I haven’t written about this particular ad, but I have seen it circulating over the past couple months… and the questions keep rolling in, so I guess the ad’s still in pretty heavy rotation and it’s time to get some answers for you.
The pitch is for Jeff Brown’s The Near Future Report ($99/yr “on sale” from $199)… and the headline term that seems to be getting everyone’s attention is the “C-V2X Revolution” and the impact it will have on new cars (and, of course, on investors). Here’s the intro to the pitch:
“Silicon Valley Insider Jeff Brown Just Named His #1 Tech Pick of the Decade:
“The “C-V2X” Revolution
“This key technology could be ‘built-in’ to nearly every new car by 2023…
“And one $6 stock is ready to capture this $12.3 trillion dollar market.”
Being greedy little cusses, all we really wanna know is “what’s that $6 stock?!”
But we’ll be patient. Don’t worry, we’ll get to the answer in a minute. Here’s a little bit from the email pitch that introduced the ad (well, re-introduced, we’ve seen it before) over the weekend:
“At the center of this new trend is a technological development known as C-V2X.
“As Jeff Brown stated in this exclusive presentation… ‘Building a brand-new network is vital if the United States is to continue to lead in the world economic growth…’Are you getting our free Daily Update
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“Many early-stage investors have already seen rises of 8,900%… 17,000%… 62,000%… in some of the best stocks in this space.
“And he expects this one to be even BIGGER.
“One company is using this patented technology to corner this $12.2 trillion market boom.
“It is the BEST positioned company out there.”
Man, what more could you possibly want? 62,000% returns? Best positioned? BIGGER? All super exciting.
How about some specific clues? Yep, we get those too… he goes into what he means by this “C-V2X” business…
“I believe it will be the most profitable trend of the decade…
“It stands for Vehicle (V) to (2) Everything (X)….
“It lets cars talk to each other. It also connects things like street lights, signals, and roadside cameras. Even parking spaces! ….
“By 2023, there’s a possibility your new car must have this type of revolutionary technology – by law.
“Proposed legislation out of Washington makes it a near-certainty.
“According to Forbes, The National Highway Traffic Safety Administration (NHTSA) published a recent rule…
“One that would mandate all automakers to install a form of this tech beginning in 2020.
“By 2023, it will be practically everywhere.
“No wonder C-V2X has the support of automakers like Audi, BMW, Daimler, Ford, PSA, SAIC, Tesla, and Toyota.”
So this is one variation of the many predictions about “connected cars” and “self-driving cars” — that they will build on an increasing avalanche of information from sensors and from each other to help make traffic faster and safer and reduce collisions and accidents, among other things.
Nothing shocking there, cars are steadily moving in that direction through technological evolution… though predicting exactly which tools will be used and what the timeline will be is more art than science.
What else does he tell us about this investment opportunity? More clues:
“My research indicates only one company has what it takes to help the big car companies ramp up in time… so they hit their targets by 2023.
“Believe it or not, you can get a piece of this superstar company for less than $6 a share today.
“It could easily double or triple from here.”
And then we get some clarity about what he’s actually teasing:
“5G is the emerging mobile technology that will let our cars drive themselves…
“Making our roads far safer than ever before.
“Perhaps you’ve heard of it… and thought it was just a new “cell phone” network.
“Well, you’re only getting half the story…
“Five years from now, almost everything you touch will rely on 5G in some way.”
Yes, I do keep hearing that self-driving cars will be a huge beneficiary of widespread adoption of 5G… assuming that technical challenges of 5G can be surmounted and get the required coverage and latency delivered to enough cars. That’s partly because 5G allows for much faster (100X faster, hopefully) data transmission, so it could enable a lot of the “thinking” of cars to be done in the cloud, instead of in a supercomputer in the trunk of each car… but faster communication between cars could also be critical, and 5G is much faster than the current modern 4G/LTE standard.
Presumably those things are a ways away, since 5G is still just being tested in a few cities and the telecom companies seem much more comfortable with fixed 5G so far (and are still struggling with 5G’s problems, like small coverage areas and penetrating buildings for the highest-band spectrum, the part that offers the fastest downloads and lowest latency), but it’s possible that things could move much faster than I think.
More from Brown:
“Based on all my research, a brand new 5G Super-Cycle is kicking off.
“The C-V2X car technology you’ve seen today is just the first potential wide-scale application.”
And then he begins to roll into some specifics….
“Instead of relying on large towers placed far apart (like you see along the highway),
“The new signals will come from smaller equipment placed an average of 500 feet apart in neighborhoods and cities.
“‘Millions of new cell towers will spring up to handle the traffic,’ admits FCC Chairman Tom Wheeler.
“One may be needed on practically every street corner….
“…the latest digital revolution also means we’ll need new cells, radios, antennas, chips, base stations, switches, modems, and data center storage.
“And tons of fiber, too.
“But here’s what almost no one is talking about…
“Hundreds of thousands — perhaps millions—of containers the size of refrigerators will be discretely placed on or near the ground.
“There are none today.
“These ‘magic mailboxes,’ as I call them, will transmit signals up to 1,000 times faster than what’s possible today.”
Ah, now this is beginning to sound a bit familiar. Haven’t we covered these magic mailboxes before?
Indeed, yes — that exact phrasing was part of his ad for what he called “Invisible Fiber” in ads that we saw starting back in the summer… which also turned out to be a “5G” themed teaser pitch.
So… is he still talking up the same companies, just in a different spiel wrapped around this “C-V2X” term? Let’s see if he drops some clues…
“At the center of this frenzy is the “$6 Digital King”
“There’s one company that is head and shoulders above anyone else.
“They’re using patented technology and covert negotiations to get ahead of the competition.
“To say this company is in the catbird’s seat would be an understatement of epic proportions.
“Their stock is hovering right around $6.
“A price that low might conjure up a startup with barely any experience.
“But this is NOT your ordinary $6 company.
“The ‘$6 Digital King’, as I call it, already has operations in 50 countries.
“This year sales could reach a staggering, mind-blowing $28 billion.
“That’s BEFORE they even get rolling on 5G.”
So… yep, that’s the same spiel he used way back in July… and this “$6 Digital King” stock is still good ol’ Nokia (NOK), the wireless pioneer that has essentially shed its handset business and refocused on network equipment (and licensing its patented technologies).
And you should stop listening to me on this one, because I’m now “talking my book,” as the Wall Streeters put it… I own both Nokia shares and short and long-term call options on the stock, and I mostly agree with Brown that it is a likely beneficiary of a rapid investment phase in 5G infrastructure by all the telecom companies. I’ve been buying NOK in relatively small bites over the past couple months, starting in earnest when I wrote about my 5G investing strategy for the Irregulars in October.
This is not necessarily a short-term, “we’re gonna get rich in a year” position for me, I think telecom infrastructure is likely to go through a multi-year investment phase that will benefit Nokia, but my options positions do imply a small bet that things could accelerate fairly quickly in 2019 as 5G investment (and press coverage) heats up… with a little juice added to that if the revolt against Huawei that President Trump is leading really ends up helping Huawei competitors like Nokia (and Samsung, and Ericsson, etc… I also own some Ericsson (ERIC)).
Nokia probably won’t have $28 billion in revenue this year, but that’s about what they had last year — they’re still in a gradual revenue decline, partly because mature global 4G networks haven’t required as much equipment and investment in recent years, and 5G investment by all the big players (Verizon, Sprint, AT&T, etc.) has all been quite small-scale so far even in the US, South Korea and China (it’s been far slower elsewhere).
So far, analysts estimate that they’ll have about $26 billion in revenue in 2019, with earnings per share growing nicely from this year’s low (26 cents this year, 36 in 2019 and 46 cents in 2020 — that’s earnings growth of better than 25%), and the company is committed to paying a growing dividend (they pay once a year, in May, with the expectation that they’ll continue to pay a dividend that provides a yield of roughly 4%). A lot is still unknown, particularly when it comes to the speed of 5G network rollouts, but I’m pretty pleased with this as a core 5G investment… we’ll see how it goes.
But, as I said, you should look elsewhere for skepticism. Here’s a long-term chart on Nokia, in case you want reason to be cautious… the stock has required a heaping helping of patience from investors over the past few years:
Brown also teases some other plays on this “C-V2X” theme, which are really more like ancillary 5G ideas… are those still the same as they were in past versions of the ad?
Not quite — one of them is:
“A Picks and Shovels Play that Could Generate 100%+ Returns in 24 Months—Remember how I said we’ll need more than 1,000,000 cell phone towers to support the 5G rollout? That’s a 5X increase from where we are now. This Picks and Shovels business is surprisingly simple… it builds towers and leases them to wireless carriers. Plus, they own the most valuable ‘real estate’ in the country.”
That’s the same spiel he had earlier in the year, and this is what I noted at the time:
“This could apply to any of the big tower companies in the US, Crown Castle (CCI), SBA Communications (SBAC) or the larger American Tower (AMT), all of which are structured as real estate investment trusts (REITs) for tax purposes. AMT is probably the more likely target for Brown, since it’s bigger and a bit more flexible (CCI pays a higher dividend, and pays out more of its operating cash flow than AMT does… SBAC is still trying to spiff up its balance sheet before they start paying a dividend), but all face essentially the same market forces — they’re at risk of losing a major customer if Sprint and T-Mobile merge, and they’re investing to try to be able to offer 5G networks, but it’s not entirely clear if the “cram the tower with antennas” model will work as well in 5G, as little antennas and “small cells” need to be on essentially every street corner to provide urban coverage.”
Personally, I’ve opted for Crown Castle (CCI) in this bunch, which is the highest yielder and one I’ve also owned in the past, and I bought a small position a couple months ago, but they’re all quite expensive and not exactly ‘contrarian’ ideas… and they’ve all performed similarly over the past five years and they’re all very big and carry a fair amount of debt, so they’ll also be sensitive to any big swings in interest rates — here’s a chart of their total return:
So that’s the same, but then we get one more, which is different than the variation of this ad that I covered a few months ago:
“The Gorilla Attacks! – Very few recognize this, but one of the best ways for investors to get exposure to the coming 5G boom is through phones themselves. Today’s “4G” phones will not be able to take advantage of this breakthrough technology… at all. So new phones capable of operating 100 times faster—and with 99% less delay—will be a compelling reason to upgrade. That means a whole lot of orders for a ‘gorilla’ in the market. No, it’s not Apple… or Samsung… but a ‘Made in America’ pioneer in our own backyard.”
It’s probably good that he switched it up, since the first version of this ad that I covered was teasing Snapchat owner Snap (SNAP), which has been a disaster. I noted back then that any growth would be from a very low base back in July, as the stock had been falling and was dropping through $14 a share, but, as so often seems to happen, falling begets falling and it’s down another 60% or so now, and remains one of the more widely shorted stocks in the market.
Other readers noted different versions of this ad a few times over the past few months, so perhaps SNAP was dropped by Brown a long time ago — this “gorilla” version seems very likely to be a tease about Corning (GLW), the creator and manufacturer of Gorilla Glass that is used in so many phones and other portable devices for its strength and scratch-resistance, though since we’re just going off the “gorilla” term and the fact that, yes, volume of phones sold is a key indicator of Gorilla Glass sales, I can’t be 100% certain on that one.
Assuming that is indeed the pitch, Corning is worth consideration as a dominant company in display glass and fiber optics (which will presumably be in more demand as wired backhaul data demand and fiber-connected data center demand grows with 5G, too, since fiber is the fastest physical transmission media)… Corning is growing revenues pretty nicely for a large and established company (7-8% or so), and the expectation is that they’ll be able to grow earnings at about 10% a year, which is pretty decent for a stock that you can buy at 15X forward earnings. Not dirt cheap, and Corning has been more volatile than one might imagine for its size, partly because they’ve historically been quite dependent on a couple major industries that fell victim to oversupply and competition (fiber optic cable, then big-screen TVs), but it’s a great company with a great history of innovation.
I don’t know if Corning will necessarily benefit from 5G anytime soon — it seems likely that a big sales push for 5G handsets is probably at least a year away, and we’re currently seeing widespread reports of a lull in smartphone sales thanks in part to the “my phone is great, why should I upgrade?” sentiment… that’s the cause of most of the Apple (AAPL) panic of late, and Apple is unlikely to have a 5G phone before 2020. In Apple’s case, that’s partly because they want to wait for Intel (INTC) to have a viable modem, since they won’t use Qualcomm (QCOM) anymore, and partly because there’s little reason to produce a phone until the networks are big and useful enough to create consumer demand.
A big upgrade cycle would benefit Corning (and Apple, and all the mobile chip and part suppliers), it’s just that I think such a cycle is probably a year or two off — there will be 5G phones from people who want to be first to market, and upgrade sentiment in the US is still really driven by Apple devices — there are some phones you can buy now that are “5G ready,” but Apple has always pushed for “best and most polished,” not “first,” and no one creates market demand like Apple once they get moving.
So there you have it — looks like C-V2X is mostly a rehash of the old “Invisible Fiber” pitch from last Summer, a broad tease to invest in some 5G-related stocks. Do you like the looks of an investment in Nokia, any of the tower REITs, or Corning? Think other favorites will do better? Let us know with a comment below.
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Disclosure: I own shares and/or call options on Nokia, Ericsson, Apple, Intel, Qualcomm, and Crown Castle. I will not trade in any covered stock for at least three days after publication, per Stock Gumshoe’s rules.