The latest “ADC” pitch from Michael Robinson has generated a lot of questions from readers this week, and the ad itself seems to be pretty much a carbon copy of the one sent out back in December… so we’re just re-posting this teaser solution for you.
What follows is unchanged from when it first appeared here on December 12, though the new ads for Robinson’s Radical Technology Profits cite March 31st as the implementation deadline instead of December 18th (the ad letter is still signed December 2017, and seems otherwise completely unchanged from the version I used in writing this piece originally). The stock surged last time Robinson teased it, then came back down… and as of the past few days, it’s surging again, presumably thanks to the attention from this newsletter ad (there’s no other recent news of import, though the earnings release at the end of February did cheer investors). I have added one comment to the bottom.
Here’s the headline that sent dozens of Gumshoe readers to send me questions this morning:
“This Tiny Tech Firm’s ADC Device Could Make You a Millionaire This Month!
“But You Must Strike Before the December 18th Mandate Goes Live!”
Sheesh, that’s only six days! Did Congress just require that lots of companies have to buy something next week? What’s this mandate? For that matter, what the heck is a “ADC Device?”
Have no fear, Robinson will tell all and let you in on the secret… here’s further enticement from the order form:
“This virtually unknown company has sold less than $49 million of their ADC device since releasing it last April.
“But they could now control a legal monopoly of this $2 billion technology.”
Notice that word “could” in that last sentence. That’s the key. If you say “could” or “might,” then you’re not actually making a promise or a firm prediction… which, in this case, is good, because the chances of one company having a monopoly on this product are, well, let’s just say “very thin.”
The talk in the ad is about life-changing safety improvements for drivers… here’s a bit of the hinting from the “presentation” …
“At the stroke of midnight, on December 18th, a little-known Federal mandate will go into effect across the United States.
“It stipulates the immediate deployment of a cutting-edge technology…
“I refer to it as an Augmented Digital Co-Pilot – or ADC for short.
“This one measures just 2.2 inches long by 2.5 inches tall and wide….
“This ADC Device can create a virtual perimeter around you that extends out 20 miles in diameter.
“It’s accurate at predicting potentially dangerous threats in your path within one microsecond and two meters…
“And helps protect you from these very threats….
“It can stop some of the deadliest accidents on the road… from ever occurring….
“ADC Devices could help prevent up to 500,000 auto accidents a year and save 5,000 lives.”
And, apparently, everyone’s going to have to have one starting on December 18… more from Robinson…
“The House of Representatives estimates the nationwide implementation of this technology will generate $2 billion.
“That’s $2 billion that’s up for grabs from this December 18th mandate.
“And it’s all thanks to this device.”
Robinson also notes that there’s going to be a rush to purchase these devices before that deadline, which would presumably bring buckets of money raining down on that monopoly owner, right?
“According to industry experts – the vast majority of people who must follow the mandate have yet to secure an ADC device.”
Robinson compares this safety technology to past mass adoption of safety features, like seatbelts and airbags and tire pressure monitors and anti-lock brakes, all of which generated billions of dollars in sales for manufacturers and patent holders as they became required technologies in all new vehicles.
So he lays it on pretty thick, as he is wont to do…
“A ground floor stake in any of these innovations could have made you a millionaire many, many times over…
“And you’d still be cashing those paychecks to this day!
“Well, I have some good news for you.
“This ADC device is the next life-saving breakthrough that is going to mint millionaires.”
And we know that’s got to be at least an “overpromise” situation, right? They’re doing their best to sell a newsletter, they’re spreading the hype on with a trowel to get you to sign up in these next few days, hopefully before you’ve had a chance to think very much. After all, you’re worried about missing that December 18 rollout, right?
Slow down, take a deep breath. We’ll look and see what the reality of the situation is, what this mandate really means, and then, in your own good time, you can decide whether or not to shell out $1,950 — especially because they’re effectively selling you this hyped-up idea with NO REFUNDS (their policy for this one is that if you don’t like the performance after one year, they’ll give you another year for free… but, of course, that costs them nothing and you’re still out $1,950).
So what’s this company?
A few more clues…
“This firm just released their ADC device last April.
“Since then, they have sold less than $49 million worth of their technology.
“That’s it. That’s amazing. That’s the very definition of a ground floor opportunity.
“And that $49 million figure could explode at any moment.
“Because their device is the most obvious choice for anyone who must quickly comply with the December 18th mandate.”
Wait a minute… I thought this was a monopoly. What’s this “most obvious choice” business? Are there other companies that sell these little ADC things?
“It’s easy. You just plug it directly into a vehicle’s diagnostic system under the dash. You don’t need to go to a mechanic….
“This firm’s ADC device is the easiest to obtain.
“That’s because their executive brain trust includes both some of America’s smartest technological minds…
“And savviest business wizards as well…
“To give them a sizeable competitive advantage in the market, they’ve inked a series of strategic deals with Ford, GM, Volvo, PACCAR, Daimler and Caterpillar…
“This tech firm has also worked out a distribution deal with Love’s Travel Shops and Country Stores.”
OK… so their device is the “easiest to obtain,” they have some “strategic deals” with big truck manufacturers, and they are selling their ADC device in at least one of the big truck stop chains.
That’s enough for us to get you an answer, at least… this is, sez the Thinkolator, Stoneridge (SRI)
And, of course, when a newsletter promo gets all hot and heavy about a stock and starts to promise that it’s got a monopoly on a $2 billion business, the stock has a tendency to go a little nutty — so SRI is up 15% or so today already.
What is Stoneridge? Well, here’s how they describe themselves:
“Stoneridge, Inc., headquartered in Novi, Michigan, is an independent designer and manufacturer of highly engineered electrical and electronic components, modules and systems principally for the automotive, commercial vehicle, motorcycle, agricultural and off-highway vehicle markets. “
And what’s this “ADC” thing? They’re not actually called ADCs, the technical term is ELD… and Stoneridge’s is called the EZ-ELD.
What’s the story with this mandate? The Electronic Logging Device (ELD) is indeed mandated for all truckers starting on December 18, though it’s not really the incredible driver safety monitoring system that Robinson teases in the ad… it’s just an electronic driving log, effectively, that monitors basic driver compliance with their maximum drive-time limits.
Some drivers still use paper logs to record their driving hours (“Record of Duty”), and they have to comply immediately next week by installing some sort of ELD… others are using one of the previous version of electronic monitoring systems, and they’ll have another two years before they have to upgrade to an ELD. So there is some portion of drivers that need to buy these right away, and some portion that will need to buy them within two years.
It’s essentially an upgraded tracker that will ensure better compliance — it monitors the engine usage, whether the rig is in motion, and how many miles are covered. And yes, it taps into the OBD slot on the truck, so it’s all automatic.
Will Stoneridge have $2 billion in sales this month because of it’s EZ-ELD?
Analysts are presumably aware of this new requirement, and they have Stoneridge penciled in for $819 million in revenue for all of 2017 — that’s nice growth from 2016 (which was $696 million), and the forecast is for $851 million next year. So they are growing, but the analysts, at least, don’t think they’re in the middle of a life-changing avalanche of profits. They’ll earn 10 cents more per share then they did last year, sez the forecasters.
And, of course, there is nothing like a monopoly anywhere in this — even if you just skim around Amazon for a few minutes you’ll note dozens of different ELD’s available… it’s new to most of us, because we aren’t truckers, but it’s not a shocking new change for the people who actually have to buy them, there are lots of solutions that tap in to existing software or systems drivers might use (including lots of tablet/phone systems that are used for GPS and other software), and a quick count of the similar-sounding ELD devices available brings up products from Garmin, Linxup, On20, Rand McNally, JJ Keller, TrackEnsure, DashLink, ZED and lots of others.
Love’s did agree to sell their ELD product… but that doesn’t mean every trucker who goes to Love’s is going to buy one. Or even that they’re pushing this particular one — heck, Love’s own frequent buyer program is giving away an ELD from Transflo, including monthly service, right now.
It could indeed end up being a great product for Stoneridge, I have no idea, but it looks like the competition is fierce — partly because most of these products are being sold with a monitoring subscription, so companies are competing to bring on board new customers in hopes that they’ll stick around for a $15/month subscription that provides some services on top of the basic ELD tracking… though in just a little poking around it’s pretty clear that you can be “compliant” without paying a monthly fee.
I don’t know much about the trucking business, but I assume there probably will be a little spurt of sales for all suppliers this month as the few drivers who don’t know about this requirement plunk down $150 for their device… and presumably Stoneridge will get some portion of that business, but I don’t see a lot of competitive advantage for them off the top of my head. I would assume that the competitive advantage, if any, goes to those who provide a service that’s compatible with whatever software the driver and/or his fleet are already using for other things — the actual mechanics of the device, a connection to the truck’s data port and the tracking of engine hours and mileage, are probably pretty much identical for all of them, and they all meet the basic requirements of the law. Whether the monthly service or the software are more appealing for some of these products than others, I have no idea — but nothing like that appeared obvious from skimming around the web for a bit (and yes, there are dozens of ELD-sellers who are advertising aggressively on Google Search as we come close to that deadline).
And the EZ-ELD is a notable product introduction for the company this year, but it’s not likely to be a dominant part of Stoneridge’s business — they supply a variety of parts to car manufacturers (sensors, switches, valves and actuators, electronic instrument controls and clusters, driver information systems, security systems, tracking devices, etc.), and the division that includes the EZ-ELD is roughly 30% of sales last year. Their design wins in autos, and the volume of automobiles sold, will presumably be more important to the bottom line than this specific ELD product.
The company is not ridiculously overvalued — there’s no real reason for the stock to have jumped 15% today, other than Robinson’s attention, but even at $25 and a new all-time high the shares are priced at about 16X next year’s earnings. So that’s not wildly out of line with reality for a small-cap auto supplier that is expected to grow sales at 3-4% a year and earnings at something in the 4-7%/year range, on average. Not cheap, but probably not crazy, that puts them somewhat above the low-valuation auto suppliers like Magna International (MGA) or Tenneco (TEN) and closer to the PE valuations of Johnson Controls (JCI), Autoliv (ALV) or Aptiv (APTV).
And that’s par for the course for Robinson’s ads, in my experience — some of his growth ideas work out just fine, but that doesn’t mean the promise of his ads made any sense… he pitched NVDA a couple years ago and that was a great pick (obviously, in retrospect), but he pitched it because it would “end all pain” because of a connection to R&D on using virtual reality for pain relief… and before that, he had a big campaign running for a long time that teased STMicroelectronics (STM), which also could have worked out well for investors, but he pitched it as having a patent on the “device that would end all disease,” and that’s hooey. So look past the promise, think about the actual company rationally, and make your own call.
For my money, I don’t see wild potential in my quick glance at Stoneridge, and I have other stocks in my portfolio that give me enough exposure to the auto supplier space… but that doesn’t mean Stoneridge is junk, just that I think Robinson’s pitch about “a historic 3,982% sales surge” based on their EZ-ELD device is irresponsibly hype-y.
UPDATE 3/20 — In case you don’t want to scroll through all the past comments on this article, here’s the comment I added below when the attention from Robinson started to heat up again this week:
Another crazy run in the stock on Robinson’s rejuvenated “ADC” pitch this week — I don’t think there’s been any meaningful change with the company or its financials, though Robinson now pitches the April 1 deadline for all drivers to have an ELD on board.
In case you’re curious, here’s the DOT list of all of the approved ELD products out there: https://csa.fmcsa.dot.gov/ELD/List — I don’t know if Stoneridge’s product will be successful for them or not, they have a decent business otherwise and presumably they’ll make some sales, but this is not a particularly demanding piece of technology that’s being sold and there are at least hundreds of options for most users. My guess remains that it’s probably a net positive for Stoneridge, but forecasting any kind of huge boom for the company because of this relatively small part of their business is silly… and it would be quite easy for the market for this basic tracking/compliance technology to be pretty well dispersed across the dozens (or hundreds, even) of companies who can all provide the required software or hardware.
The stock is perhaps not ridiculously overvalued still, compared to other stocks, but is now trading at 14X forward earnings and 28X trailing earnings in a sector that doesn’t generally carry lofty valuations (particularly as investors remain worried about “peak auto”). It is trading at a new all-time high price/sales ratio of just over 1X, so that’s a possible warning indicator… my guess is that this Robinson-driven surge in the stock will reverse and the shares will see the high teens/low $20s again before too long, but that’s just a guess — I haven’t dug into the company enough to judge whether it’s worth betting against them just because they’re more richly valued than they usually have been.
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P.S. I own shares of Aptiv (APTV) and Amazon (AMZN) among the companies mentioned above. I won’t trade in any stocks covered for at least three days per Stock Gumshoe’s rules.