the sector as well).
The second pick teased is, we’re told, a “Key stock for testing and virtual reality technology” — a “VR Powerhouse.”
What clues do we get
“Early mover in 5G, getting into the sector back in 2013. They provide an essential service testing the speed and efficiency of 5G networks.
“Verizon and China Mobile are both using this company.”
I honestly don’t understand the virtual reality connection here, but by those limited clues I’d guess that Wyatt is teasing Keysight (KEYS), a stock I own and have written about quite a few times.
Keysight is a testing company, they sell products and services for testing all kinds of electronic systems, and 5G networks are a big and growing part of their business right now. They just reported earnings last night, which were disappointing as many of their customers are on hold or temporarily not ordering, but I expect (and analysts seem generally to agree) that the business will bounce back relatively quickly when things are back to something a bit more normal — some sectors will be slower to recover, like some of their industrial customers, but the telecom networks are not going to slow down dramatically so the 5G piece should pick up pretty strongly late in the year.
The last time I looked in detail at Keysight was for a repeated Navellier teaser pitch a few weeks ago, if you want more of the story. I haven’t gone into the details of their latest earnings report yet, I just looked at the basic commentary enough to not be concerned for my long term thesis, but I will probably dig a little deeper for the Irregulars on Friday.
And no, they don’t really have much to do with virtual reality — though virtual reality on a large scale in any mobile or wireless context will likely have to be done through 5G. Maybe there’s another testing company that does, the clues weren’t particularly specific — but Keysight does work with both China Mobile and Verizon, and they did begin planning to take the lead in 5G testing equipment and services back in 2013, before they were spun out of Agilent (A).
Wyatt says number three is a “5G powerhouse Holding 25 Global Contracts for 5G”
They have contracts with “companies like” T-Mobile, Sprint, US Cellular, AT&T, Vodafone, SoftBank, Telenor and Verizon, are a “dominant player in the telecom sector,” and they have “over 49,000 patents.”
This company is a network technology supplier, and a key supplier both in the US and across most of the rest of the world. Wyatt describes it as “the trusted source for people who are worried about working with Huawei.”
And the stock is, he says, “Under $9 today, but could go to $30, $50, $90 or $110.”
That must be Swedish telecom giant Ericsson (ERIC).
Ericsson and its fellow Scandinavian leader Nokia (NOK) are regularly teased as 5G plays, which makes sense — they are the biggest “pure play” networking technology companies (the biggest competitors in most of their businesses are Samsung and Huawei, which also do lots of other things). Ericsson, so the popular narrative goes, has gotten a bit of a lead on Nokia because of better software and a less-screwed-up management, but both have been disappointing for years as 4G investment slowed down and Huawei began to take a lot of their business. In many ways, the slowdown of investment in 4G networks as telecom companies waited for 5G has hurt more than the slower-than-expected ramp up in 5G spending around the world — partly because the competition to establish a lead in 5G is fierce, and the pricing is therefore probably not as strong as they had hoped.
I’ve been wrong about these stocks, and was stopped out of both over the past year — they seem like they should be in a very strong position, with fast-growing 5G network buildouts around the world, and yet they haven’t been able to turn that into revenue growth or even optimistic forecasts of late. I pretty much just have to throw my hands up in the air with these two and let you make your own call.
Number four is “Uncle Sam’s 5G stock that’s protecting America.”
Wyatt says this is a “leading maker of radio frequency (RF) filters” which “filter out unwanted radio signals.”
Some other clues:
“Manufactures everything in America, has been selected by the military for RF Filters.
“In July (of 2019) they won a contract for new radar systems
“Right now, sending sample RF Filters to smartphone makers and wireless carriers
“One major defense contractor is buying these rf filters”
And a big push for this stock is based on the fact that 5G is much more complex than 4G, using many different frequencies, and that therefore 5G phones will require 75 filters, versus the 25 used in 4G phones.
“They’ve already secured 26 patents, 46 patents pending, and could be weeks away from landing another major customer….
“562% sales growth in the coming year largely because of military, could surge faster if they land a couple 5G contracts.”
He says that the company was founded five years ago, and that the founder owns 10% of the shares… and it is priced around $8 but “could easily double or triple.”
Wyatt also inserts an image in the presentation that looks pretty familiar — it shows “RF content growth per device” over the years, and indicates that the cost will go from $19.50 in “premium 4G phones” in 2017 to $24.50 in “early 5G phones.”
And yes, the reason that chart Wyatt uses looks familiar is that it was cribbed from the latest investor presentation from Akoustis Technologies (AKTS)… so that’s our stock here.
Akoustis is a very small company, but they still do have some analyst coverage — and those analysts now expect revenue growth of just over 700% for 2021 and then another 200% in 2022 (though only about 20% in 2020, when revenue remains very marginal at just a million or two). So there’s some possible growth excitement brewing, but it’s early (and uncertain) days right now and they haven’t actually gotten those big company-changing orders for 5G equipment (the big competitors in RF filters are challenging, to say the least — AKTS has different technology, and perhaps it will end up being better, but they’re going up against large firms like Qorvo (QRVO) and Broadcom (AVGO).
Wyatt isn’t alone in chasing this small cap, Jeff Brown has been touting it for more than a year, Chris Wood also pitched it in 2019, and our readers tell us that George Gilder is a big fan as well.
And one more… a “tiny 5G stock that could deliver 286% gains”
Wyatt says that, “this may be the stock I’m most excited about”
What are the clues?
“Makes wireless devices that allows us to connect to the internet and mobile networks
“Small, but has already shipped over 30 million devices
“Launched the world’s first 5G hotspot in partnership with one of the top wireless carriers”
“In talks with over 25 cellular operators
“… profitable on a cash basis”
And a “little known hedge fund called Renaissance Technologies recently invested $9 million.”
This is our old friend Inseego (INSG), which has been teased by almost every technology newsletter around over the past year — they make hotspot “pucks” for mobile or fixed wireless, and they are Verizon’s rollout partner for that project. They also had blowout earnings in the latest quarter because of the huge demand for those WiFi hotspots and similar products — though that wasn’t 5G, that was “everybody has to stay home and they need to upgrade their wireless networks,” with big pushes for stuff like sending hotspot pucks home so kids without internet access at their house can still “got to school” online.
And no, Renaissance Technologies didn’t “recently invest” — that’s a quant fund, the most successful investment hedge fund in the world (probably in the history of the world) thank to Jim Simon’s math wizardry, and they own hundreds of stocks in any given quarter but often move in and out of those positions, and they do not make fundamental company-specific bets because of trends like 5G. And while they did have about $9 million invested in Inseego at one point last year (a pittance for that fund, to be clear, it was never a big stake), as of the December quarter (according to 13Fs filed in mid-February), Renaissance had sold out its entire INSG stake.
I invested a bit in Inseego call options last year because of the wave of attention it was getting from a bunch of different newsletters, but don’t have any exposure currently… and I’m frankly a little surprised that the stock has surged quite this much. My concern isn’t that it’s a bad company, they seem to be good at what they do, it’s that there isn’t a lot of profit in this network equipment because the competition for what are generally commoditized products is very tight… and the customers, at this point, are generally price-sensitive telecom companies who have the power to squeeze Inseego’s margins.
I may be too pessimistic on this one, it’s another one that comes up as a George Gilder favorite and has been teased very aggressively by the Oxford Club’s David Fessler for more than six months now, following a parade of pitchmen touting the stock in 2019. The stock is around $10 at the moment, it has seen both $5 and $14 in just the past two months — there was a little weakness most recently when they did a convertible note offering a few weeks back, but they were fairly conservative in their Q2 guidance given the surge in revenue in Q1, so investors will be watching really closely to see if that surge of orders in the first weeks of the coronavirus shutdown continued (the next quarterly update won’t be until early August, so we’ve probably got a while to wait).
And Wyatt throws in a bonus sixth pick as well — not sure if we can name this one, but let’s give it a try:
“Bonus: security tech stock that could surge 355%
He says that this company sells “technologies to identify terrorist threats.” And he says their products could have stopped the attacks in recent years in Paris, Brussels airport, Manchester Arena, and the Las Vegas shooting with its three groundbreaking technologies.
The stock is trading around 50 cents, and Wyatt is personally already invested… the 5G connection is that he says 5G will “enable them to go mainstream in sports stadiums and government buildings.”
That’s not enough of a clue set for us to be sure, but I’ll throw out a guess for you: Patriot One Technologies (PAT.TO, PTOTF OTC in the US), which was a 50-cent stock for a couple months as the shares have languished since early 2019 (it got over $2 on some initial enthusiasm in 2018, when the stock was heavily promoted and testing its installation in Las Vegas)… though a little corporate restructuring and some very small but still encouraging contracts and investments have helped the stock recover a bit of late (it’s at 77 cents now, in US$).
I suppose 5G networks will help Patriot One’s scanner technologies become more efficient, though their work has mostly been in trying to build out building security systems that scan for weapons, chemicals and suspicious intruders, using networks of scanners (magnetic, radar, video) and AI processing of those signal feeds to ID concealed weapons, chemical attacks and other bad stuff.
They have recorded a small bit of revenue in the last couple quarters, so that’s a change, but that revenue is all from the AI company XTRACT that they bought in September, the PATSCAN sensor/security business has not yet recorded any revenue… and this is still highly speculative — I last wrote about it when it was a market darling idea being touted by penny stock letters a little over two years ago, and I can’t say I’m any more enthused about the stock than I was then. It’s very much a stock that has been sold using an “active shooter prevention” story, but they haven’t yet figured out how to sell PATSCAN — and at this point, I imagine folks like big hotels, casinos, schools, and stadiums have much more pressing matters to deal with this year, so we probably won’t be seeing a lot of installation work anytime soon.
Here’s what they said in their last quarterly filing, in February:
“During the six months ended January 31, 2020, the Company has continued the commencement of a
strategic, deliberate, roll-out of its platform technologies with a select small group of resellers and earlyadopter customers, aiming to identify and understand the optimal deployment scenarios. While certain
refinements, enhancements, additions, and other such modifications are expected to be made, the
Company has commenced charging these select early-adopter customers at early-adopter price points.”
Again, though, that’s just a guess. If you’ve got a different little security stock trading near 50 cents you’d like to propose as a solution here, I won’t be offended.
And that’s all we’ve got time for today, folks — have a fondness for any of these 5G players? Prefer different stocks as a play on that emerging trend? Let us know with a comment below.
P.S. Readers always want to hear from subscribers who have actually tried out these newsletters — so if you’ve ever subscribed to Wyatt’s Million Dollar Portfolio, please click here to share your experience with your fellow investors. Thanks!
Disclosure: Of the stocks mentioned above, I own shares of and/or call options on Apple, Intel and Keysight. I will not trade in any covered stock for at least three days, per Stock Gumshoe’s trading rules.