“The Device Spreading 5-Times Faster Than The iPhone”

What's Smart Tech Investor's virtual reality pitch all about?

By Travis Johnson, Stock Gumshoe, March 2, 2017

This article originally ran on May 24, 2016, when we were in the midst of a run on virtual reality teaser pitches that had lasted for months. Apparently the ad is running again and this older article has been difficult for readers to track down, because we’re getting lots and lots of questions about it again… so we’re re-posting it here for your edutainment, with a few added bells and whistles.

The ad has been updated a bit, it appears, so a few of the quotes below might not match the current version of the ad — but the pitch is still clearly for the same three stocks hinted at in the original ad and in this version. If you’re curious, I’ve added a chart way down at the bottom in the PS so you can see how the three stocks have done in the ten months or so since this ad from Smart Tech Investor made the rounds the first time (or, at least, since I wrote about it on May 24 last year).

And with that, I’ll leave you to this older article with the details about Pearce’s favored virtual reality stock, and the brief notes about the two other ideas. The worst performer of the three by far has been the one highlighted most aggressively, HiMax, thanks to some disappointing quarters with dropping revenue, margins, and earnings because of soft ordering from display and smartphone customers, who are far more important than virtual reality to Himax’s numbers right now… though that firm does now hope that growth will pick up late in the year, and the stock has climbed nicely in the last couple weeks after the weak quarterly earnings report as analysts have started to say some nicer things about 2017 prospects.

–from 5/24/16–

I really want to promise that this will be the last Virtual Reality article for the week… but every time I say that, some big publisher rolls out another huge campaign and I feel compelled to respond. But I hope it will be the last VR pitch we look at for at least a few days.

We’ve covered virtual reality-related teaser ads from most of the major publishers over the past couple months, and many of them are running over and over and over, inundating us with the promise of a fantastic world in which we all wear special goggles and never leave our homes… and, more importantly, that the consumer lust for virtual reality devices will wash over the economy like a tsunami, enriching those of us who invest in the right stocks.

And today it’s Investing Daily’s turn — Jim Pearce is promoting augmented reality and/or virtual reality goggles as “The Device Spreading 5-Times Faster Than The iPhone,” and he’d like to tell you all about it… after you pony up $1,495.

And to entice you to pry open your wallet and part from that much money for a subscription to his Breakthrough Technology Profits (which used to be called Smart Tech Investor), he has to make the investment sound pretty freakin’ exciting… here’s how he introduces it:

  • “Google, Microsoft, and Facebook are scrambling to invest billions in this device
  • Experts say its poised for a 15,000% sales surge over the next 48 months
  • And a virtually unknown $9 company that owns the patents on its components is poised to skyrocket in 2016.”

It’s that last bullet point that really grabs our attention, of course — “skyrocket in 2016” makes you sit up a little straighter in your chair and think about whether you should call your broker.

But before you get too excited, let’s see what the reality is.

We’ll sift through the clues and tell you what “secret” stock Pearce is really talking about in this ad, and give you some basic background that you can use to shmear a layer of rational thought on top of the copywriter’s artistic license. If you feel like ponying up $1,495 afterward, well, be my guest — but if you’re like most people, your ability to think rationally or skeptically about a stock gets much lower after you’ve paid a big up-front fee to hear the recommendation, so let me see if I can maybe supply a little skepticism first.

The basic pitch for virtual reality is similar to what many folks have said — the adoption rate will be rapid, growth will be fast, etc. etc. They’re all guessing, of course, just like the people who say it will be a fad and will never sell outside of the hard-core gamer market are guessing, but the consensus seems to be emerging, at least among big tech hardware companies and investing pundits, that virtual reality will be “real” as a market. Here’s some more from the ad:

“1 billion iPhones are now used worldwide… and however you feel about the technology, few can doubt one thing…

“It’s the fastest-spreading — and most profitable — technology in human history.

“Which makes what I’m about to share with you all the more remarkable.

“You see, a new device is emerging that has leading analysts making some pretty mind-blowing claims.

“Deutsche Bank says this technology is ‘like smartphones nine years ago.’

“Goldman Sachs — not one for hyperbole — says it’s ‘as game-changing as the advent of the PC.’

“One prominent hedge fund even projects that it will grow from selling just 200,000 devices to 39 million by 2018.”

That 1 billion number isn’t for active iPhones, it’s for iPhones sold, cumulatively. I think I’ve bought four or five as I’ve upgraded or broken phones. Still, it’s a lot — and if you add in other devices like iPads and Apple Watches, then Apple has at least implied that they have something like a billion active devices. And, of course, they had none nine years ago — so that is rapid growth no matter how you look at it.

Whether you think augmented reality (like Google Glass, or Microsoft Hololens) will be as ubiquitous as smart phones or iPhones is a big question, and we won’t be able to answer it with anything other than a guess or a feeling. My guess is that augmented reality will remain a niche market for professional use, and virtual reality will be a larger niche market for video gaming and other immersive entertainment, and that both will grow more slowly than we think… but that’s just my guess and my personal bias, and it’s probably worth noting here that I scoffed at the fact that they were putting cameras in flip phones 15 years ago — who one earth would want to take bad pictures with their telephone? It’ll never catch on!

More from Pearce:

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“The first one million devices just shipped early this year…

“And it’s just getting warmed up…

“By December, no less than 14 million units are expected to enter American homes — generating the first $1 billion in sales.

“Then the upside is even more incredible moving forward…

“Again, projections put this device’s sales potential at $150 billion.

“That’s a stunning 15,000% sales surge from current levels!

“Not 20, 10, or even 5 years down the road… but in just 48 months”

OK, so that’s combining guesses and projections for all the possible virtual reality and augmented reality headsets — so it doesn’t necessarily mean anyone’s predicting that a single product will have sales growth like that… but what is it that Pearce is specifically suggesting as an investment?

“Working quietly behind the scenes of this unprecedented growth story is a tiny company.

“One that supplies the major components of this device to the likes of Microsoft, Google, and Facebook.

“And in exchange, it commands an astronomical price.

“In fact, it rakes in about 1 of every 5 dollars this device generates. So given expert projections, we’re talking about a $30 billion market in just 48 months’ time.”

Really? $0 to $30 billion in four years for “one little company” that gets $1 for every $5 of virtual reality hardware sold? That sounds like a pipe dream to me… let’s see if we can get some more specifics:

Pearce compares this company to Qualcomm or Intel, and those stocks soared 10,000% or more (much more for Intel) as they sold key parts into the booming smart phone and computer industries (helped by crazy dot-com boom valuations).

And he goes on to mention many of the same things that other pitchmen for virtual reality have been excited about — pain relief, PTSD treatment, training for military and physicians, virtual tourism and real estate viewing and online mall shopping and industrial design and, well, all the virtual reality applications you can imagine. Some of which have been around for quite a long time, waiting for the technology to improve to make the immersive environments more real and rich, and to make them move and refresh