October 2016

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In this Week’s Issue:

• Handset Headwinds Ahead

• Banking Semiconductor Returns, including Micron Technology Inc. (NASDAQ: MU) for +38.35%, LG Display (NYSE: LPL) for +48.81%, and More.

• Auto Crisis 2.0: The Perils and Profits of Autonomous Vehicles

• One New Recommendation (A Driverless Cars Play)

• Company News and Position Updates

Smartphone Woes and a Semiconductor PurgeThe holiday season is just around the corner, which means it’s time again for consumers around the world to begin upgrading their aging mobile devices. Historically, this season has been a major sales boon for smartphone OEMs and their suppliers, but this year we’re not exactly sure that’s going to happen, at least to the extent that it has in the past...

This year, the world’s two largest handset makers, which together account for more than one-third of global shipments, are facing major headwinds. Apple, for one, is coming off its second straight quarter of sales declines after 13 years of consecutive growth. Its iPhone 7 reveal was notoriously underwhelming and, for the first time since the release of its flagship product, the firm did not reveal opening-day sales numbers (a very bad sign).

Jointly, Samsung is facing its own nightmare scenario during this prime season, having just killed the production of the Galaxy Note 7 altogether due to battery explosions. While not a total deathblow (at least it’s not the Galaxy 7), the defective and dangerous Note will surely tarnish the entire Galaxy lineup. While not inherently dangerous, no one wants to buy other products from a company associated with exploding batteries when those products contain batteries as well.

Now, maybe some of you saw the MarketWatch article put out last week suggesting that Apple could sell another 15 million phones because of the Samsung Note explosions and production halt, but you’d be remiss to take that speculation for reality. Because Samsung is built off Android, we don’t expect too many users shifting to an entirely different ecosystem in iOS. The two OEMs that will benefit from this most are actually HTC (TPE: 2498) and Alphabet Inc. (NASDAQ: GOOG) — the two closest high-end Android handset makers.

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If you want to scoop up either of these two companies heading into the holiday season, it certainly wouldn’t be a bad bet, but we’re not making an official recommendation on either. Instead, our focus right now is to purge our portfolio of exposed semiconductor firms and component providers, as overall smartphone sales are now at risk of a serious plummet.

Fortunately, we’ve done quite well investing in semiconductors and various component companies since 2014. We closed out several winners earlier this year, all for double-digit returns, and currently have 11 open semiconductor positions with just two unrealized losses. We’re not going to go into each of these companies and whom they supply in detail, but here’s what we’re selling based on an expected decline in smartphone shipments this year:

• Sell Analog Devices Inc. (NASDAQ: ADI) for +8.2%

• Sell inTEST Corp. (NYSE: INTT) for -9.9%

• Sell LG Display (NYSE: LPL) for +48.81%

• Sell Intel Inc. (NYSE: INTC) for +15.7%

• Sell Micron Technology Inc. (NASDAQ: MU) for +33.2%

• Sell Synaptics (NASDAQ: SYNA) for -1.37%

• Sell NXP Semiconductors NV (NASDAQ: NXPI) for +20.25%

Déjà Vu: Is a Second Auto Crisis Brewing?

The automotive crisis of 2008 to 2010 was part of a global financial meltdown that most of us will never forget.

Spearheaded by a five-year energy crisis leading up to 2008, demand for oil climbed to all-time highs and gas prices shot through the roof. In turn, consumers stopped buying SUVs and trucks because of their poor fuel economy. Walking to work suddenly became commonplace, and sales of bikes, bus tickets, and subway tickets ballooned.

The “Big Three” automakers (GM, Ford, and Chrysler) faced heavy criticism for their lineup of vehicles in face of rising fuel prices. They were seen as irresponsible to much of the public, and the fact is, they were.

Add in rising unemployment throughout the U.S. on top of a tightening credit market, and it

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isn’t particularly surprising that automakers experienced such significant sales declines. After all, 90% of consumers finance automobile purchases through loans, either directly from the financing arm of the manufacturers or from third-party institutions.

Due to all of these factors, sales fell dramatically, from roughly $8.1 billion in 2007 to $4.6 billion in 2009. That’s a shocking 43% decline in an industry that was crucial to the U.S. economy.

Facing financial losses, the “Big Three” shut down many factories, drastically reducing employment levels. All told, the number of workers dropped from 185,800 to 123,400 in assembly plants and 607,700 to 413,500 in parts plants…

That’s roughly 250,000 workers total... a quarter million.

Consumers quickly turned to smaller, more economical imports from Japan and Europe, causing the “Big Three’s” market share to decline rapidly by the end of 2009 to only 44%. This was

down from an all-time high of over 70% just a decade earlier.

The damage was done. Jobs were lost and savings accounts were used up…

The first American auto crisis had officially hit.

The Beginnings of Auto Crisis 2.0

As much as I hate to say it, another auto crisis is brewing once again... This time, though, it threatens to make 2008 look like a cakewalk.

Millions of Americans today make a living by driving trucks, delivery vans, taxis, and ride-hailing cars. The transportation industry is one of the most important aspects of today’s economy, particularly in regards to job creation. All told, about 12% of American jobs involve driving a car or a truck.

But with virtually all major automakers now shaking up the game with self-driving car initiatives, what exactly will happen to that 12% of the population when driving skills are no longer needed?

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It’s a scary albeit important question that any serious investor needs to start considering.

Unfortunately, the magnitude of this problem is truly breathtaking. Just take a look at some of the numbers:

• Over 1 million people employed as either taxi drivers, chauffeurs, or ride-share drivers giving rides to passengers throughout major cities.

• Over 1.4 million delivery truck drivers picking up and/or delivering packages and small shipments within the city or region, driving a vehicle of 26,000 pounds or less, usually between a distribution center and businesses or households.

• Almost 3.5 million heavy-truck and tractor-trailer long-haul drivers transporting goods across the nation’s highways.

By the end of 2016, these areas will account for somewhere over 5.9 million workers who depend on the transportation industry to pay their bills. Within a decade, many of these people will lose their jobs and their livelihoods to automation.

For transportation companies, the total cost of drivers (including wages, benefits, and taxes) is among their biggest expense. Human drivers are also one of their biggest efficiency problems. After all, unlike machines, people get sick, need vacations, and can’t drive 24 hours a day.

Ride-hailing service Uber, for instance, reportedly lost $1.68 billion in the first three quarters of 2015. Its biggest expense? Drivers... which is why the company recently gutted Carnegie Mellon’s top robotics lab to build self-driving cars

Currently, Uber is testing automated taxis in Pittsburgh. For now, they’re supervised by humans in the driver seat... but that isn’t the end game.

The fleet consists of specially modified Volvo XC90 sport-utility vehicles outfitted with dozens of sensors that use cameras, lasers, radar, and GPS receivers. Realistically, these vehicles are already capable of picking up and dropping off passengers on their own.

The two companies signed a pact earlier this year to spend $300 million to develop a fully autonomous car that they say will be ready for the road by 2021.

This will no doubt be a large blow to both ride-share drivers and the taxi industry, but passenger transportation is just one piece of the puzzle...

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The Autonomous, Job-Killing, Revenue-Crushing Fleet

According to NPR.org, the most common job in 29 of the 50 states is truck driver.

Labor leader Andy Stern believes the biggest potential hit will be to America’s 3.5 million truck drivers. “Commercial truck driving is going to be the leading edge of a tsunami of labor displacement,” says Stern, former president of the Service Employees International Union. “It’s not something the next generation is going to have to deal with. It’s going to happen in the next decade.”

“We’re talking millions of jobs — the drivers themselves, but also the people in insurance, repairs, restaurants, hotels,” Stern points out. “I think it’s incredibly irresponsible that no one’s making plans for this.”

Uber, among others, sits at the forefront of this industry.

The wildly popular ride-sharing firm recently purchased Otto, a company led by former employees of Google, Apple, Tesla, and Cruise Automation that’s turning commercial trucks into self-driving freight haulers.

Prominent staffers include former Google Maps lead Lior Ron and Anthony Levandowski of Google’s self-driving car team.

Just take a look at what Otto is doing…

Rather than building its own trucks, Otto is hoping to make hardware kits for existing truck models that would either be installed by service centers or possibly at the factory if the company is able to forge manufacturer partnerships.

Daimler is also producing self-driving car technology, as you can see here.

And it doesn’t stop with the transportation industry losing workers. In fact, the entire auto industry is at risk...

PriceWaterhouse predicts a complete collapse of vehicle sales due to ride sharing, with a drastic reduction from over 245 million vehicles on the road now to just 2.4 million vehicles — believing it will be easier and more cost-efficient for people to travel without the costs of vehicle ownership.

And while automated cars are nowhere near perfect in terms of safety, they are undoubtedly safer than the average American driver.

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With over six years of public testing, Google’s vehicles have only been in 11 minor accidents, and if Google’s reports are trustworthy, none of those accidents was caused by the autonomous vehicle.

A study by McKinsey & Company predicts that, in a future where all cars are automated, we could see a crash rate reduction of up to 90%.

Lower accident rates would lead to less frequent visits to auto body repair shops, leading to the possibility of a good portion of the 445,000 auto body repairers in the U.S. without a job. As Stern points out, this will also affect a number of other sectors including the insurance industry.

The takeaway? Driverless cars will cause an unprecedented job loss (at the very least a massive job shift) and a fundamental restructuring of our economy…

But at the same time, this new innovation will also solve large portions of our environmental problems. It will prevent tens of thousands of deaths per year and save millions of hours with increased productivity…

Most importantly, though, it will create entirely new industries and new opportunities for us to invest in. The companies embracing the automated car revolution and the companies making this technology a reality — this is how you turn a crisis into profit.

Where to Invest: Advanced Driver Assistance Systems (ADAS)

ADAS efforts have been developed to automate, adapt, and enhance vehicle systems for safer and better driving. There’s some form of ADAS in most cars today. Anti-lock breaking, cruise control, and other assistance technologies marked the dawn of the automated vehicle.

But as time moves forward, we’re going to see more and more of this technology introduced, where ultimately, we’ll see a road where most of the vehicles will be self-driven and fully automated.

And as we do, savvy investors who take the right course of action will be rewarded beyond measure. We’ve already seen the beginning of this trend with relevant companies like Tesla Motors (NASDAQ: TSLA), NXP Semiconductors (NASDAQ: NXPI), and Autoliv Inc. (NYSE: ALV) taking off, but it’s only the beginning.

In order to find the next auto tech stock, we have to look at the different technologies that are being introduced to the industry today. Going after the actual car companies won’t produce these types of results. If PriceWaterhouse is correct, the automakers themselves are actually a

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terrible investment.

This is why we’ll be continuously building our exposure to the companies “underneath the hood” of autonomous cars, so to speak, as the driverless vehicle industry continues to take hold. As we’ve already signaled in our purge of consumer electronics semiconductors firms, the growth in component providers for smartphones is mostly done with.

This, however, is not necessarily the case with the auto industry. For the remainder of the issue, we’re going to take a look at a few firms strengthening their footprints in autonomous vehicles today. The first three are brief highlights of stocks to watch (we believe these firms are currently overpriced right now), and the fourth is an official recommendation.

Watchlist: Ambarella, Inc. (NASDAQ: AMBA)

Most automotive cameras treat video quality as an afterthought, but Ambarella’s automotive solutions — sensing cameras, viewing cameras, and drive recorders — put video processing at the forefront, with low energy draw 4K imaging.

Automotive safety applications — from collision avoidance systems to lane departure warnings — are only as good as the data they can gather and process quickly. Low-quality data equals low-quality performance. High-quality data equals high-quality performance.

Ambarella uses advanced image processing and computer vision algorithms to produce superior results, improving the performance of common ADAS features while enhancing the driver’s field of view.

Its technology improves dynamic range in high-contrast scenes and delivers advanced low-light processing in dark environments, resulting in significantly fewer false positives and false negatives during detection tasks under challenging conditions.

The company’s automotive solutions cover the following:

• 360-Degree Surround View: Four-channel HD video provides unobstructed, distortion-free views of the vehicle from every side, reducing the risk of accidents.

• E-Mirrors: Side mirrors with viewing cameras to enhance the visibility of traffic, eliminate common blind spots, reduce glare from bright headlights via sophisticated high dynamic-range processing, and improve fuel economy by reducing drag.

• Drive Recording: Capturing the highest-quality video — whether to test vehicle

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performance, to gather critical evidence, or purely for the enjoyment of the road.

Watchlist: TomTom NV (OTC: TMOAY)

TomTom has been in the automotive arena for quite some time, but most wouldn’t know it’s positioned to become a major player in the autonomous driving arena.

TomTom’s HAD (highly automated driving) Map provides a highly accurate and realistic representation of a roadway profile, including curvature and terrain information.

In short, its patented technology delivers a highly optimized 3D view of the roadway.

With this, a vehicle can correlate the company’s proprietary “data” with data obtained by its own sensors. By doing this correlation in real time, the vehicle knows exactly where it is located on the road, even while traveling at high speeds.

TomTom has also developed a Connected Navigation System (CNS) that gives system vendors and OEMs the components they need to develop a unique, state-of-the-art automotive-grade IVI system, which meets end-user expectations as driven by the consumer electronics market.

The components are developed to create an OEM-branded custom system. Each component is designed to be used independently of other components, giving OEMs full flexibility.

Tech pundits were preparing the last rites for this navigation pioneer a few years ago, but it has proved to be resilient. As others fell away, this company is now the biggest and arguably the only consumer tech company Europe has left to boast about.

Due to the company moving into the autonomous driving area, it’s seeing a revitalization in its stock price. We’re keeping an eye on the firm’s income statement, but for now we’re putting it on the back burner.

Watchlist: Mobileye (NYSE: MBLY)

Mobileye develops vision-based advanced driver assistance systems (ADAS), providing warnings for collision prevention and mitigation.

The company’s technology is based on the use of optical vision systems with motion detection algorithms, unlike many other systems that use a combination of visual detection, radar, and laser scanning.

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Its vehicle detection algorithms recognize motorized vehicles such as cars, motorcycles, and trucks in day and nighttime conditions.

Mobileye’s version of ADAS performs vehicle detection–based functions using a single camera mounted in the rearview mirror, unlike the usual approach of using radars, laser scanners, or, in some cases, stereo-cameras.

Mobileye also has proprietary lane and pedestrian detection technologies that set it apart from a lot of other autonomous technology companies…

• The lane detection system is an in-vehicle electronic system that monitors the position of a vehicle within a roadway lane and warns a driver if the vehicle deviates or is about to deviate outside the lane.

• The pedestrian detection technology is based on the use of mono cameras only, using pattern recognition and classifiers with image processing and optic flow analysis.

Both static and moving pedestrians can be detected to a range of around 90 feet using VGA (video graphics array) resolution imagers.

Mobileye is a pioneer in this space and looks to dominate for years to come. As the self-driving car industry ramps up to full production, this company will continue being utilized by many OEMS. For now, though, the company is trading at 30 times sales, which is a bit too pricey on our value scale.

Official Recommendation: Telit Communications (OTC: TTCNF)

While many stocks relating to the driverless car market today remain overpriced, there are still a few companies that are being overlooked by the market. Telit Communications is certainly one of them, currently priced at just 1.1 times sales and 12.2 times forward earnings. For perspective, a better-known firm like Mobileye is trading at 27.5 times sales and 35.0 times forward earnings.

Telit’s potential role in the autonomous vehicle market is simply huge. The company specializes in M2M, or machine-to-machine technology. Basically, Telit enables machines to communicate with each other, and it’s focused on both industry and carmakers.

By leveraging its M2M capabilities, Telit has been heavily involved in the development of driverless cars and has six sales offices dedicated to the market in the U.S., Germany, Japan, China, and Korea. The firm sells directly to both carmakers and their suppliers.

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Specifically, Telit markets several families of intelligent automotive modules offering up to 150 Mbps download and 50 Mbps upload speeds. These modules come in both cellular (long-range) and short-range variants.

Telit’s rugged, all-weather computer chips allow vehicles to perform a long list of tasks from downloading firmware updates and uploading information from sensor feeds to mining consumer data and running complex applications. Basically, Telit can provide OEMs and suppliers the brains of a driverless car.

And Telit isn’t purely a driverless car company, either. It’s exposed to the upside of autonomous vehicles, but its M2M technology has applications in the broader IoT market, which is a major plus. Not only does this expand the addressable market for the firm, but it adds much-needed diversification.

One way we target companies to add to our portfolio is to locate discrepancies in real performance and stock performance. Since 2014, Telit has consistently increased its top line, from a low of $240 million to $343 million. Meanwhile, share price has remained relatively flat, which hints at a pricing inefficiency.

Telit is profitable with an annual net income (TTM) of $10.7 million. The firm last reported $19.2 million in cash and a very manageable $48 million in long-term debt. To add some perspective, the firm has a $379 million market cap. It’s not tiny, but it’s still small enough to go on a run.

In tandem with its continued top line growth, over the next few years, Telit expects significant

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cost reductions as a percentage of the top line, currently targeted at an 8–9% decrease. This includes percentage reductions in G&A, Sales and Marketing, and R&D. These reductions will be fueled by overall revenue growth, currently projected in the double digits.

Here’s a bit from CEO Oozi Cats during the latest conference call regarding recent and future performance:

We continue to see strong growth in our IoT services that includes connectivity, IoT platforms, IoT factory solutions, and integrated end-to-end IoT solutions for corporates and enterprises, alongside strong recognitions by customers and partners. Our IoT Services revenue grew 23.4% to $13.7 million from $11.1 million in H1 2015. We believe this growth will accelerate during the next few years, starting from 2017. Our gross margin improvement from 39.7% in H1 2015 to 40.1% demonstrates our ability to continue improving our IoT products cost, alongside with better mix of our IoT Services, out of the total revenue.

Although the decrease in operational expenses as a percentage of Group revenues is behind our plan during H1, we expect a meaningful decrease over the next few years of gross R&D, sales and marketing, as well as general and administrative expenses as a percentage of revenues. Our target is to shave about 8% to 9% from those operational expenses by 2018. As stated in our full-year guidance, we believe that the revenue growth in the second half of 2016 will lead to the full-year revenues to a double digit growth for the seventh year in a row.

Our 2016 annual guidance is for revenues of $370 million to $390 million based on our expectations for a strong second half. One of the main drivers for this growth would be the North American market. As mentioned earlier, this represents revenue growth of 11% to 17%. Our Adjusted EBITDA guidance is for $52 million to $60 million, which represents a growth of 15% to 32% over the $45.3 million we have achieved in 2015. Our guidance for adjusted earnings per share is $24 to $30 which represents a growth over 2015 earnings per share of 15% to 38%. Our $2.50 interim dividend for 2016 is based on average of the guidance of $27, which represents a dividend growth of about 24%.

Telit’s dividend works out to about 1.5%, while most of its competitors offer no income opportunity for investors at all. Good value, strong growth, fair fundamentals, and income — all these things make Telit an attractive stock to own as driverless cars and the IoT are just now emerging.

We rate Telit Communications (OTC: TTCNF) a Buy under $3.50. The risk level is Medium-Low.

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Portfolio Snapshot and Updates

ABB Ltd. (NYSE: ABB)

Snapshot:

ABB Group is a multinational industrial automation corporation headquartered in Zürich, Switzerland. The company operates primarily in robotics and power/automation technologies. It ranks as a top 200 Forbes company and is one of the largest engineering firms in the world, with over 135,000 employees, operations in ~100 countries, and annual revenue over $35 billion.

ABB is a company focused on keeping up with technological innovation. A diversified global powerhouse, the firm is found at the center of current developments in fields such as (but not limited to) clean energy, smart grids, microgrids (localized, independent grids), robotics, industrial asset effectiveness, and sustainable transport.

Updates:

Earlier this month, Reuters reported that activist shareholder Cevian Capital was campaigning for a breakup of ABB, specifically to spin off its Power Grids segment. ABB was legitimately considering other ownership options, including a sale, IPO, spin-off, or joint venture, but ultimately decided against it.

ABB reports that the decision to retain the unit was supported by independent analyses from McKinsey and independent financial advice from Goldman Sachs and Credit Suisse. The firm cited market attractiveness, existing and future product offerings, and business model opportunities for the retainment.

ABB disclosed the decision as part of a new strategy to focus corporate structure into four divisions: Electrification Products, Robotics and Motion, Industrial Automation, and Power Grids, effective the turn of 2017.

On top of keeping its Power Grids unit, ABB has jointly revealed a $3 billion share buyback plan to run from 2017 through 2019 and has raised its white-collar productivity savings target by 30% to $1.3 billion. Further, ABB is raising its operational EBITA margin target corridor for the Power Grids division from 8%-12% to 10%-14%, effective 2018, and has reaffirmed its overall revenue growth target of 3%-6% through 2020.

We rate ABB Ltd. (NYSE: ABB) a “Hold” under $22.50. The risk level is “Low.”

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Amazon Inc. (NASDAQ: AMZN)

Snapshot:

Amazon is an American e-commerce and cloud computing company. It is the largest Internet-based retailer in the United States and the world’s largest provider of cloud infrastructure services. The company also produces consumer electronics and sells digital media content.

Updates:

Credit Suisse has officially raised its price target of Amazon to $1,050 from $920, joining J.P Morgan, Cantor Fitzgerald, RBC Capital Markets, and Evercore ISI, who all have $1,000+ targets in place. At the same time, Amazon short interest has hit a historical high of $5.3 billion and now sits at a price-to-sales ratio of 3.25, which is arguably a bit pricey for the e-commerce giant.

Since first recommending Amazon back in February we’re now sitting on an unrealized gain of ~55%. This has always been a “buy and hold for life” kind of stock, but we wouldn’t blame anyone for wanting to get those returns on the books. Considering the sharp rally in 2016, we just might close out part or all of our position at some point after the holiday season, in which Amazon sees enough demand to justify creating 120,000 seasonal jobs.

In further news, Amazon is considering plans to further expand its grocery business with curbside pickup and convenience locations for grocery products. Reportedly, this would include drive-up locations where online grocery orders will be brought to cars. The firm is working on technology to automatically read license plates in order speed the process.

We rate Amazon (NASDAQ: AMZN) a “Buy” under $535. The risk level is “Low.”

Amtech Systems (NASDAQ: ASYS)

Snapshot:

Amtech Systems is a supplier of solar panel and semiconductor capital equipment with a global presence in North America, Europe, and Asia. Amtech’s products and services include silicon wafer handling automation, thermal processing, and various products used for fabricating solar cells and semiconductor devices.

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Updates:

No new news or updates for Amtech this issue aside from a number of follow-on orders for its next-generation solar ALD (Atomic Layer Deposition) systems produced by subsidiary SoLayTec B.V. The orders come from a number of unnamed solar cell manufacturers in Asia and are expected to ship within the next six months. SoLayTec has so far booked 22 ALD system orders since its inception, of which 15 are for mass production.

We rate Amtech Systems (NASDAQ: ASYS) a “Buy” under $7. The risk level is “Medium.”

CalAmp Corp. (NASDAQ: CAMP)

Snapshot:

CalAmp Corp. provides wireless communications solutions for various applications worldwide. It offers solutions for mobile resource management, machine-to-machine (M2M) communications, and other emerging markets that require connectivity. Its M2M and MRM solutions enable customers in energy, government, transportation, and automotive markets to optimize their operations by collecting, monitoring, and reporting business-critical data from remote and mobile assets.

Updates:

CalAmp reported second-quarter 2017 results late last month. While weaker than expected, they still show an ongoing growth story. Net income for the quarter grew 2.5% compared to fiscal 2016 while revenue came in at the bottom of the consensus range at $90.5 million (29.6% growth).

CalAmp experienced 35.6% year-over-year growth in wireless datacom ($83.8 million) with $31.9 million attributable to its recently acquired vehicle-recovery specialist LoJack. CalAmp’s satellite business was weaker, showing a 16.5% decline to $6.7 million, but this is of no surprise as the firm announced it would soon be discontinuing satellite operations two quarters ago.

As for the balance sheet, CamAmp reported cash and equivalents of $117 million with total debt at $143 million.

As for the current quarter, CalAmp is anticipating revenue of $81 million to $87 million, up from $74.7 million last year. Management states that it remains “cautious in the very near term” given unfavorable macro-conditions in North America. The firm expects product revenues

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will begin to improve later this fiscal year and into 2018. No reason to hit the panic button on CalAmp yet.

CalAmp (NASDAQ: CAMP) is a “Buy” under $20.50. The risk level is “Medium.”

Cellectis S.A. (NASDAQ: CLLS)

Snapshot:

Cellectis is a genome engineering company that is developing immunotherapies for cancer using a gene-editing method known as TALEN (transcription activator-like effector nucleases) and pioneering agricultural biotech using a revolutionary gene-editing method known as CRISPR through its wholly owned subsidiary Calyxt.

Of the two technologies above, CRISPR is the one that grabs the headlines and currently warrants the most hype. Cellectis’s efforts in immunotherapy are undoubtedly of great importance to the firm, but we ultimately see the biggest speculative upside in its agricultural arm Calyxt, which has been granted an exclusive license agreement with the University of Minnesota for worldwide rights to patent family WO/2014/144155 entitled “Engineering Plant Genomes Using CRISPR/Cas Systems.”

Updates:

No news or updates for Cellectis this month, but for those who missed our comment last issue, the firm reported second-quarter results in September, marking down a 126.3% increase on the top line ($20 million) thanks largely to collaboration revenues. As a developmental firm, Cellectis’s biggest issue remains solvency, but with a cash position of $300 million, it’s in excellent position.

Cellectis S.A. (NASDAQ: CLLS) is a “Buy” under $36.00. The risk level is “Medium.”

Crown Castle International Corp. Inc. (NYSE: CCI)

Snapshot:

Crown Castle owns, operates, and leases shared wireless infrastructure in the United States and Australia. The company provides towers and other structures, including rooftops and distributed antenna systems — a type of small cell network.

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Crown provides access to its towers, small cells, and third-party land interests through long-term contracts in various forms, including license, sublease, and lease agreements. Crown also offers network services related to wireless infrastructure, primarily consisting of antenna installations or subsequent augmentations, as well as site development services. The company operates upwards of 39,000 towers in the United States and approximately 1,700 towers in Australia.

Updates:

No new news or updates for CCI this issue minus a declaration of a $1.125 dividend (4.5%) on its preferred stock, payable on Nov. 1 to shareholders on record as of Oct. 15.

Crown Castle International Corp. Inc. (NYSE: CCI) is a “Buy” under $95.00. The risk level is “Low.”

Editas Medicine (NASDAQ: EDIT)

Snapshot:

Editas Medicine is a genetic engineering company that originally spawned from five scientific founders considered world leaders in the fields of genome editing with specific expertise in CRISPR/Cas9 and TALEN technology. The all-star group of academics includes Feng Zhang of MIT, George Church and J. Keith Joung of Harvard Medical School, David R. Liu of Howard Hughes Medical Institute, and Jennifer Doudna of Berkeley.

Updates:

No news or updates for Editas this month.

We rate Editas Medicine (NASDAQ: EDIT) a “Buy” under $25.00. The risk level is “High.”

Fanuc Corporation (OTC: FANUY)

Snapshot:

Fanuc Corporation is a leader in industrial robotics, with a product lineup that includes factory automation systems, laser cutting, motion control, and compact motors. Fanuc serves a wide range of industries including aerospace, agriculture, construction, metal forming, and automotive manufacturing.

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Updates:

No news or updates for Fanuc this issue.

Fanuc Corporation (OTC: FANUY) is a “Strong Buy” under $27.00. The risk level is “Low.”

Flex Inc. (NASDAQ: FLEX)

Snapshot:

Flextronics International (recently re-branded as Flex) provides customized electronics manufacturing services (EMS) to original equipment manufacturers (OEMs) in the electronics industry. The company also supports supply chain efforts through services packaging, transportation, design, maintenance, repairs, etc.

Over the years, Flex has developed a long customer list of recognizable OEMs including Cisco Systems, Dell, Eastman Kodak Company, Ericsson Telephone Company, Hewlett-Packard, Kyocera, Microsoft, Motorola, Nortel Networks, Sony-Ericsson, and Xerox.

Updates:

No pertinent news for Flex this month, but notably, the company has been moved to Goldman Sachs’s prized ‘Conviction Buy’ list with a $16 price target.

Flex will also hold a conference call to discuss its second-quarter fiscal 2017 results on Thursday, October 27 after market close. A live webcast and recording of the call will be available on the company’s investor relations website at investors.flextronics.com. As always, keep an eye out for our take on the results next issue.

Flex Inc. (NASDAQ: FLEX) is a “Buy” under $13.50. The risk level is “Medium.”

FuelCell. (NASDAQ: FCEL)

Snapshot:

FuelCell is an integrated fuel cell company that designs, manufactures, installs, operates, and services stationary fuel cell power plants. Specifically, the company provides distributed power generation for electric utilities, commercial and industrial customers, universities, and government entities around the world.

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Updates:

No news or updates for FuelCell this issue.

FuelCell. (NASDAQ: FCEL) is a “Buy” under $5.30. The risk level is “Medium-High.”

GoPro, Inc. (NASDAQ: GPRO)

Snapshot:

GoPro, Inc. manufactures a line of standalone high-definition action cameras, with its flagship “Hero” product line. The company also produces various mounting accessories for its cameras and software applications for video editing and social media.

Updates:

As we had predicted in our September Issue, GoPro Inc. (NASDAQ: GPRO) rallied in late September following the reveal of its new Hero5 action camera and Karma drone, in what was undeniably the company’s biggest product launch in two years. Shares closed up 14.6% during the week of the reveal but have since cooled off.

GoPro’s flagship Hero camera is now $50 cheaper at $400, waterproof out of the box, and has a touchscreen on the back which can be used to adjust focus and exposure. The camera also includes voice control and updated software for editing. Its Karma drone, which folds neatly into a small backpack, has already received wide praise, and is being described in the Financial Times as “intuitive as playing a Nintendo handheld.” The products are due to launch later this month (October 23), just in time for the holiday season. Consumer reception is still relatively unknown but we’ll have more information on that next issue.

GoPro, Inc. (NASDAQ: GPRO) is a “Buy” under $15.00. The risk level is “Medium.”

Himax Technologies, Inc. (NASDAQ: HIMX)

Snapshot:

Himax Technologies, Inc. is a fabless semiconductor company headquartered in Tainan City, Taiwan. The company seems to have intentions to infiltrate the world of virtual and augmented computing. Facebook uses its video processing chips for the Oculus Rift, while Microsoft and Google use its near-field displays for the HoloLens and Project Aura (previously Google Glass).

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Updates:

No major news for Himax this month, though the company has reiterated its third-quarter guidance and business outlook for the second half of the year in response to recent price volatility. In a press release to reassure investors, here’s what management had to say:

Regards to the AR/VR business that many investors believe to offer the most exciting long term growth prospect, with little competition, the Company continues to work with 30+ customers for various AR devices using LCOS microdisplay and/or WLO with the list of customer still growing. The Company’s design engagements cover leading companies in a wide variety of industries as well as niche players with innovative product ideas. More of the Company’s customers are expected to bring their AR products to the market next year.

No doubt this year has been a wild ride with Himax shares moving quickly in either direction. We’re still in the green since first recommending the firm, but are well off our peak returns of 40+%. For anyone who’s getting nervous all I can say is to keep in mind we’re still very early in the stages of AR and VR. It will be important to continue exercising patience as this industry emerges. Remember that companies like Intel and Qualcomm did not get to where they are today overnight.

Himax (NASDAQ: HIMX) is a “Buy” under $11.50. The risk level is “Medium.”

Infinera Corporation (NASDAQ: INFN)

Snapshot:

Infinera sells low-cost and power-efficient data communications equipment to network operators building out Internet infrastructure. This includes long-haul, subsea, data-center-interconnect, and metro applications. The company offers high-speed “super-channels” that transport 500 Gigabits per second (GB/s) and metro connections of 100 GB/s.

Updates:

No news or updates for Infinera this month but the firm will release its financial results for the third quarter after market close on October 26, 2016 and will also host a conference call to discuss the results. A live webcast and recording will be accessible at the firm’s investor relations webpage here: investors.infinera.com

As we’ve discussed in previous issues, Infinera is running into near-term headwinds. Long term,

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there isn’t much to worry about, but with margin pressure building this isn’t going to be a pretty quarter. As always we’ll have more on that next month.

Infinera Corporation (NASDAQ: INFN) is a “Hold.” The risk level is “Medium.”

Intellia Therapeutics (NASDAQ: NTLA)

Snapshot:

Intellia is a genetic engineering firm that uses CRISPR technologies licensed from Jennifer Doudna, who serves as a scientific advisor for the firm. Intellia represents a potential hedge against another one of our holdings, Editas Medicine, as the two companies are engaged in an important patent dispute over the groundbreaking precision genome editing tech.

Updates:

No news or updates for Intellia this month, minus coverage initiation for Janney Montgomery Scott, setting an ambitious price target of $29.00 per share. In a note to clients, Janney describes Intellia as having “assembled a top-notch team” and says it believes CRISPR “will eventually improve clinical outcomes and speed development timelines.”

Intellia Therapeutics (NASDAQ: NTLA) is a “Buy” under $22.00. The risk level is “High.”

International Business Machines (NYSE: IBM)

Snapshot:

IBM is an American multinational technology and consulting corporation, with headquarters in Armonk, New York. IBM manufactures and markets computer hardware, middleware, and software. The company provides infrastructure, hosting, and consulting services in areas ranging from mainframe computers to nanotechnology.

Updates:

IBM just released its third-quarter earnings on Monday reporting EPS of $3.29 versus estimates of $3.24 and revenues of $19.2 billion versus estimates of $19.0 billion. The positive quarter was led by continued double-digit growth in IBM’s strategic imperatives

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(cloud, analytics, mobility, and security), which were up 16% year over year and now represent 40% of the firm’s top line. Notably, IBM’s Cloud-as-a-Service run rate was also at $7.5 billion, up 66% year over year. While the results technically marked IBM’s 18th consecutive quarter of declining year-over-year revenues, the top line was effectively flat, which is good news for investors betting on a turnaround story. IBM is clearly showing it can be effective at growing alternative business avenues as it transitions to a post-PC environment. Long term the firm remains a solid income play.

International Business Machines (NYSE: IBM) is a “Buy” under $140.00. The risk level is “Low–Medium.”

Iridium Communications Inc. (NASDAQ: IRDM)

Snapshot:

Iridium is a global communications provider. The company offers the world’s most extensive voice and data service through a fleet of next-generation low-orbit satellites. It is currently launching the NEXT satellite constellation to serve the machine-to-machine (M2M) communications market.

Updates:

Iridium will release earnings and hold a conference call on October 27, 2016 before market open. A live webcast and recording will be available at http://www.iridium.com. As usual, keep an eye out next issue for our take on the call.

iRobot Corporation (NASDAQ: IRBT)

Snapshot:

iRobot is an American robotics company that serves the consumer, medical, enterprise, and military industries. iRobot’s product functions range from home cleaning to telecommunication to various military operations. iRobot currently generates the vast majority of its revenue from its Home Robotics division.

Updates:

iRobot Corp. (IRBT) has breached two-year highs after the Department of Defense announced

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the company has been awarded with a $23.4 million Navy contract for conversions and reconditioning work on the Man Transportable Robotic System MK1. We’re now up 34% on our iRobot position and are holding strong.

iRobot (NASDAQ: IRBT) is a “Hold” at current prices. The risk level is “Medium.”

JinkoSolar (NYSE: JKS)

Snapshot:

JinkoSolar (NYSE: JKS) is a Chinese firm that makes a variety of photovoltaic (PV) products, including solar modules, solar cells, silicon ingots, and silicon wafers. The company operates internationally (69% outside of China) in two segments: manufacturing and solar projects.

Updates:

For those who missed it last issue, Jinko reported mixed second-quarter earnings in late August, missing on the top line but beating earnings estimates. Earnings per share came in at $1.92, up from $1.04 last year and exceeding consensus of $1.74. Revenues increased 86.1% year-over-year to $896.1 million but still fell short of consensus of $903.7 million.

In total, Jinko shipped 1,716 megawatts (1.7 GW) of solar modules during the quarter, marking a record high. Geographic distribution was as follows: 46% to China, 43% to North America, 5% to Asia Pacific region, 4% to Europe, and 2% to emerging markets.

For its outlook, Jinko expects total solar module shipments to be lower, in the range of 1.5 GW to 1.7 GW for the third quarter. The firm expects demand to begin to recover in the fourth quarter, but will likely face headwinds for the remainder of fiscal 2016.

In other news, Jinko has been ranked #16 on Fortune’s list of 100 Fastest Growing Companies and has decided to sell its 55% stake in downstream power generation business Jinko Power to a consortium of buyers. Total considerations equal $250 million.

JinkoSolar Holding Co. is a “Strong Buy” under $22.00. The risk level is “Medium.”

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Oceaneering International, Inc. (NYSE: OII)

Snapshot:

Oceaneering International provides engineering services and hardware primarily to customers operating in marine environments. The company’s services are marketed to oil and gas companies as well as the aerospace and construction industries. The company receives the bulk of its revenue from ROVs and Subsea Products.

Updates:

Oceaneering has acquired the assets of Blue Ocean Technologies, a privately held provider of riserless light well intervention services (RLWI), for ~$30 million. The acquisition includes three RLWI systems, two of which are currently under construction, and are expected to be fully functional by mid-2017; OII says it plans to invest an additional $10 million to complete construction of the RLWI systems. RLWI enables petroleum operators to increase the oil and gas recovery rate from subsea oil wells.

Oceaneering International, Inc. (NYSE: OII) is a “Buy” under $35.00. The risk level is “Medium.”

Opko Health, Inc. (NYSE: OPK)

Snapshot:

Opko Health is a mid-stage biotechnology development and medical diagnostics company. OPK has a deep drug candidate pipeline spanning from kidney disease to cancer treatments. It also provides a revolutionary diagnostic test known as the 4Kscore, used in prostate cancer screening. The company’s proprietary diagnostic technologies allow doctors to keep blood-based tests in house rather than outsourcing to outside laboratories.

Updates:

No pertinent news for OPK this month minus a coverage denial for the firm’s 4Kscore prostate cancer test from Palmetto. The decision is a setback but not completely. Novitas, a peer to Palmetto, will act independently in its coverage determination, and granting coverage for the test would be an advantage to it now. Frost continues scooping up shares on the dip as usual.

Opko Health, Inc. (NYSE: OPK) is a “Buy” under $11.00. The risk level is “Medium.”

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Parker-Hannifin Corp (NYSE: PH)

Snapshot:

Parker-Hannifin is an American manufacturer specializing in motion and control technologies, which allow customers to move and position materials, machines, and equipment during manufacturing. In brief, the company serves customers by helping them maximize their automation processes — from manufacturing to waste disposal.

Parker is well diversified on the global front, with slightly more than half of its revenue coming from 45 countries overseas. Approximately 73% of sales come from Parker’s Industrials segment, 18% from Aerospace, and 8% from Climate and Industrial Control.

Updates:

No news or updates for PH this month minus recent upgrades from Goldman Sachs and Stifel heading into the firm’s first-quarter fiscal 2017 earnings. The company will release its fiscal 2017 first-quarter results before market open on Friday, October 21. The conference call will be available on Parker’s investor information website at www.phstock.com with an accompanying slide presentation.

Parker-Hannifin Corp (NYSE: PH) is a “Buy” under $120.00. The risk level is “Low.”

Photronics Inc. (NASDAQ: PLAB)

Snapshot:

Photronics is a small technology firm that provides a unique fabrication tool for creating advanced chip circuit designs — something called a photomask. Photomasks are essentially high-precision plates made of quartz that contain images to be printed microscopically on electronic circuits. In short, photomasks use light to transfer complex geometric patterns onto computer chips.

Updates:

No news or updates for Photronics this issue.

Photronics (NASDAQ: PLAB) is a “Buy” under $13.50. The risk level is “Medium.”

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Rockwell Automation (NYSE: ROK)

Snapshot:

Rockwell is an American provider of industrial automation solutions and equipment. This includes various power, control, and information systems that fall under two segments: Architecture/Software and Control Products/Solution, which work out close to a 50/50 split.

Headquartered in Milwaukee, Wisconsin, Rockwell is a Fortune 500 company that employs over 22,000 people and serves customers in more than 80 countries. Its top brands include Allen-Bradley and Rockwell Software.

Updates:

Rockwell acquired leading systems integrator MAVERICK Technologies earlier this month for an undisclosed price. Maverick currently has 21 locations in the U.S. with more than 300 engineers and technical salespeople. In July 2016, it was recognized by The Silicon Review magazine as one of the “2016 50 Best Companies to Watch.” Speaking to synergies, Senior VP Ken Champa had the following to say:

“Industrial control and information solutions are most effective when they result from close collaboration between a knowledgeable supplier and the user... The combination of our global industrial automation leadership with MAVERICK’s platform-independent domain expertise will help our customers reduce complexity and realize unprecedented productivity.”

The acquisition supports Rockwell’s ongoing strategy to help customers increase global competitiveness by adopting what’s called the “connected enterprise”, the connection between information across plant floors and an entire enterprise to drive business efficiencies. The connected enterprise is particularly important to process customers (such as those in chemical, food and beverage, oil and gas, etc.) where uptime and continuous performance are critical.

Rockwell Automation Inc. (NYSE: ROK) is a “Buy” under $125. The risk level is “Medium.”

Spectra7 Microsystems. (OTC: SPVNF) (TSX:SEV)

Snapshot:

Spectra7 manufactures semiconductor devices for consumer electronics manufacturers. The

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stock is a speculative play on dedicated VR hardware, as its components were recently found in a teardown of Facebook’s Occulus Rift headset. Specifically, Mackie Research Capital has found two of Spectra’s “VR 7050” chips (bi-directional low latency data) in the USB & headset connector and its “VR 7100” chip (high speed video) in the headset connector.

Updates:

Due to an oversight on my end, we have mistakenly left Spectra7 out of our portfolio section in past issues. To get everyone back in the loop, here’s what’s happened since we left off: Spectra7’s CEO unexpectedly died from a heart attack shortly after our recommendation in May and a new CEO (Raouf Halim) was appointed in late September. Since the unexpected tragedy, there really hasn’t been much to do from an investment standpoint other than roll with the punches as investors panicked in wake of the management void. No doubt there will be a noticeable revenue impact this quarter, but the good news at least is that Mr. Halim fits the AR/VR mold that we pinned Spectra7 for back in April very well, having come from a 3D image capture company by the name of icClarity.

Most recently, Spectra7 has increased the size of its bought deal financing to $6.7 million, which reflects our initial comments that “ Spectra7 is not yet profitable and at current burn rates [would] need to finance within the year.” Dilution and burn rate remain a concern on this high-risk play.

Spectra7 Microsystems is currently a ‘Hold’.

Technology and Opportunity Copyright © 2016, 111 Market Place, Suite 720, 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 does not provide individual investment

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