This article was originally published in October, but we’re getting more reader questions about it and Matthew Carr has a second version of the ad that focuses a little less on Apple and the iPhone, so we’re re-sharing our solution below. What follows is based on a slightly different ad, but the “secret” $10 growth company and the general focus are the same. The shares have recovered from the $6 they traded at in October, but at $8 today they’re roughly where they were in August (the ad is still circulating, but is dated “August 2021”).
This is the story we shared on 10/25/21:
Here’s the headline that has driven some Gumshoe reader questions our way…
“The iPhone Mega-Upgrade
“Apple Is Reportedly Building a Secret $330 Million Facility to Add One New Technology to Its iPhones, iPads and Laptops.
“Here’s Why Investors in One $10 Stock Could Make Big Money as a Result…”
So what’s the story? It’s an ad from Matthew Carr at the Oxford Club, pitching subscriptions to his Oxford Growth Investor newsletter ($79/yr, this publication used to be called Strategic Trends Investor), and it’s one of my favorite kinds of ads, the “inside this mysterious building” pitch (that’s my second-favorite — the best ads are the Indiana Jones stories about intrepid newsletter editors trekking through the mountains to find a hidden gold mine, but the “secret building” ads are right up there). They include a photo of a white factory building and go on…
“… inside, Apple scientists are reportedly working day and night on a new breakthrough technology.
“It’s perhaps the most revolutionary new technology we’ve seen since the invention of the smartphone itself.”
Ooooohhh, exciting, right? However did Matthew Carr find out about this secret building, and learn what Apple’s employees are doing there?
More importantly, though, there’s yet another building nearby that’s even more exciting…
“… next door to that white industrial building I just showed you is another building… run by a different company.
“This company is virtually unknown.
“I’d venture to say not 1 in 1,000 Americans can name it.
“It trades for less than $10 a share.
“But it stands to be… BY FAR… the biggest winner as this new technology develops.
“The fact is… it’s this unknown $10 tech stock… NOT APPLE… that actually holds key patents in this new revolutionary technology.”
The fact that Apple has historically been so secretive about their new products always fuels these kinds of “what will they do next” pitches, whether they’re about virtual reality headsets or Apple Cars or Apple Televisions… Steve Jobs’ paranoia about keeping the lid on their R&D projects has stuck with Apple, even if they’re not quite as good at keeping secrets as they used to be, and that has created a cottage industry of investment speculators and Apple rumor-chasers. What is this one? No surprise, it’s not been confirmed by Apple…
“Apple and the $10 stock behind this tech are staying tight-lipped and have not confirmed the project yet.
“But frankly, it’s pretty obvious when the two companies built facilities right next door to each other.”
What is this technology that Carr thinks Apple is working on, in partnership with his $10 company? Apparently it’s not just for Apple…
“Apple is not the only company that seemingly wants to use this company’s technology.
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just click here...“Far from it.
“Samsung has a confirmed partnership with this company to add the tech to its televisions.
“Tesla has partnered with it as well, to add it to its cars.
“And these partnerships are not speculation.
“The $10 stock is setting up a whole new production facility right near Tesla… just as it is reportedly doing with Apple.”
And we get a couple specific clues dropped about this secret company, which will be a great help for the Thinkolator…
“Net income is up from $121 million to $1.54 billion when you compare the last 12 months with all of 2020…
“That’s 1,165% growth… faster growth than high-flying tech stocks like Netflix, Amazon and even Apple itself.”
What does this company actually make and sell? We get into that a little later in the ad…
“… more than 2 billion new devices annually… and virtually every one comes with a new screen.
“And even this is just scratching the surface.
“Screens are found in medical equipment… solar cells… refrigerators… cash registers… airplane seats… almost everything!
“So I want you to imagine for a second what would happen… if a company came up with a patented technology that could make screens simpler, cheaper, clearer and brighter… with better color and definition…
“And what would happen if that company’s technology began getting picked up by the most powerful tech companies all over the world.”
And specifically, this company has some kind of patents on MicroLED technology, one of the exciting new advancements in display tech…
“This $10 stock holds more than 20,900 patents… the vast majority of which are invention patents.
“As you can guess, many of these patents are related to important new screen technologies.
“And one in particular is going to be huge.
“It’s the company’s new breakthrough Micro LED technology.”
MicroLED is sometimes called mLED, and is in some ways similar to Organic LED (OLED) in that the appeal comes both from lower power consumption and thinner and flexible displays (since these screens don’t need a backlight, like LCD and traditional LED screens do), though the consensus seems to be, for the moment, that MicroLED is more stable and has a longer lifetime than OLED, and has the potential to be brighter… but is much trickier to mass produce, which is the hurdle companies are trying to leap over right now. OLED is maybe a decade ahead of MicroLED, and has been in full commercial production for a while, many TVs and smartphones use OLED screens right now, but MicroLED is apparently inching closer to getting to real mass production.
MicroLED has been the “next big thing” in display technology for a few years, and MicroLED screens have been demonstrated at the big consumer electronic shows as cool concepts or high-end “sort of available” products, like Samsung’s Wall in 2018 and similar products from Sony a few years before that, which likely cost close to a million dollars for a wall-size modular display (this year you can at least theoretically buy a MicroLED TV, but they’re mostly for commercial use or for high-end homes and generally start well above $100,000), but we’re probably still a few years from seeing them on sale at Target or Walmart at “normal” prices. There’s a good story here from the Wall Street Journal about the excitement building back in 2019… it sums up the potential this way:
“MicroLED is, at least in theory, the best of all worlds. A MicroLED screen is made up of massive numbers of the teeny tiny versions of the LEDs you already know and love. Each is self-powered so it can have similar image quality to OLED, but MicroLED’s inorganic material won’t degrade over time or cause screen burn-in. MicroLED is smaller, thinner and brighter, too, so its displays can be even flatter and less power-hungry.”
So what’s this company that’s partnering with Apple? More from the ad:
“Our company will be involved in manufacturing the tiny wafers that hold the Micro LED lights, as well as the big panels that hold the wafers once they are put together.
“The products are reportedly going to be used in the iPhone, iPad and Macbook product lines.
“And if this initial run goes well, then the collaboration might ‘further expand’ in the future.
“And let me tell you… a big collaboration with Apple can spell huge profits for a company.”
And apparently this company has gotten into Samsung’s products as well… more from the ad:
“This $10 Stock Just Got Into Samsung’s Supply Chain!
“Samsung is the #1 TV producer in the world.
“It sells more than 40 million flat-screen televisions each year.
“But even Samsung seems to have recognized that this company’s technology is better.
“In 2020, instead of doing it itself, Samsung began outsourcing its premium 8K and 4K TVs to this company.
“But now, Samsung is taking it up a notch.
“In late 2020, Samsung began asking suppliers to send samples of their new mini LED and Micro LED technology.
“It was looking for a new supplier as it began integrating Micro LED into its lineup.
“And guess who blew the doors off the other competitors?
“No surprise… our company.
“In the second half of 2021, the company was added to Samsung’s supply chain for its latest Micro LED televisions.”
I wouldn’t say that means Samsung recognizes “this company is better”, the premium product they’re outsourcing is the 8K and 4K LCD TVs, since Samsung is winding down its LCD display manufacturing… in order to focus its attention on newer display technologies, including OLED and MicroLED… though this “top secret” company did also make it into Samsung’s MicroLED supply chain this year, they’ll be a provider of backplanes for some of Samsung’s MicroLED displays.
It’s hard to see this becoming a meaningful business with Apple in the near term, nobody’s ready to roll out 200 million MicroLED displays for smartphones and guarantee that they will survive a couple years of being banged around by teenagers, but I guess anything is possible. I would assume that we’re still at least a few years away from MicroLEDs making it into smartphones, and that we’ll see some decent MicroLED TVs or gaming monitors hit the mass market first, but that’s just a guess.
This ad from the Oxford Club folks carries an August 2021 date, though it’s running pretty heavily right now from what I can tell (we’re getting lots of questions, at least), so we also need a stock that was below $10 in early August.
So who is it? As you might have guessed by now, the Thinkolator confirms that this must be display company AU Optronics (AUOTY), which is now down to about $6 a share (it was around $8 in August).
They’ve been around and publicly traded for a long time, so you may have heard them mentioned as a display provider in the past. The company used to have a US-listed ADR at ticker AUO but delisted about two years ago — they still have ADRs available for US investors, but they trade OTC at AUOTY. The primary listing is in Taiwan at ticker 2409, and their last close in Taiwan was at NTD$17.15, which translates to about 62 cents in USD$. Each OTC ADR in the US is worth 10 shares in Taiwan, and the current price in US trading is pretty close to the “fair” price of $6.20.
AU Optronics is a fairly small company, with a market cap of about US$6 billion, and it looks dirt cheap on an earnings basis, trading at a PE ratio of about 4. That’s not unusual in the display business, where there’s a lot of competition and a big installed base for production that leads to pretty wild swings in earnings as demand, particularly for mass-produced televisions and mobile phones, goes through periods of oversupply or technological transition that requires massive retooling and upgrading. With the exception of Samsung, most of the big manufacturers of displays are not themselves brands and don’t sell a lot of finished consumer products, they’re generally suppliers to brands.
AU Optronics does boast of its commitment to developing MicroLED technology, though I don’t know whether their patents are more or less impressive than those of other developers in the space, including LG Display (LPL), Samsung Electronics (SSNLF), and lots of companies in Asia and Europe that I’ve never heard of before. Most of their MicroLED focus, at least publicly, is on automotive applications, where we’re probably at least five years from seeing sales (if you want to be designed into a mass-produced car built by a major automaker in 2030, start convincing the designers and bean counters now — it takes a long time to vet, test and authorize new components), but they are working on other areas as well. And, of course, they remain fairly substantial players in other display technologies, working with lots of brands to produce integrated LCD and LED displays, including more advanced MiniLEDs (which unlike MicroLED or OLED require a backlight … but it’s a much better backlight technology), and other much lower cost, commoditized products.
Will their rumored work with Apple lead to anything? Maybe.
For some context, yes, that generic white building shown in the ad is an Apple facility in Taiwan, and when Apple bought that facility from Qualcomm (QCOM) back in 2015 it became their Taiwan HQ, and the story was that they intended to work on new display technologies there (much like Qualcomm used it to try to develop its own display tech in the several years before that, a project that never really got any traction). You can see the same photo of the facility in this article about the project from December of 2015. That makes perfect sense, several companies with facilities in the area have been Apple partners or suppliers, including several display technology companies, and companies who work together or have similar specialties often congregate in the same area.
And there were stories last year rumoring that Apple was “weighing up to a $330 million investment” in a Taiwanese factory to make LED and MicroLED displays for future devices — that project was rumored to be a partnership with Epistar and AU Optronics, and the story was that it would be an extension of Apple’s presence in that same business park, whether it’s the same building I have no idea. And yes, AU Optronics is their neighbor in that business park. (If you’re wondering about that other company, I think Epistar is still the largest manufacturer of LEDs in Taiwan, making the actual diodes rather than the displays — they combined with Lextar to form Ennostar this year, they’re listed at ticker 3714 in Taiwan.)
Those stories about Apple’s MicroLED project first surfaced in mid-2020, so I’d be cautious about assuming anything imminent about the prospects of the project or the financial prospects of the participants. And do keep scale in mind — Apple is absolutely massive and works on a lot of R&D projects and attempts to bring technology to commercial viability, and it doesn’t always lead to anything… they spend about $50 million per day on R&D globally, and have abandoned lots of projects and partners over the years, so a $330 million investment is not a make-or-break commitment on their part.
But yes, AU Optronics is a leading display producer, it has been in that Taiwanese business park for longer than Apple has, and they are involved in trying to develop and commercialize MicroLED displays as a competitor for both established LCD and LED technology (which has been AU’s focus in the past) and for the current leading OLED technology that Apple and others use for their high-end mobile devices. They’ve also been an Apple supplier in the past, supplying LCD panels for iMacs and other components for various products, I don’t know if they’re currently an Apple supplier.
But if you want to see the value of being a branded product developer compared to being a component supplier, the relative performance of AU Optronics and Apple in the stock market provides a little more context still… this is the revenue growth for Apple (green) and AU Optronics (orange) over the past decade, and you can see the impact of that business growth in the share price (AUOTY in purple, AAPL in blue):
What might be a little interesting, though, is the recent surge in AU’s earnings — this is the chart of earnings per share over that same time period (well, starting a little later — AU Optronics wasn’t earnings a profit in 2012)…
It’s still clear why you would have been happier with Apple, that steady growth in earnings is far more comforting than the wild ups and downs at AU Optronics… but that recent surge does catch one’s attention, what’s that all about?
Well, it’s mostly just about “selling TVs” — that business collapsed in 2019 with the trade war, and then surged in 2020 with the COVID shutdowns leading everyone to buy new TVs (and laptops) for their pandemic cocoons. There is really only one analyst covering AU Optronics, and it looks to me like that analysts thinks both that the shares are cheap, and that the stock will underperform, with earnings dropping next year to $1.39 (still a forward PE of around 4 — the estimate for 2021 is for earnings of $2.28 when the year is done, for a current-year PE of less than 3).
I don’t know anything else about the business, but the fact that LG Display (LPL) trades at essentially the same kind of valuation (slightly higher, a forward PE of 6 and current-year PE of 5, also just one analyst estimate), tells me that there’s not much investor interest in display companies. Maybe that changes, buying stuff that other people aren’t interested in is often a good contrarian idea if you can be patient, and it wouldn’t take much chatter and excitement to cause shares that are this cheap to soar higher, but I can’t say that I’m particularly enthused.
The challenge for suppliers in some of these sectors, and particularly in mobile phones and televisions, is relentless deflation — without clear technological leadership or a trusted brand, they have very little pricing power. In televisions, the downward push on pricing is dramatic and immediate as soon as a newer technology comes out, and in mobile phones there are really only two major customers, Apple and Samsung, who are generally willing to buy the most advanced technology. For little suppliers who do get into mobile phones, those two customers might also make up 50-80% of revenues, and Apple in particular puts the hammer down on pricing when they dangle the idea of ordering a component for the 200 million iPhones they sell each year.
Those are the orders that can make or break a smaller supplier, and from Apple’s perspective the key is to both get the best price, and to make sure that they limit the “sole source” products by helping to make sure that enough suppliers are in the market that they have some competition. Sometimes Apple has to stick with a single source for key chips or components if one company has a real competitive lead or a patented technology that Apple needs, like Qualcomm or Skyworks Solutions (SWKS) at various points in the past decade, and sometimes that probably even means Apple has to pay full price and suck it up… but that rarely seems to be the case. Getting Apple as a customer is kind of like getting Walmart as a customer if you’re a small manufacturer — “Hurray, we’ve hit the big time! Wait, what did you say my price has to be?”
So there you have it… MicroLEDs are coming, probably slowly. AU Optronics is one of the companies working to commercialize the technology and get ready for mass production, and maybe MicroLED tech will make it into some augmented reality devices or wearables in the next few years… the good thing is that the stock looks awfully cheap if you feel like buying it as a roll of the dice that their work on MicroLED will bear fruit in the next five years, the bad thing is that AU Optronics has often looked cheap over the past decade, and still hasn’t really gotten anywhere, and you might have to be very patient — there’s no chance that the 2022 iPhone, for example, will have a MicroLED screen, things are not moving that fast.
That means it’s a qualitative choice — cheap isn’t enough for me, for me to get interested I’d probably have to have some level of confidence in management and their ability to break through with new products and establish some earnings growth… though, to be fair, if more than two or three people had that kind of confidence in AU Optronics, it wouldn’t be trading at PE of 4. Maybe Matthew Carr is on to something, if you start off with “cheap” you do have the odds at least somewhat in your favor, but I’ve seen lots of teasers for component makers and suppliers over the years and I’d always start with low expectations.
That’s what I think, anyway… how about you? When it comes to your money, you have to make the call… ready to speculate on a cheap display supplier? Think there are other places where your money will be treated better? Let us know with a comment below.
I thought it looked interesting and I took a little bite.
Seems to be as usual, bait for larger bait to come.
I would be very cautious to invest in any Taiwan companies at this time. The threat of China declaring war on Taiwan in the next thirty days is very very real… If China succeeds it will disrupt the entire semiconductor market and use this as leverage.
Could be, though for those worry about that outcome, do note that if Taiwan risk accelerates most of the market will be in big trouble, not just the Taiwanese companies — it’s hard to find an advanced chip market that isn’t highly dependent on Taiwan, particularly on fabrication by Taiwan Semiconductor, so if the guns are blazing across the Strait, look out below NVIDIA and AMD and Apple and Tesla and so many more. War’s no good for anybody, but that one could really clobber the tech sector.
I’m hopeful that peace will prevail, and we’ve certainly gotten through several bellicose interludes in the past 50 years, but China is certainly flexing its muscle on “reunification” these days. Peace might mean Taiwan eventually is forced to kneel and kiss China’s boot… probably not a great outcome for the Taiwanese people.
High probability that the next “Black Swan” will be a Chinese takeover of their lost Taiwan province. May not be in 30 days, but soon now that the Chinese mainland military and Communist Party have sensed weakness under the current US administration and determined that the United States would not come to Taiwan’s rescue. This would of course send a signal to North Korea to move on the South and Russia to re-integrate the Ukraine into their sphere of influence. There is little stomach in Biden’s administration to risk challenging any of the above. A major world order change is imminent and the wise investor should prepare.
How could there be any kind of probability about a “black swan” when a black is a total unknown. There would zero probability for a black swan.
Could the US intervene?
Not sure what to call it — maybe a “Pink Llama” — but it’s sure not a “black swan” if you are predicting it…
The reasons such a war is unlikely in the near term are manifold and are the subject of other messages here.
About Korea I think the common perception is almost completely erroneous. The DPRK has a huge but almost completely incompetent army. Yes, their special forces are numerous and are actually well trained and equipped, unlike nearly every other element of the DPRK military. And their role is diversionary and not decisive. Sure, the DPRK has huge numbers of arty tubes pointed South but these have a life expectancy in combat measured in single digit numbers of rounds fired. ROK forces are highly trained and well equipped.
Frankly the question is not whether US intervention is needed to defeat the DPRK but whether the US can restrain a ROK counterattack from moving so far North that the PRC deems it necessary to stage their own invasion of N Korea to secure the DPRK’s nukes.
Would the US intervene? Given the DPRK’s inability to defeat the ROK, the Nkoreans will try to bring a conflict to the negotiating table by imposing high civilian casualties on the South with arty shelling of urban areas and use of chemical weapons. NO American leader will stand by if American children are shredded by DPRK artillery or suffocated by nerve agents. And there are tens of thousands of American civilians in Seoul alone. Even if a President wanted to stall, the weight of public opinion would force intervention.
Fun fact: There are more PRC citizens resident in the ROK than US citizen civilians.
Probably not the current U.S. decision makers.
I have the subscription and this stock is not part of the portfolio
Sometimes these kinds of pitches are for “special reports” that aren’t formally in the model portfolio, though I don’t know how this newsletter operates on that front.
Look at the article in Oxford Growth Investor
Last time I took a spec on Apple glass Ilost a ton. They even had paid for the ovens so I thought it was safe. With weak lyn’ Joe China will take over Taiwan and??? NO THANKS
It’s unfortunate that the discussion digressed into politics (even though I am very concerned about the situation in Taiwan) but I would very much like to see a continuation of the chip shortage issue and it’s potential impact if Taiwan was removed from the supply chain.
There are lots of possible outcomes — remember, China is a huge part of the global supply chain for tech, too, and everything is far more interconnected and interdependent than it was 10 or 20 years ago… though Taiwan is specifically important for the highest end chips (Apple, NVIDIA, etc).
It’s hard to imagine how the war of words might play out, and what the odds of a bad economic outcome might be. The US and Japan have never officially recognized Taiwan as separate from China, which is part of what has mollified Beijing, but the threatening chatter has flared up whenever the subtext from Taiwanese leaders becomes more independence-focused. Taiwan has very limited military power and in any actual showdown would depend on the US, if it comes to that.
Interesting food for thought. A little frightening to think that it could come to an all out war but I choose to think that cooler heads will prevail. Ironic that an old Chinese proverb comes to mind, “may you live in interesting times”. Well these surely are interesting times. Keep up the great work.
What you say is a proverb was/is actually regarded by the Chinese as a curse
I didn’t know that, I had always thought the opposite.
Travis, Irregular Friends: the PRC won’t attack Taiwan unless success is essentially guaranteed. Failure of such an adventure could mean the end of the CPC. And success is not guaranteed while the PLAN lags US sub tech and Taiwan has the means of closing many PRC ports to trade, among other factors which sow doubt among the PLA’s notoriously risk-averse leaders.
Folks need to keep in mind that 9 of 10 of the PRC’s largest trade partners require sea-borne trade via routes liable to US interdiction. 3 of 10 of the US’s largest trade partner’s require sea routes liable to PRC interdiction. Consider too the sources of energy required by both powers. Technology may make the world smaller in many ways but geography cannot be denied.
US leaders have become increasingly clear about intent to support Taiwan in extremis. The discussion is, in fact, whether or not to drop the pretense of “strategic ambiguity.”
Taiwanese politicians have been careful to avoid talking about independence. Let’s hope Tsai and get successors remain this prudent.
I’m not arguing that such a war is impossible; only that it is highly unlikely in the near term and will remain highly unlikely farther out if Taiwan makes sensible investments in its own defense.
I believe that President Xi wants Taiwan back in the fold in time for the 80th anniversary of the unification of the mainland under CCP rule. ie. 1949 to 2029. This will be Xi’s legacy; unification of China along with a strengthened CCP in absolute charge.
As usual Travis hit this pick right on the head! AU Optronics (AUOTY) is Matthew Carr’s recommendation!
Companies involed in the Amazon TITAN EV care effort. Any wizard out there know what happened to Hon Hai Foxconn $3 retirment fund that Bill O’rielly and Alex Green pitched last year. What are the three companies working with either the Apple car or other called the Titan. Thanks for any wisdom for the folks. DeWitt
My mistake i think it is Apple.
Travis, what do you think of the VOSO/ WEJO SPAC?
Although the author says that this company – and this stock – is the single biggest growth story we will see over the next few years, it is not in any of the official portfolios.
But on another note, I followed your breadcrumbs on VYGVF from your last report with 1,000 shares from $12.00 to $17.00 in four days. THANK YOU, THANK YOU , THANK YOU. Yours is the best newsletter around. As Jack Webb would say, “Just the facts ‘mam, nothing but the facts”. No BS and not filling up my email inbox with upselling ads like my other services. Thanks !
Hi Travis & Co,
How can buy some AU Optronics stock -in the UK ?
I buy all my CHOSEN STOCK thru H/lansdown – that way I can easily trace & evaluate all my positions as rapidly & easily as possible !
But H/L cant do the biz on AUOTY stock !?
Regards
David Newman
They’re not listed in the UK, the primary listing is in Taiwan at 2409 and most US investors would probably buy the ADR through that AUOTY OTC ticker — most OTC stocks are not easily traded by most non-US brokers, according to comments I’ve received from readers in the past (though I certainly don’t know a lot about UK brokers). It looks like it’s also trading in Germany, at AU7A, not sure if that’s any easier or if the volume is high enough for fair pricing. I don’t own this one, personally.
If you want cheap with huge upside check out -NHHH.V or in the us -NHHHF on the OTC market. the new 0 carbon fuel for everything.
Hi. Does anyone know what the stock is that Alex Green promotes on his staged interview – #1 Microcap stock for 2021?
Does anyone know what Alex Green’s #1 microcap stock for 2021 is?
It’s interesting that there is more fear about China and Taiwan tan on the recent 30% drop in #DOCU. Anyways, here’s a good discussion on Taiwan.
theamericanconservative.com/articles/taiwan-means-war-only-if-we-want-it-to/
AUOTY rose from $6 to $8 between Oct 25, 2021 and Dec 20, 2021. Note: M Carr and The Oxford Club services are geared toward identifying Small Cap opportunities that expire in about 60 to 90 days. Alerts are sent out for both entry and exit prices. Option investing is encouraged to magnify Gains when realized. If 33% Gain was realized in 60 days on AUOTY, and if even greater gains were realized on a CALL Option, then M Carr and The Oxford Club fulfilled their promise to members of their alert service. It is “how” they identify picks and their entry and exit prices, along with the results, that is their “value add” to subscribers.
The ad has still been running recently, so he must like more than one trade on that one. And no options in this case, since AU isn’t listed.
Agreed, It looks good for future investment of two years or more. Why wait for that? There are so many other places to put your money.
Great analysis and comments – agree.