Investment opportunities in online infrastructure/devices
Surrounding enablers play a key role in online businesses. This includes microcontrollers (processors/storage), platform providers (monitoring), application software (reporting), devices (end user applications), airtime (transporting communications) and services (deploying, management and support). These services are generally captured and developed by IoT related companies. These companies create vertically integrated solutions with multiple layers and functionalities and are responsible for connecting consumers with sellers.
Tangible investment opportunities do exist in companies supplying the key elements for the smart- and mobile-phone market. These are the companies that design and develop devices such as wireless chargers, portable lens modules, acoustics, connectivity chips, and/or application processors. Providers of these devices are able to scale up the technological curve and can produce their products in a cost efficient manner. Most often, their revenues are not based on volume pricing, but are royalty payments based on the sale value of the smartphone sold.
| Company | Ticker | Sector | Upside Potential | Sharpe (FY01) |
| Synchronoss | SNCR | Software | 26 % | 5.35 |
| Investment case: Synchronoss exploits more than 100 seminal patents, and has one of the largest, most comprehensive technology platforms in production; one that is widely used by the largest service providers and more than 2 billion mobile subscribers globally. Given Synchronoss’ growth prospects its shares currently trade towards the high end, with a P/E of 45. | ||||
| Company | Ticker | Sector | Upside Potential | Sharpe (FY01) |
| Splunk | SPLK | Software | 30 % | 2.52 |
| Investment case: The tremendous growth anticipated in the next 3 to 6 years will increasingly use connect and remote facilities to extract data in a coordinated and logical manner. Splunk is one of the key software companies focusing on IoT services. Its applications and services help with collecting data, providing security, and data analytics though its software platform services. During this spring’s IT-stock correction, the SPLK share price temporarily lost over 50% of its market value. Given the context of the business and the age of the company, this type of behaviour is certainly not standard but should be considered when buying the stock. | ||||
| Company | Ticker | Sector | Upside Potential | Sharpe (FY01) |
| AAC Technologies | 2018 | Electrical Components | -35 % | 1.58 |
| Investment case: AAC designs, develops and distributes receivers, speakers, microphones, vibrators, headsets and antennas. Its key clients include Apple, Motorola (Google), Sony, Samsung, LG Electronics, HTC, Philips, Delphi, Huwei, Lenovo, ZTE and Bosch. AAC’s top 3 clients generate over 70% of smartphone sales. It is interesting to note that Chinese sales have increased more compared with other markets, and more than 2/3 of all devices sold sit within the higher quality range. | ||||
| Company | Ticker | Sector | Upside Potential | Sharpe (FY01) |
| ARM Holdings | ARM | Semiconductors | 15 % | 4.02 |
| Investment case: ARM Holdings is a leading licensor of the chip architecture used in mobile devices. Their products have a dominant position in the smartphone market. ARM’s revenues are based fully on intellectual property licensing. Its key customers include: Apple, Samsung, Qualcomm, Broadcom, and MediaTek. ARM is a direct beneficiary from the roll out of higher quality standards in the smartphone industry. | ||||
| Company | Ticker | Sector | Upside Potential | Sharpe (FY01) |
| Avago Technologies | AVGO | Semiconductors | 6 % | 3.74 |
| Investment case: Avago is a multi-product provider to the smartphone industry. Its products include radio frequency (WiFi, Bluetooth, FM, GPS) components such as filters, power amplifiers and other related devices. More than 45% of its sales volumes were derived from the wireless business. This part of the business is expected to grow rapidly in the coming years, and by 2016 should reach close to 70% of the company’s sales volume. | ||||
| Company | Ticker | Sector | Upside Potential | Sharpe (FY01) |
| Qualcomm | QCOM | Semiconductors | 7 % | 6.47 |
| Investment case: QCOM designs, develops and produces baseband and application processor chips used by the smartphone industry. About 60% of the applications used by today’s consumer contain a QCOM device. Because the company’s 3G technology is backward compatible, QCOM is recognizable today as a clear winner going forward. | ||||
| Company | Ticker | Sector | Upside Potential | Sharpe (FY01) |
| Synaptics | SYNA | Semiconductors | 3 % | 2.08 |
| Investment case: SYNA designs, develops and produces single-layer touch controller solutions. Its products are critical in the medium and low-end markets; therefore it has ample market opportunity in Asia and LATAM. SYNA is also seizing another opportunity by designing and developing technologies in the field of fingerprint authentication. In the event there is a meaningful breakthrough in this area, the company has placed itself in a formidable position to benefit from any oncoming trend. | ||||