Chris Wood’s “Tiny Disruptor” in 5G teased for “Project 5X”

By Travis Johnson, Stock Gumshoe, April 11, 2019

Yesterday I was writing about Jeff Brown and his tease of Akoustis Technologies (AKTS) as an RF filter company that should see increasing demand from 5G (each advancing wireless standard is more complex and requires more filters), and that brought this pitch from Chris Wood to mind.

To be fair, this ad is not new. I’ve seen it circulate several times since January, but the offer is not currently “live” (though newsletters that stop soliciting new members soon wither away, so I’m sure they’ll be back to selling sub again soon) — I got it most recently when Marin Katusa was pushing the subscription about two weeks ago, so the info itself is relatively fresh.

The newsletter is from RiskHedge, which itself is pretty new, and is called Projext 5X (list price $3,500/yr). Chris Wood has been around the business long enough to have been covered in this space before — he helmed Casey Extraordinary Technology for a while, recommending tech and biotech stocks, which is presumably why he knows Katusa (who started out working on Casey newsletters and left when Stansberry bought Casey).

The reason this pitch came to mind when writing yesterday’s article is that Wood started off by offering Akoustis as his “freebie” stock pick…

“I’m going to tell you all about the “disruptor” stock pick that’s set to soar 500%, no charge and no strings attached.

“I’m going to tell you the name of the first company right now.

“Its a $200 million RF filter company based in Huntersville, NC, close to Charlotte.

“The company is called Akoustis Technologies Inc. (NASDAQ: AKTS).

“Akoustis is a disruptor.

“It developed a unique kind of RF filter, called a BAW RF filter.

“And even though BAW filters are expensive, customers are lining up to buy them.

“That’s because companies need them in order to take advantage of 5G.

“My research shows that the market for Akoustis’ BAW RF filters should grow by 230% in the next two years, and then take off from there.

“Akoustis is a great company. It grew by about 150% in 2018 alone, and bigger growth is coming.

“But before you buy Akoustis… I’ve got a MUCH more lucrative pick to tell you about.”

And that second stock is also an RF filter company… more from Wood:

“Akoustis could well 5X your money.

“But my research shows that the other RF filter company could make you 20X your money….

“This other RF filter company is, hands down, my top pick of 2019.”

So what clues do we get about this new little fella?

“It has patented a technology that can build custom designs.

“So, they’ll be able to build far more complex filter arrangements than Akoustis.

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“They’ll be able to do it faster and cheaper, too.”

So what does this company do? Can we get a few more clues?

“It doesn’t just sell RF filters. It licenses the design.

“Then it collects royalties every month.

“So, this company has managed to turn a one-time fee into ongoing streams of income, without giving up the intellectual property rights.”

I’ve got a soft spot for royalties, so that’s lovely. Any other clues?

“Right now, the stock trades for less than $3.50 a share. That won’t last.

“In fact, my research says it could surpass $55 a share in three years…”

And then we get a dangerous statement, considering that speculating on a little $200 million company in Akoustis is probably already too risky to play a meaningful role in most retirement accounts:

“If you’re happy with a solid base hit, invest in Akoustis.

“But if you’re looking for a homerun…

“A modest investment in the second RF Filter company could save an underfunded retirement.”

So what’s our stock? This is almost certainly Resonant (RESN), which is, indeed, even smaller than Akoustis… with a market cap of about $85 million… small enough that when one of their investors exercises warrants and generates one million dollars for them it’s worthy of a press release.

So what do they do? They say their “Infinite Synthesized Networks® technology revolutionizes RF filter design and manufacturing.”

No, I don’t know what that means either. Though they are clearly different from Akoustis, not least because they don’t do their own manufacturing and they are trying to sell their filter design system on a royalty basis, partnering with handset makers and other customers to develop custom RF filters more quickly and efficiently, and pocketing a (presumably very small) per-device royalty in return.

They explain it in their nice flashy investor presentation here. Apparently RF filter makers are constrained by low design capacity… which I guess means they have a system that uses less trial and error in the design of specific filters, though I’m not smart enough to be sure.

The company does have a series of informative videos designed to explain things to investors, so that’s worth a browse if you have some time.

The CEO previously worked at Energous (WATT), king of the overpromise/underdeliver small tech companies, so that makes me a little concerned, though I don’t know anything else about him. And they include this line in the presentation, which strikes me as a little silly and too MBA-speaky, but maybe that’s just an emotional reaction:

“Resonant continues to retire risk through execution both internally and externally”

Maybe we should all start saying that — I’m going to “retire risk” now in my portfolio… but how do you execute externally? Maybe that was left up on the power point slide by mistake, like leaving the photo of the model in your new picture frame.

The good news?

They say they have already shipped royalty-earning products.

The bad news?

Either the royalties are super low, or they’re not shipping very many.

Royalty revenue for the full year last year was $159,000. No, not leaving off a comma. And that wasn’t their first year of revenue, they had $40,000 in royalty revenue in 2017. They had other revenue on the year as well, a total of $524,000 (down by about 20% from 2017), but it’s that royalty revenue that is what should be of future interes