technology opportunity · 2020. 11. 30. · for our part, we saw a strong buying opportunity as...

November 2020

TechnologyOpportunity

&

November 2020 Issue

1


&

In This Month’s Issue:

• The Power of Electrification: The Proof is in the Profits

• New Sell Alert: Banking 143% in Just 5 Weeks on Switchback Energy

• Position Spotlight: Global X Lithium ETF

• Company News and Updates

Let me tell you a quick story about the most unusual gas station I’ve ever passed.

Although the Midwestern states may hold a monopoly on the weirdest roadside attractions you’ll ever find, the most intriguing one I’ve ever was located less than 30 minutes from my doorstep.

Last summer I was driving down to Washington D.C. for the day when my gas light came on. Foolishly, I hadn’t even thought of filling up before I left, so I hopped onto the nearest exit ramp and started scanning the horizon for the first gas station to pop-up.

Less than a mile later, I pulled into RS Automotive and was immediately shocked.

Oddly, all the pumps had been covered with a green tarp.

See for yourself:

I had stumbled across the first gas station in the U.S. to replace its pumps with EV chargers.

Don’t get me wrong, we weren’t talking about some major Pilot Flying J hub, with a fleet of trucks parked in the lot.

November 2020 Issue

2


&

No, the owner substituted his gas pumps with four chargers that had a capacity of 200 kW. That can get you a nearly full charge in under 30 minutes.

It’s not the size of the operation that had captured my attention, but rather its existence.

During the first half of 2020, approximately 87,398 electric vehicles were sold in the United States. Not surprisingly, Tesla accounted for 80% of that market share.

Truth is, Tesla’s three top models were the three best-selling EVs from January through June. The Chevy Bolt was the only non-Tesla model to crack the Top 5 during this period, with a little over 8,300 units sold.

It wasn’t just Tesla’s sales that were intriguing.

Elon Musk’s announced at Tesla’s Battery that the company would soon dive headfirst into the lithium game and build a lithium hydroxide refinery in Texas. The spodumene conversion facility will be located right next to Tesla’s Gigafactory 5 in Austin, Texas.

If you haven’t before, then it’s time to pay close attention to the North American lithium producers. Musk plans on getting at least part of his supply from Piedmont Lithium, and struck an off-take deal with them for approximately 8,000 tonnes of lithium hydroxide per year starting in July of 2022.

Granted, Tesla’s biggest competition isn’t Chevy, Ford, or any other giant auto companies.

But as we’ve talked about before, the final EV hurdle is laying down the infrastructure necessary to truly transition to an all electric fleet of cars.

That brings us to our Kensington Capital Acquisition Corp. trade last month. The merger that was about to take place with QuantumScape crossed our radar, and so we took advantage of it.

On November 27th, that combination took place and QuantumScape started trading under the ticker ‘QS’ on the NYSE. This company was a great play for us on solid-state batteries, and we see a strong upside to their technology.

We currently rate QuantumScape (NYSE: QS) a “Buy” under $45.

Now it’s time for some profits...

November 2020 Issue

3


&

New Sell Alert: Switchback EnergySometimes you nail a trade perfectly.

As it turns out, we couldn’t have timed our Switchback trade any better.

First, a quick recap...

In your October issue, which you can access directly by clicking here, we told you about our top enabler stock for electric vehicles: Switchback Energy Acquisition Corp. (NYSE: SBE).

Our premise was clear. ChargePoint Inc., the world’s largest electric vehicle charging company, plans on expanding its network to more than 250,000 stations by the end of 2021. By 2025, the company hopes to have over 2.5 million stations!

We can’t ignore that kind of growth.

In order to take advantage of this situation, we pulled the trigger on Switchback Energy, the company that Chargepoint chose to go public through via the SPAC route.

For our part, we saw a strong buying opportunity as Switchback Energy’s shares were trading under $17 apiece.

Let me show you how that trade worked out for us over the last five weeks:

https://assets.angelpub.com/pdfs/2020/42/tao-october-2020-1726.pdf

November 2020 Issue

4


&

As you can see, it didn’t take long for the stock to start climbing higher in November!

Now here comes the hard part. Even though we are wildly bullish on EV growth this decade, perhaps the most important trading axiom any investor can learn is this:

It’s never truly a gain until the cash hits your bank account.

I learned this lesson on my very first trade, and I’ll never forget it.

As I write this, our position is up 143%!

I want to be the first to congratulate you on this winning trade.

We more than doubled our money on Switchback Energy, and I have a feeling this won’t be the last time we find ourselves as shareholders again.

Now that we have a little more spending cash for the holidays, let’s move on to another way we are profiting from the EV revolution.

November 2020 Issue

5


&

Position Spotlight: Global X Lithium & Battery Tech ETF (NYSE: LIT)

Here in Baltimore, the lock-downs started all the way back in mid-March.

Time suddenly slowed down to a crawl, and your humble editor didn’t even leave the house for the first few weeks. By the time we all started to realize what a lock-down truly meant, the markets had been beaten bloody.

No other sector experienced that harsh volatility than the energy sector.

Just consider that at one point, crude oil was trading at negative prices!

It’s true. People were paying you to take their oil off their hands. Even the largest independent oil companies on the planet still haven’t recovered from that.

Exxon Mobil Corporation is currently trading for around the same price as it was during the second quarter of the year.

But not all energy markets were created equal.

Look, we more than doubled our money on Switchback Energy on the idea that electric vehicles will experience incredible growth in the coming years.

Yet, that’s not the only angle we’ve taken to capitalize on the rise of electric vehicles.

Back in 2017, we established a position in Global X Lithium & Battery Tech ETF (NYSE: LIT).

Officially, Global X Lithium ETF attempts to replicate the performance of the Solactive Global Lithium index. In short, this ETF gives us a little diversity within the lithium industry. Its holdings include EV giants like BYD and Tesla, as well as the world’s top lithium producers and battery manufacturers such as Albemarle, Ganfeng, and LG Chem.

If nothing else, the lithium industry has thrived during this pandemic.

November 2020 Issue

6


&

Naturally, that’s great news for this ETF

Since March, our position has climbed more than 150%!

Take a look:

Not too shabby, but the best part is that things are about to get even hotter for the battery sector going forward.

The global battery market was valued around US$108.4 billion last year, and is expected to grow at a CAGR of 14.1% between 2020 and 2027.

Looking at the U.S. battery market alone, there’s no question that lithium-ion will account for the bulk off future growth:

November 2020 Issue

7


&

In 2019, the U.S. battery market was worth roughly $10.5 billion.

Never forget that the rapid adoption of electric vehicles is an incredibly strong catalyst for lithium-ion batteries.

For our purposes, putting all our eggs in one basket didn’t seem too appealing, especially given the volatile nature of the lithium market over the last decade.

Global X Lithium & Battery Tech ETF offers us with the diversity we were looking for to ride this battery boom over the long-term.

Right now, shares look a little oversold. And although we are not looking to exit our position just yet, I am raising our “Buy Under” price to $45 to better reflect its performance.

We rate Global X Lithium & Battery Tech a “Buy” below $45. Its risk level is “Medium Low.”

Let’s move on to some portfolio updates.

November 2020 Issue

8


&

Portfolio Snapshots and Updates

Activision Blizzard Inc. (NASDAQ: ATVI)

Snapshot:

Activision Blizzard is a video game holding company formed in July 2008 through the merger of publishers Activision and Vivendi Games. Its intellectual properties include Call of Duty, Guitar Hero, World of Warcraft, Overwatch, and Candy Crush. The company is based in Santa Monica, California, and operates under five business units: Activision Publishing, Blizzard Entertainment, King, Major League Gaming, and Activision Blizzard Studios.

Updates:

If there is a clear-cut winner during these Covid times, it’s gaming and esports. The pandemic has boosted revenues for companies, and our Activision position is proof of that.

When the company released its Q3 results, it reported earnings of $0.88 per share — a 66% year-over-year increase. This beat analyst expectations, and also the company reported net bookings increased to $1.77 billion, representing a 45% year-over-year jump.

Product revenues during the quarter totaled $408 million, up 57% over the previous year, with subscription, licensing, and other revenues totaling $1.55 billion, a 51% year-over-year increase.

The company is projected to earn non-GAAP revenues of $2 billion during the fourth quarter. Earnings is expected to come in at $0.63 per share.

We rate Activision Blizzard Inc. (NASDAQ: ATVI) a “Hold.” The risk level is “Medium.”

November 2020 Issue

9


&

Allied Motion Technologies (NASDAQ: AMOT)

Snapshot:

Allied Motion Technologies, formerly known as Hathaway Corporation, is an American manufacturer of motion control systems and other robotics components. The company’s products are used in automated farm equipment, Amazon factory robots, and prosthetic limbs, just to name a few applications. The company was founded in 1939 in Denver, Colorado. Today, it is based in Amherst, New York, and its business is roughly evenly split between domestic and international customers.

Updates:

Recently, Allied Motion Technologies posted strong third quarter numbers after releasing its latest earning report. The company beat earnings and revenue estimates after showing $95 million in revenues for the quarter, and generating earnings of $0.42 per share.

Clearly the company has continued to perform well. We expect further upside ahead as the company builds on this momentum. Medical demand for Allied Motion’s products and ventilators remained high throughout the quarter.

We rate Allied Motion Technologies Inc. (NASDAQ: AMOT) a “Hold.” The risk level is “Low.” We’re putting a 20% stop-loss on the position.

Brooks Automation Inc. (NASDAQ: BRKS)

Snapshot:

Brooks Automation is a uniquely positioned robotics stock, as it allows us to play both consumer technology and biotech at the same time. The firm is headquartered in Chelmsford, Massachusetts, with direct operations in North America, Europe, and Asia.

Brooks provides both automation and cryogenic solutions for multiple markets, which include semiconductor manufacturing and life sciences. Its robots help companies automate the storage, retrieval, and testing of biologic samples, so scientists don’t have to. This is all done to ensure consistency and to help fight against accidental contamination or injury.

November 2020 Issue

10


&

Updates:

Our Brooks position has made a tremendous run higher over the last month. Since the first week of October, our shares have surged 51%.

The market took the company’s latest earnings report well. During the third quarter, Brooks generated $246 million in revenues, and posted earnings of $47 per share — nearly double from where earnings were a year ago.

We rate Brooks Automation Inc. (NASDAQ: BRKS) a “Hold.” The risk level is “Medium.”

Ceragon Networks Ltd. (NASDAQ: CRNT)

Snapshot:

Ceragon provides high-capacity communication systems for wireless backhaul, the segment of 5G that connects cell towers to an operator’s core network. Ceragon Networks already has some of the biggest telecom companies in the world like Verizon, Sprint, AT&T, and T-Mobile clamoring for its wireless products. Ceragon has a customer base of over 460 service providers of all sizes and operates in hundreds of private networks in over 130 countries. The company is based in Tel Aviv, Israel, and has been taking part in the market for over 50 years.

Updates:

Ceragon Networks also released its most recent quarterly report last month. The company posted earnings of $0.03 per share. This beat what analysts were projecting, and the strong revenues and high gross margin helped the company generate $1.6 million in GAAP net profits.

The company also reported that it was making progress in multiple operator 5G network processes, going from design wins to proof of concepts and purchase orders. Expect to see possible high-volume orders during the latter half of 2021.

We rate Ceragon Networks Ltd. (NASDAQ: CRNT) a “Strong Buy” under $5. The risk level is “Medium.”

November 2020 Issue

11


&

Drone Delivery Canada Corp. (OTCMKTS: TAKOF)

Snapshot:

Drone Delivery Canada Corp. is a drone manufacturing firm based in Toronto. The company is designing, developing, and implementing a commercially viable drone delivery system. Drone Delivery Canada Corp. has built drones that can carry up to 400 pounds. It already has commercial customers and plans to establish up to 150,000 drone delivery routes in Canada.

Updates:

Last week, we learned that Drone Delivery Canada Corp. signed a Letter of Intent with Drones Express for a multi-year, multi-route, Condor project in Quebec. The effective date on the LOI is November 23, 2020.

According to the details, the LOI will be for 10 years, and generate a total of CAD$3.6 million in revenue for Drone Delivery.

We rate Drone Delivery Canada Corp. (OTCMKTS: TAKOF) a “Buy” under $0.85. The risk level is “High.”

Global X Lithium & Battery Tech ETF (NYSE: LIT)

Snapshot: The Global X Lithium & Battery Tech ETF invests in the full lithium battery cycle, from mining and refining the metal through battery production. It’s designed to correspond to the Solactive Global Lithium Index. The fund invests at least 80% of its total assets in securities of companies that are economically tied to the lithium-ion battery industry.

Updates:

Please refer to earlier in the issue for our latest thoughts on Global X Lithium & Battery.

We rate Global X Lithium & Battery Tech ETF (NYSE: LIT) a “Buy” below $32. Its risk level is “Medium-Low.”

November 2020 Issue

12


&

KVH Industries Inc. (NASDAQ: KVHI)

Snapshot:

KVH Industries is the manufacturer of mobile satellite communications, guidance, and stabilization equipment and solutions for consumer, commercial, and military applications. It operates in two main segments: mobile connectivity and inertial navigation. As of today, the bulk of the company’s revenue comes from its maritime internet connectivity business. The real focus of KVH Industries is the fiber-optic gyroscopes (FOGs), a kind of inertial measurement unit (IMU). FOGs are highly accurate electronic components that measure the orientation and movement of various pieces of hardware and machinery. Although FOGs make up a small part of KVH’s top line, soon this segment will overtake its maritime business.

Updates:

There’s a reason our KVHI position is closing in on a new 52-week high.

The company released its third quarter earnings at the end of October, and posted earnings of $0.06 per share. This absolutely smashed expectations, as Wall Street was expecting the company to post a net loss of $0.10 per share. This is the third time over the last four quarters that we’ve seen KVH Industries exceed earnings expectations.

Two weeks ago, the company reported that Furuno, a Japanese electronics company, started offering KVH’s AgilePlans maritime connectivity service in Japan. This is a subscription-based model that offers maritime satellite communications.

KVH Industries Inc. (NASDAQ: KVHI) is a “Buy” under $12. The risk level is “Medium.”

November 2020 Issue

13


&

Nokia Corporation (NYSE: NOK)

Snapshot:

Nokia is a multinational information, technology, and communication company founded in 1865. In its more recent years, the company has become an innovative contributor to the world of mobile and internet technology. Today, the company produces a wide range of hardware and software. Nokia also operates networks, sales, and communication channels on a global scale. The company’s segments include Ultra-Broadband Networks, IP Networks and Applications, and Nokia Technologies.

Updates:

You could say it was a busy month for Nokia.

In early November, the company completed the Ceneri and Gotthard Base Tunnels communications infrastructure project. This project was responsible for project management and tunnel control system delivery for the two tunnels, and enabled customized, real-time monitoring of the two tunnels’ communication infrastructure.

This was a six year project, and Nokia hit every milestone they set during its completion.

The company also expanded its agreement on 5G-ready IP network, which will replace an existing IP edge/core network in Greece and Hungary. Deutsche Telekom will utilize Nokia’s 7750 Service Router platform to modernize the network.

Nokia launched the world’s first 25 Gbps symmetrical PON (passive optical network) solution last month. As we talked about in one of our weekly “This Week in Tech,” series recently, the 25G PON technology is the next step in PON evolution, and will enable the converging of high-end services on a single fiber infrastructure.

Last week, we learned that Nokia was selected as one of TELUS network’s infrastructure partners to provide 5G mobile services in Canada. Nokia solutions will be used to support the Canadian operator, and strengthen its 5G services.

We rate Nokia Corporation (NYSE: NOK) a “Hold.” The risk level is “Medium.”

November 2020 Issue

14


&

Nuance Communications (NASDAQ: NUAN)

Snapshot:

Nuance Communications is a communication software company specializing in speech-recognition and conversational artificial intelligence (AI) applications. It is known for the role it played in developing Apple’s Siri personal assistant software, as well as for its Dragon speech-recognition software and its customer service chatbot products. The company was founded in 1992 and is based in Burlington, Massachusetts, a suburb of Boston. Its Nina AI platform is ranked as the No. 1 ranking virtual assistant for enterprise customer support.

Updates:

Nuance Communications recently beat expectation on its latest quarterly report. The company generated $352 million during the quarter, and posted non-GAAP earnings of $0.18 per share.

The company also announced that it had won two top honors at the 13th Annual Corporate Governance Awards recently. It received an award for the best governance team of the year, and its Chief Legal Officer Wendy Cassity was named governance professional of the year.

We rate Nuance Communications (NASDAQ: NUAN) a “Hold.” The risk level is “Medium.”

Rockwell Automation Inc. (NYSE: ROK)

Snapshot:

Rockwell Automation is an American provider of industrial automation solutions and equipment, which includes various power, control, and information systems that fall under two segments: architecture and software, and control products and solutions. Headquartered in Milwaukee, Wisconsin, Rockwell is a Fortune 500 company that employs over 22,000 people and serves customers in over 80 countries. Its top brands include Allen-Bradley and Rockwell Software.

November 2020 Issue

15


&

Updates:

Rockwell reported its latest earnings report in mid-November. The company posted adjusted earnings per share of $1.87 during the quarter, with sales totaling $1.57 billion.

The company announced last week that the next evolution of its Original Equipment Manufacturer (OEM) Partner Program was underway. The program now provides increased market access opportunities, simplification, standardized product alignment for manufacturers, allowing participants to fully leverage the company’s technology.

We rate ShotSpotter Inc. (NASDAQ: SSTI) a “Hold” at current levels. The risk level is “Medium.”

Teradyne Inc. (NASDAQ: TER)

Snapshot:

Teradyne has historically been a developer and supplier of automatic test equipment (ATE), but it recently purchased a company by the name of Universal Robots (UR), the world leader in customizable, collaborative robots. With an intuitive interface (no programming experience needed) and an estimated return on investment of just three to eight months, UR robots are an easy decision for U.S. factories that seek to gain an edge. UR robots can automate virtually anything, from assembly to painting and labeling to injection molding. Teradyne offers a full line of robotics solutions with its UR3, UR5, and UR10 robotic arms. The robots are easy to program and set up and are flexible for redeployment. High-profile customers include Samsung, Qualcomm, Intel, Analog Devices, Texas Instruments, and IBM.

Updates:

In mid-November, Teradyne announced that it would pay its quarterly dividend of $0.10 per share on December 18th to all shareholders on record as of November 25, 2020.

The company also reported that its Chairman of the Board of Directors, Roy Vallee, was retiring. His retirement will be effective at the 2021 annual meeting next May.

We rate Teradyne Inc. (NASDAQ: TER) a “Hold.” The risk level is “Medium.”

November 2020 Issue

16


&

Unity Biotechnology Inc. (NASDAQ: UBX)

Snapshot:

Founded in 2011 and based in South San Francisco, California, Unity Biotechnology is a biotech startup focused on targeted therapies that treat common joint and eye diseases by slowing the aging process at the cellular level. The firm holds 13 patents and is working on three drugs: an arthritis drug candidate called UBX0101 and two ophthalmologic drug candidates called UBX1967 and UBX1325. It has garnered large investments from Jeff Bezos, Peter Thiel, the Rockefeller Family, BlackRock, Renaissance Technologies, and Goldman Sachs.

Updates:

Unity Biotechnology released its third quarter results earlier this month. The company reported a GAAP loss $0.52 per share, missing the analysts’ consensus by $0.10 per share. The company reported cash, cash equivalents, and marketable securities of $132.2 million.

The company has stated that it can sufficiently fund its operations well into mid-2022.

We rate Unity Biotechnology Inc. (NASDAQ: UBX) a “Hold.” The risk level is “High.”

Verizon Communications Inc. (NYSE: VZ)

Snapshot:

Verizon Communications is an American-based multinational telecommunications company. Beyond that, Verizon is one of the largest technology companies in the world, connecting millions of people, companies, and communities through powerful technology. Today, Verizon is using its groundbreaking mobile networks to make innovative breakthroughs in networks, broadband media, and the internet of things.

November 2020 Issue

17


&

Updates:

Verizon recently expanded its 5G Ultra Wideband service to two more cities. This time, Akron, Ohio, and Nashville, Tennessee, have become the latest additions to Verizon’s services. By year-end, the company expects to have its 5G Ultra Wideband services in more than 60 cities.

A few weeks ago, we learned that BuzzFeed was acquiring the HuffPost website from Verizon Media. Verizon will continue to invest in the company, and will retain a minority stake.

We rate Verizon Communications Inc. (NYSE: VZ) a “Hold.” The risk level is “Low.”

Technology and Opportunity © Angel Publishing 2020, 3 E Read Street, Baltimore, MD 21202. All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Technology and Opportunity and Angel Publishing do not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment. Neither the publisher nor the editors are registered investment advisors. Subscribers should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question. Unauthorized reproduction of this newsletter or its contents by Xerography, facsimile, or any other means is illegal and punishable by law.

17

technology opportunity · 2020. 11. 30. · for our part, we saw a strong buying opportunity as...

Documents