vol. 7 issue 11

You take it for granted, but it’s a small miracle.

There are hundreds of millions like it, but the one you’re holding is yours.

I’m talking about your smartphone, the device you’re probably using to read this right now.

Dictionaries, encyclopedias, newspapers, maps, notebooks, voice recorders, cameras and camcorders, paper money and credit cards, radios, walkie-talkies and land phones, clocks and watches and many more things have been replaced or can be replaced by your smartphone.

It’s the electronic equivalent of a Swiss army knife.

No one person can assemble a smartphone from start to finish. From the C-level office suites to the factory floors, it takes the work of thousands — actually millions — to make this pocket-sized miracle. That’s pretty incredible.

Take the popular iPhone, for example. Its story began with a design team in California’s Bay Area. Years of research and development coalesced around the final design that would become your phone.

The team that built your phone is doing so on knowledge that has been accumulated over many years all over the world. We all stand on the shoulders of those who came before.

Engineers and scientists working over decades in places like Massachusetts and the United Kingdom laid the foundation for the phone you use today.

To do this, they use the ultimate resource: Imagination and the power of the human mind.

But smartphone growth is slowing. Innovation lacks in this market. I’m looking for companies that can profit from the new growing tech trends — things like augmented and virtual reality, as well as smart and autonomous cars. These trends have outpaced anything the smartphone has done in years.Until now.

Today, I’m going to show you two ways you can profit from the newest smartphone innovation — and you don’t have to buy a company like Apple to do it.

No, instead, we’re going to smash the smartphone wide open to reveal where the real profit opportunities are.

Smartphone Smash!The Big Profits Hiding in Your Mobile Device

w w w.agor afinancial .com

TECHNOLOGY PROFITS CONFIDENTIALProfit Today From Bleeding-Edge Technology and Innovation

AGORAfinancial AUGUST 2017

INSIDE THIS ISSUE

Profit from the Ground You Walk On

This month we’re smashing the smartphone open to reveal its inner workings. You may be surprised to learn that the tech-nology you rely on every day comes straight from the small specks on the ground: dirt, dust, minerals and metals all trans- formed into something greater. Our first recommendation is going to help you turn all that dirt and dust into profit…

The Future Is Here

Imagine if all of your devices had the same depth and recog-nition as the human eye…your phone, gaming console or even your car. Rumor has it that this fabless semiconductor company is ready to change the future of technology. The virtual reality trend is here and it’s here to stay. As devices rapidly become “smarter” the growth of this market could be here sooner than we think…

Portfolio Positions

Buy Corning Inc. (NYSE: GLW) up to $34.00.

Buy Himax Technologies (NASDAQ: HIMX) up to $9.00.

Ray Blanco Editor

Connect with Agora Financial:

technology profits confidential

2

And it all starts with the earth. Dust, dirt, minerals and metals.

The millions of people who made your phone trans-formed raw resources — the stuff the planet is made from — into one of the most complex products ever made.

And that’s where the real profits lie…

Big Opportunity From Tiny Specks in the GroundYour phone is comprised of different natural materials from all over the world.

One of the most important materials used in your phone, silicon, came from a quarry in the ground — maybe from North Carolina’s Blue Ridge Mountains.

Although it’s the second most common element in the planet’s crust, only some locations have a quality that is good enough for making chip-grade silicon.

Even then, it takes hundreds of steps to transform what’s basically sand into a silicon wafer that can be used to make a complex computer chip like your smartphone’s CPU. By the time the raw material is transformed and ready, it can cost more than $50,000 per ton.1

That CPU can contain billions of transistors, intricately arranged in microscopic patterns to the specifi-cations of the chip’s design — using fabrication equipment capable of accuracy down to billionths of a meter. They order materials contain-ing elements like arsenic, antimony, boron, gallium and phosphorus.

That CPU in your phone isn’t manufac-tured in California or North Carolina, however. It’s probably made in Taiwan in a giant chip fabrication facility that cost billions of dollars to build — or maybe a different multibillion-dollar plant in a place like Singapore, Texas, Oregon or South Korea.

The all-important battery in your phone uses lithium to store energy. That lithium might have been mined in Bolivia or Nevada.

Like silicon, this element has to go through a lengthy process from dirt to device. The lithium is combined with cobalt, mined in Congo.

More than a dozen rare earth metals, mostly mined in China’s east, are also needed to make your phone. They have the critical electrical properties necessary to make your phone’s functioning possible.

There’s indium for the touch screen, as well as others like yttrium and scandium. Neodymium’s magnetic properties make it ideal for speakers, microphones and tiny vibrat-ing motors. The rare earth deposits aren’t hard to get to, but the process of making them yield a pure and useful product is.

Overall, the raw materials bill calls for over five dozen different elements for the phone’s various components.2

To put that in perspective, the periodic table of the elements has only about 80 stable elements — your phone uses more than three-quarters of them to work.

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Technology Profits Confidential is published monthly for $99 per year by Agora Financial LLC, 808 St. Paul Street, Baltimore, MD 21202-2406, www.agorafinancial.com. Subscriptions are US $99 per year for U.S. residents. Executive Publisher: Addison Wiggin; Publisher: Aaron Gentzler; Managing Editor: Amanda Stiltner; Associate Editor: Jackie Danowski; Graphic Design: Drohan DiSanto

Elements of a SmartphoneScreen

Battery Casing

Electronics

InIndium

49

OOxygen

8

SnTin

50

AlAluminium

13

SiSilicon

14

OOxygen

8

KPotassium

18

YYttrium

39

GdGadolinium

64

LiLithium

3

CoCobalt

27

CCarbon

6

AlAluminium

13

AgSilver

47

Au Gold

79

TaTantalium

73

OOxygen

8

LaLanthanum

57

BuEuropium

68

TbTerbium

65

DyDysprosium

66

NiNickel

Terbium

28

CuCopper

29

Tb65

DyDysprosium

66

NdNeodymium

60

PrPraseodymium

59

PrPraseodymium

59

GdGadolinium

64

Touch Screen Film

AluminosilicateGlass

Color & UV LightProtection

Lithium-Ion Batteries

MicroelectricalComponents

Internal Microphone& Speakers

Conductive Chip

Soldering

Protective Plastic

SiSilicon

44

AsArsenic

33

NiNickel

28

OOxygen

8

PPhosphorus

15

SbAntimony

51

GaGallium

31

CCarbon

6

MgMagnesium

12

BrBromine

35

SnTin

50

PbLead

82

Source: Corning Investor Presentation

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There’s the protective case, which might be made of aluminum mined from an Australian bauxite deposit. If it’s carbon-based plastic, then it was made from oil that might have been wrested from the ground in North Dakota.

The camera’s outer lens might be made of a hard sapphire sheet — synthetic but almost as hard as diamond.

There’s the LCD screen and its touch sensitive layer is glass — more silicon. And not just any glass… a specially tough and scratch resistant glass that might have been made in Japan but was originally invented in New York state.

Gold, tungsten, silver and copper are needed to connect the various components to the main circuit board. These include modems, sensors, memory chips, power circuits, switches, radio-frequency circuits, antennas, micro-phones, speakers and many more.

And they are all finally assembled in a huge factory — probably in China.

The original smartphone team didn’t necessarily come up with the original design for all of these components — but they had specifications for this device’s many parts. The actual implementation of these specs is handled by dozens and even hundreds of other innovative firms. The iPhone, for example, can’t be made without the know-how of over 200 suppliers.3

It took millions of people from all over the world peacefully cooperating through trade and markets to make your phone. Perhaps only a few of them gave

thought to something beyond their own personal benefit…but each added a little value to the final product you hold, and received some in return.

But it didn’t just take cooperation — it also took competition.

Huge Smartphone Catalyst on the HorizonThe battle to get a design win in a popular smartphone — like the iPhone — can be fierce. Electronics companies pour billions in research and development to come up with the most powerful designs.

Designing a winning component can be make or break for a semiconductor company — but the road can pave the way to huge revenues and big profits.

The next iPhone — Apple’s 10th-anniversary model — is expected to be scheduled for release this September.

Some tech companies are proud to share their progress as they work on new designs and get them ready for the market. Apple, however, holds its cards close to its vest — the company is notoriously secretive.

It keeps new products under wraps until it releases them in grand fashion.

The original iPhone was revolutionary and created the modern smartphone market — but every model since has been an iterative improvement rather than a quantum leap.

It took millions of people from all over the world peacefully cooperating through trade and markets to make your phone.

technology profits confidential

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The new iPhone, however, is rumored to be unlike any we’ve ever seen from the company before. As in the past, the new phone will, of course, feature more powerful chips, denser memory and a better display.

But among the rumored new features are an all-glass body with an edge-to-edge screen as well as wireless charging — something users have been clamoring for. The new phone might also include features like a 3-D camera as well as iris, facial and gesture recognition.

Another revolutionary feature of the next iPhone might be the price — $1,000 or more for a flagship model. And analysts expect it to sell over 120 million units — a record for the company.4

Of course, many Apple fans will want the latest and greatest tech, but the timing of the 10th-anniversary iPhone is also expected to coincide with a window of time in which mil-lions of existing users will be due for an upgrade.

This could translate to success for Apple — but also for tech companies supplying one of the hundred key com-ponents that go into an iPhone.

And the beauty of investing in these tech companies is that they can also sell into the broad smartphone market. Being “good enough” for Apple’s latest creation means a tech edge, something competing smartphone-makers will want in their own products as they try to “catch up” to the Cupertino trendsetter.

But I’m looking for companies that are more than just beneficiaries of a big Apple product upgrade cycle…

An American Icon Keeps up With the TimesThat brings me to the first company I want to tell you about today. It’s been innovating since before your grand-parents or great grandparents were born — 166-year-old Corning Inc. (NYSE: GLW).

Corning was founded to help grow the domestic glass industry, and it’s still headquartered at its namesake — the city of Corning, New York.

Early on, Corning’s founders established a laboratory to study glass and how to make it. As we built railroads across the continent, Corning supplied the glass to light the tracks.

The company soon hopped on a new trend: the lightbulb. Edison’s invention was on the cusp of lighting millions of homes, but his electric lighting technology was encased in glass.

Corning hired glass blowers to meet the new demand, but the old way of making glass meant that bulbs were an expensive proposition, especially since they needed frequent replacement. Since even an expert glass blower could only make a few bulbs an hour, scaling production wasn’t easy, either.

Corning soon hit on a solution called the ribbon machine. A ribbon of hot glass flowing through the machine was transformed into bulbs by air nozzles that mimicked a glass blower’s lungs. As the technology was refined, ribbon ma-chines got faster and faster, able to make many thousands of bulbs an hour.

Edison may have invented the lightbulb, but it was Corning that made it cheap to light up the country. And soon after, these machines were supplying the early electronics industry with vacuum tubes, which made their way into everything from radios and TVs to early computers.

By the 1970s, we were at the beginning of the information technology revolution. New ways were needed to send data over long distances. Corning stepped in again with glass technology at just the right time when it invented a flexible glass fiber that could be spun out to great lengths.

In 2006, Corning did it again. Steve Jobs didn’t like plastic screens for the iPhone, but the glass that Apple was using in prototypes cracked too easily.

He turned to Corning, and in six months the company had identified and put into production an improved type of glass it had accidentally discovered back in the 1960s.

Corning was able to supply the glass for millions of iPhones. Corning’s glass was thinner, tougher, stronger, more flexible and more scratch resistant than anything else available.

Jobs said the company made the iPhone possible. When the original iPhone launched, he told Corning’s CEO, “We couldn’t have done it without you.”5

Source: Corning Investor Presentation

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Over the past decade, when iPhone users interact with their device, they’re touching the result of Corning’s genius ability to constantly reinvent itself over time. Today, Corn-ing supplies not just Apple but a who’s who of smartphone manufacturers. Its glass, called Gorilla Glass, has been continuously improved over the past decade. Today, it’s been used on over 5 billion mobile devices.

It’s a safe bet that Corning has been working on even more improvements in time for the rumored all-glass iPhone 8.

The company is already beginning to profit from a trend toward all-glass phones. Glass cases are more transparent to radio frequencies and bring wireless charging advan-tages. We’re already seeing this trend in smartphones like the Google Pixel and Samsung Galaxy S8.

This year, Apple even awarded Corning with $200 million to support American jobs and revolutionary glass produc-tion methods.6

Corning is more than just a play on the new iPhone, however. We keep becoming more and more connected, and data use is exploding. With new, bandwidth-hungry applications ranging from connected cars to the internet of things (IoT) and augmented and virtual reality, there’s going to be more demand than ever before.

New wireless standards are being drawn up that will allow mobile users to download full high-definition movies in seconds.

While the “last mile” of that data is flowing over the air in the form of radio waves, it still needs to be aggregated into the high-bandwidth physical connections that make up the backbone of the internet. And that means more fiber-optic connections — more Corning glass.

Corning has developed glass so clear, that if it replaced the water in the ocean, you could see the bottom from the surface. The company recently signed a three-year, $1.05 billion deal to supply fiber-optic cable and hardware to Verizon.7 Corning has also launched a platform to help prepare carriers, operators and municipalities deploy fiber networks in preparation for new 5G wireless standards.8

Connected smart cars will also drive demand for Corning glass — and the company has been working overtime to be ready.

Corning has teamed up with the world’s top automakers to meet the needs of future cars, which will need light-er-weight glass to improve efficiency, heads-up displays to be visible when the driver looks down the road and new display glass to cover automotive interiors, eliminating knobs, switches and buttons. Corning’s R&D is making display glass that is easier to read.

Screen Protector

Front CoverCorning® Gorilla® Glass 5

Back Cover Corning® Gorilla® Glass 5

Source: Corning Investor Presentation

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The company has been on the road, showing prototypes of its “glass car” technology.9 I had the opportunity to view its prototype earlier this year.

One of those automakers might even be Apple, since the company is rumored to have hundreds of employees working on self-driving car technology.10

Corning currently trades for just under $30 per share and has a market cap of $27.8 billion. It’s a growth story in this new tech environment, but it still pays a dividend that yields 2% — a dividend that has been raised 29% over the past two years.

Corning has a war chest of $4.8 billion in cash and equivalents. It plans to generate an additional $26 billion in cash through 2019. Furthermore, the share-holder-friendly company has returned $6 billion to shareholders by repurchasing shares, buying up 24% of shares. The company authorized a new $4 billion share repurchase program at the end of last year.

Young Player Stakes a Claim in the Smartphone MarketCorning’s clearly got a leg up on enabling some of the biggest tech trends in the world. However, the second company I’d like to tell you about isn’t nearly as famous — or as old. But it’s turning into a major player.

It was founded in 2001 and is headquartered on the other side of the world. I’m talking about Himax Technologies (NASDAQ: HIMX), a fabless semiconductor company based out of Tainan, Taiwan. Himax made it to the Nas-daq exchange in 2006, raising $147 million on an IPO deal put together by Morgan Stanley.

Even though it’s a much younger company, that hasn’t stopped it from racking up 2,800 patents on three con-tinents for its technologies. More than 90% of its 2,100 employees are engineers, many of them at its six research and development centers in Taiwan, China and Korea, with an additional design center in Irving, California. It’s a world leader in visual imaging processing tech.

Himax has interested me for years as a way to play the virtual/augmented reality trend. After the smartphone, this will be the next big mobile-computing technology. Himax is perfectly positioned to benefit.

One of the company’s specialties is liquid crystal on silicon (LCOS) microdisplays. This technology is useful for head-mounted and heads-up displays as well as small projector applications. Market analysts believe that this market could reach $4.5 billion per year by 2025.11

Big tech companies like Microsoft, Facebook, Samsung, HTC, Google and Sony are all working on new VR and AR technology. The company’s displays are reported to power everything from Microsoft’s HoloLens to Face-book’s Oculus Rift to HTC’s Vive. Google itself took a 6.3% stake in the company back in 2013.12

But the elephant in the room could well be Apple. The company that made the smartphone something that everyone wanted to own is working on doing the same thing with augmented reality. Apple wants to capture this market and keep consumers in the Apple universe.

Earlier this year, Tim Cook said that he regards AR “as a big idea like the smartphone. The smartphone is for everyone. We don’t have to think the iPhone is about a certain demographic or country or vertical market. It’s for everyone. I think AR is that big. It’s huge.”13

And the company recently released an augmented reality software toolkit that lets developers create AR experienc-es on Apple products.14 The framework, called ARKit, will be built into the new version of Apple’s operating system, due for release alongside the new iPhone.

All this means that major Apple AR wins could be in Himax’s future — but we might not even have to wait longer than the release of the iPhone 8. Apple has been working for years on 3-D sensing technology.

The new iPhone is rumored to have 3-D sensors that can sense depth like our own eyes do. This function will enable features like facial and iris recognition, as well as gesture control. 3-D sensing can also help enable a better

RECOMMENDATION: Buy Corning Inc. (NYSE: GLW) up to $34.00.

technology profits confidential

7

augmented reality experience, since virtual objects can be more realistically displayed in the real world.

Apple seems to have been working on this idea for a long time. In 2013, the company acquired Israeli 3-D sensor company PrimeSense — an early contributor to Microsoft’s Kinect technology. Earlier this year, the company acquired Israeli facial recognition company RealFace,15 as well as AI startup Emotient.16

How’s this good for Himax? Well, the company also happens to be a specialist in 3-D optical sensors and could win a place in Apple’s next product.17 The com-pany’s wafer-level optics (WLO) technology can reduce the size of 3-D sensing so that it’s practical in small mobile devices like smartphones.18

3-D scanning will be a major new feature in upcoming smartphones, and the company is seeing strong demand from multiple top-end customers. It offers complete solu-tions, or individual technologies separately.

Himax is also securing a position in the fast-growing automotive integrated circuit market with a market share in excess of 20%. As cars become “smarter,” this should yield further growth for the small Taiwanese tech innovator.

Right now HIMX trades for about $8.30 per share, with a market cap of $1.42 billion. It pays out an annual dividend that, at today’s price, yields 1.45%. As of its last filing, the company reports $200 million in cash and short-term investments — but no long term debt. It’s positioned for growing markets in AR/VR, 3-D sensing and automotive — and it could be a big winner in Ap-ple’s next flagship product.

To a bright future,

Ray Blanco

RECOMMENDATION: Buy Himax Technologies (NASDQ: HIMX) up to $9.00.

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feedback@agorafinancial.com. All numbers are believed to be correct. Prices as of 06/29/17.

COMPANY SYMBOL BUY DATE BUY PRICE CURRENT PRICE GAIN LOSS

Computer TechnologyAeroVironment Inc. AVAV 12/27/13 $28.58 $36.50 27.71%

Nvidia Corp NVDA 2/6/15 $20.38 $146.68 619.73%

Lam Research Corp LRCX 3/27/15 $71.15 $142.35 100.07%

Integrated Device Technology IDTI 7/27/15 $19.14 $25.96 35.63%

CyberArk Software Ltd CYBR 12/28/15 $44.96 $49.81 10.79%

NVE NVEC 2/4/16 $46.35 $77.24 66.65%

Advanced Micro Devices, Inc AMD 5/31/16 $4.50 $12.60 180.00%

Palo Alto Networks PANW 7/5/16 $117.84 $134.70 14.31%

Cognex Corp. CGNX 9/6/16 $49.69 $85.91 72.89%

Intel Corp. INTC 10/4/16 $37.90 $33.54 -11.50%

Facebook FB 7/18/16 $118.71 $151.04 27.23%

Cavium Inc. CAVM 5/3/17 $68.61 $62.36 -9.11%

Blackberry BBRY 5/26/17 $11.19 $10.00 -10.63%

Corning Inc. GLW 6/30/17 NEW! NEW! Buy up to $34.00

Himax Technologies HIMX 6/30/17 NEW! NEW! Buy up to $9.00

BiotechnologyActinium Pharmaceuticals, Inc ATNM 12/2/14 $5.54 $1.25 -77.44%

Neuroderm, Ltd NDRM 6/4/15 $14.99 $29.20 94.80%

Johnson & Johnson JNJ 6/30/15 $97.34 $132.64 36.26%

bluebird bio Inc BLUE 9/1/15 $128.86 $108.25 -15.99%

Cellectis CLLS 3/3/16 $25.80 $25.25 -2.13%

Imperva Inc. IMPV 11/1/16 $36.25 $48.10 32.69%

Teva Pharmaceutical TEVA 1/27/17 $34.69 $32.83 -5.36%

Astellas Pharma ALPMY 2/24/17 $13.59 12.06 -11.26%

Alternative Energy8point3 Energy Partners LP CAFD 4/4/17 $13.09 $14.94 14.13%

For citations and resources used for this issue, click here.