Mad Hedge Technology Letter
January 27, 2021
Fiat Lux
Featured Trade:
(DINOSAURS OF TECH REINVENTING THEMSELVES)
(BB), (AMZN), (BIDU), (GME)
Tech companies change so quickly that sometimes companies have no choice but to reinvent themselves and that is exactly what BlackBerry (BB) has done as their stock has already delivered gains of 190% in 2021.
Historically known as a hardware business, BlackBerry decided to opt out of its legacy operations and elect for a push into enterprise software, internet of things (IoT), and cybersecurity, pivoting away from handsets as that business flagged.
That is where all the serious tech money is these days.
A torrent of positive announcement has rallied investors to this stock with the company announcing an expanded partnership with Baidu (BIDU) that will see it continue working on automated high-definition mapping software that Baidu uses in its autonomous driving technology.
Baidu is a Chinese tech company that is also hoping to reinvent themselves away from their legacy business of internet search.
Data and connectivity are opening new avenues for innovation in the automotive industry, and BlackBerry and auto companies share a common vision to provide automakers and developers with optimal data so that they can deliver new services to consumers.
The tie-up with Baidu caused the stock to shoot higher by 17.3% at $21.15 in premarket trading.
This move broadens the company's use of BlackBerry’s operating system in its "Apollo" autonomous driving open platform.
Under the expanded partnership, Baidu’s high-definition map will be integrated with BlackBerry’s QNX Neutrino real-time operating system.
The integrated system will be mass-produced and available on Guangzhou Automobile Group electric vehicle arm’s upcoming GAC New Energy Aion models.
The BlackBerry QNX software scores high in functional safety, network security, and reliability, while Baidu has achieved long-term development in artificial intelligence and deep learning.
GAC is one of China’s largest automakers. It also manufactures the Hycan 007 cars under a joint venture with EV startup NIO.
This is just an example of how BB is running to the part of the end zone where the ball is going to be thrown unlike other dinosaur tech like IBM.
The company’s stock has recently been included in strong dialogue on online message boards such as Reddit, which like GameStop (GME) has felt a sharp appreciation in price or probably better describes as rocket boosters.
GME is up 100% just today which can only be described as an epic short squeeze.
At a strategic level, the success of BlackBerry’s stock can be attributed in part to the strategic shift to cybersecurity and the Internet of Things.
The shift away from handheld devices is long due, and so what's really happening is the market is putting its stamp of approval on this new shift of BlackBerry away from its old business model and what it’s doing now.
BB holds more patents than any other company in Canada.
BlackBerry shares spiked as much as 20% after settling a patent infringement suit with Facebook.
BlackBerry first targeted Facebook with a lawsuit back in 2018, filing a 117-page complaint accusing the social network of infringing on Blackberry's innovative messaging technology.
The settlement removed any litigious uncertainty offering another clear pathway for the stock to rise.
The biggest strategic overhaul has been its recent partnerships with Amazon (AMZN) Web Services in December to use its cloud services.
They signed an agreement with Amazon for BB to develop a software platform that allows automakers to read vehicle sensor data, improving cloud-connected vehicles' performance.
Blackberry announced it sold 90 patents to China's largest phone manufacturer, Huawei.
Automakers can use this information to create responsive in-vehicle services that enhance driver and passenger experiences.
BlackBerry IVY addresses a critical data access, collection, and management problem in the automotive industry.
Cars and trucks use many different parts, with each vehicle model comprising a unique set of proprietary hardware and software components.
These components, which include an increasing variety of vehicle sensors, produce data in unique and specialized formats.
The highly specific skills required to interact with this data, as well as the challenges of accessing it from within contained vehicle subsystems, limit developers’ abilities to innovate quickly and bring new solutions to market.
BlackBerry IVY will solve these challenges by applying machine learning to that data to generate predictive insights and inferences, making it possible for automakers to offer in-vehicle experiences that are highly personalized and able to take action based on those insights.
Although many legacy tech companies get caught in the weeds, never to grow again. BB has sorted out its vision and is well on its way to delivering shareholder value back to the end investor.
Even though I would say the short-term price action in BB is at this point euphoric, it would serve any tech investor well to dip their toe into this stock long term when there is a pullback.
“Any time there's significant change, there's going to be some people who embrace the change and others who are against the change.” – Said CEO of Uber Dara Khosrowshahi
Mad Hedge Technology Letter
January 25, 2021
Fiat Lux
Featured Trade:
(THE NEWEST PORTAL FOR FINANCIAL SCAMS)
(TIKTOK)
Sometimes the best way to become successful at investing in technology stocks is to avoid the black swan or the big disaster.
I hate to say it but investing risk has never been higher as we migrate our lives to the internet to extract what we need from personal to business affairs.
One question that keeps getting rehashed that I thought I might take time to address is the rise of TikTok influencer-adviser.
According to a brief Google search, TikTok, known in China as Douyin, is a video-sharing social networking service owned by Chinese company ByteDance. The social media platform is used to make a variety of short-form videos, from genres like dance, comedy, and education, that have a duration from three seconds to one minute.
Unfortunately, for serious retail investors lately, content has migrated into high-stakes themes like finance and financial advising giving rise to content that is produced by video creators to get a piece of the financial industry.
Naturally, this has brought down the level of the financial content on the internet to historic lows simply because most of the content is marginal at best.
These promulgators often preach about their status of “trading gurus” and often leverage the hype of digital currencies to claim they are fully invested in “crypto assets” and urge anyone reading to become one of their new “cult followers.”
They are also usually paid to market a bulletproof financial app or certain crypto asset to avid followers without properly disclosing that they are being paid for the advertisement.
This behavior is being encouraged by the TikTok algorithms who order this type of misleading content at the top of searches simply because it gets more hits being a click-bait type of content.
The more outlandish the videos become, gloating about get-rich-quick schemes and 1,000% daily returns, the higher up in the search queries they usually populate when filtered through TikTok algorithms.
These accounts are known as financial “influencers” and share 100s of such videos every month featuring fraudulent success or minimizing the difficulty of profiting through trading and a mix or mash of everything in between.
Even some proclaim to have unlocked the holy grail of trading and “guarantee” 100% returns or your money back.
Another speaking point they like to touch on is how video watchers can “also” afford wealthy lifestyles without having to work, at least in the traditional way.
The sad fact is that this content is incredibly hurtful for naïve or beginning investors.
To dumb down the travails of investing and trading to something easier than pouring a glass of water is a lie.
Many of these novice investors are duped into paying for services that are nothing more than promotional buzz offering hyped-up marketing language as specific trading advice.
Unfortunately, US regulators have turned a blind eye to what is happening on this Chinese platform, and imitators are spawned daily and are certainly incentivized to do so.
While I must admit that regulating this type of behavior on TikTok is incredibly messy, to leave this unchecked will result in massive fraud for the little guy that I try to help.
I will say the main reason for ignoring these TikTok “influencers” is because there is even worse cybercrime taking place out there and the content these influencers are peddling is straddling the gray areas of the law.
The digital migration during Covid has created a tsunami of fresh cybercrime that is really making the TikTok gurus look like choir boys.
Here are some statistics to stew over according to Gartner research.
- 88% of organizations worldwide experienced spear-phishing attempts in 2020.
- 68% of business leaders feel their cybersecurity risks are increasing.
- On average, only 5% of companies’ folders are properly protected.
- Data breaches exposed 36 billion records in the first half of 2020.
- 86% of breaches were financially motivated and 10% were motivated by espionage.
- 45% of breaches featured hacking, 17% involved malware and 22% involved phishing.
When digital professionals went remote, this also increased the risk of cybercriminals wreaking havoc by isolating their targets.
In the scheme of the internet, the TikTok trading “gurus” are small fish to fry when hackers are attempting to topple state of federal governments and Fortune 500 companies; but that doesn’t make it okay.
The Financial Conduct Authority (FCA) is already looking into trading scams and considering ramping up its capacity to monitor those TikTok creators and others who are flogging trading signals, managed investment services, or other fraudulent services.
But it’s not enough, and readers need to understand the heightened risks of diving feet first into these TikTok vortexes where you just get whipped around unknowingly.
Pre-emptively protect your portfolio by avoiding these TikTok trading gurus.
Stay vigilant and happy trading and just know there is no holy grail of trading.
It’s hard work earning your crust of bread.
THE NEWEST RABBIT HOLE FOR FINANCIAL SCAMS
“There are two kinds of companies, those that work to try to charge more and those that work to charge less. We will be the second.” – Said CEO and Founder of Amazon Jeff Bezos
Mad Hedge Technology Letter
January 22, 2021
Fiat Lux
Featured Trade:
(THE ADDITIVE MANUFACTURING BOOM)
(DM), (DDD), (SSYS), (GE)
Desktop Metal (DM) produces metal and carbon fiber 3D printing accessible to all engineers, designers, and manufacturers.
I’ve dipped my toe in this industry before by recommending Stratasys Ltd. (SSYS) whose stock has tripled from October 2020.
Since its inception, the company has been a happy recipient of generous funding channels and attracted total funding of $438M, always a good start.
Desktop Metal is truly well-capitalized after its SPAC transaction and strategically positioned to reap the rewards from a "dramatic increase" in the use of 3D printing for end-use part production over the next decade.
The company's outsourcing of manufacturing processes should generate strong free cash flow which should turn positive by 2023.
Sales are expected to explode 286% this year alone, passing $71 million by the end of 2021 as this technology becomes more mainstream.
This is the only publicly traded, pure-play additive manufacturing 2.0 company, and DM has the fastest metal 3D printing technology in the market.
DM is 20 times cheaper than existing laser-based metal 3D printing technologies while allowing the use of a much wider range of alloys.
Not only are they expanding at a rapid clip, but they are also in the perfect market to grow with revenue runway of 11x to $146B this decade, propelled by a shift from prototyping to mass production.
Unlike many other tech startups, the first-mover advantage is buttressed by a diverse blue-chip customer base in the automotive industry.
The automotive industry is a key vertical for volume additive manufacturing and they have started shipping a new, intermediate version of its P-50 Production System, the new P-1 printer, to Ford Motor Company (F).
Buying growth has been a go-to strategy for frothy tech companies as deploying extra capital to take advantage of new efficiencies by owning new assets has been a winning strategy.
M&A is a solid route as a “value creation” strategy and the systems subsector would appear to present a viable strategic acquisition candidate going forward.
Desktop Metal recently bought competitor 3D printing firm EnvisionTEC.
Founded in Germany in 2002, EnvisionTEC specializes in photopolymer additive manufacturing, putting its technology in more direct competition with the likes of 3D printing darling Carbon than Desktop Metal’s own existing competencies.
It’s pouring $300 million to acquire EnvisionTEC through a combination of cash and stock.
There is a great chance for Desktop Metal to grow here.
EnvisionTEC has the underlying technology with the ability to print in more than 190 materials, and Desktop Metal has the resources to help scale that tech.
Today, EnvisionTEC has over 5,000 customers across a broad spectrum of industries, including medical devices, jewelry, automotive, aerospace, and biofabrication.
They are major players in the dental market, more than tripling the number of Envision One dental shipments from 2019 to 2020 and with over 1,000 dental customers now using its AM machines for end-use parts.
Key customers include Cartier, Celgene, Ford, Hasbro, Oral Arts, Stuller, and Smile Direct Club.
In addition to extensive customer adoption, EnvisionTEC has a broad library of over 190 materials, featuring photopolymer resins with material properties in-line with or exceeding those of thermoplastics and multiple FDA-listed and 510(K)-cleared resins for the manufacturing of medical devices.
The company augments its robust proprietary material development efforts with a selectively open business model, leveraging relationships with major chemical companies such as Henkel Loctite, DSM Somos, Detax, Keystone, and Arkema to sell third-party, industry-validated resins for use with its additive manufacturing platforms.
This is most likely the beginning of many purchases as they are flush with new capital from the IPO and other outside investors.
Investors need to know there are a few risks to take note of.
The rapid prototyping to mass production timetable appears quite ambitious, especially since DM has had significant issues with deploying its technology in the field.
Also, the attractive branding of “additive manufacturing 2.0” perhaps could turn into an overhyped industry.
Even though they have solid technology to become successful, there are industry veterans that won’t just lie down including 3D Systems Corporation (DDD), General Electric (GE), (GE Additives), and SSYS.
These recipients are also beneficiaries of all the hot money pouring into the sector the past year.
China could also bring down the 3D printing sector with a race to zero type of domino effect.
DM is a 3D printing company stock to put on their watchlist and buying growth isn’t always a guarantee to buy the “right” growth, but let’s see how they execute it.
Either case, the secular tailwinds can’t be ignored and if this technology goes viral, then watch out.
“I don't want to fight old battles. I want to fight new ones” – Said CEO of Microsoft Satya Nadella
Mad Hedge Technology Letter
January 20, 2021
Fiat Lux
Featured Trade:
(THE CONTRARIAN PLAY)
(ADT), (GOOGL)