5 Stocks Set to Soar After the Coronavirus Sell-Off

Stock market routs are miserable events. They sow widespread financial pain and suffering… along with a heaping dose of anxiety.

These steep downdrafts bring pleasure to almost no one, except for a maybe a few random short sellers who are reaping the rewards of betting against the market. But for the rest of us, there is no “Joy in Mudville” – no smiles when the stock market strikes out and loses, big time.

That said, stock market sell-offs are the extreme events that create opportunity. They produce the panic selling and “washouts” that usually offer great moments to make savvy long-term investments.

“I will tell you how to become rich,” Warren Buffett famously remarked. “Be fearful when others are greedy. Be greedy when others are fearful.”

The sage advice seems so obvious when you read it in black and white. Yet it seems almost impossible to implement in the real world. That’s because when others are fearful, we are usually part of that group of “others.”

Most of us do not possess some magical immunity against the fear of losing money or suffering large stock market losses. No, most of us are terrified, just like everyone else… and for good reason.

As bad as the stock market has been during the last few weeks, it could become even worse.

No one knows. Therefore, I don’t believe it’s worth spending much time trying to know.

Instead, I recommend using the current weakness to establish new positions or add to existing ones. But I do not suggest throwing caution to the wind and making all your purchases at once. Instead, design a plan to purchase a specific selection of stocks over the span of a few weeks.

Initially, many of these purchases could produce poor results, if the market continues its downward spiral.

But if you are purchasing the shares of dominant companies at today’s discounted prices, you will probably be patting yourself on the back one year from now.

In other words, when buying into a hyper-volatile market, you often feel quite stupid at the outset. But over time, that “stupidity” starts looking a lot like genius.

For example, investors who purchased stocks during the SARS virus outbreak in 2003 would have endured some initial mark-to-market losses, as global markets continued sliding lower.

But those March 2003 lows turned out to be great buying opportunities.

As the above chart shows, all the major stock markets were much higher on February 10, 2004 than they were on February 10, 2003 – the day the SARS virus first made headlines.

And within four years after the SARS outbreak, the S&P 500 had doubled, the MSCI EAFE Index of international stocks had tripled, and the Shanghai Composite had quadrupled.

To be sure, today’s sell-off is more severe than the 2003 downturn. But it is definitely not worse than the 2008-’09 debacle, which sent the major market averages tumbling more than 50% before reaching a bear market low.

Even in that episode, as bad as it was, investors who sprinkled “Buy” orders into the market throughout that downturn would have fared well over the next few years.

Yes, these hypothetical investors would have suffered some deep mark-to-market losses on their initial investments. But despite that “bad start,” the stock market ultimately rewarded the investors who “bought when others were fearful.”

In fact, Warren Buffett was among those intrepid investors. He made investments in various emerging market securities and bank stocks during the rout phase of 2008.

Almost immediately, those investments were underwater… deep underwater.

But Buffett ultimately booked billions in profits on these trades.

I would not dare to minimize the risks of investing in the current market volatility. To the contrary, I respect its power to destroy capital by falling much lower than it already has.

But history tells us that moments like these are what buying opportunities are made of. So if you have the stomach for it, do a bit of buying now… while others are fearful.

With that in mind, here are five stocks that I believe will soar once the coronavirus threat passes…

Why the Coronavirus Won’t Phase Technology

“I do not believe the introduction of motorcars will ever affect the riding of horses.”

That’s what John Douglas-Scott-Montagu, a member of the British Parliament, declared in 1903. That may sound absurd now, but it was the accepted wisdom of the time.

Just five years later, Henry Ford was mass-producing Model Ts. And within one decade, 10 million Americans were puttering around in motorcars.

Automobiles aren’t alone. Breakthrough technologies often become commonplace necessities more rapidly than anyone can imagine at the outset.

The electric vehicle (EV) will be no different. This breakthrough technology will gain global popularity and market share much more rapidly than most folks expect.

Likewise, the energy storage technologies needed to make electric vehicles and other technologies possible will fan out across the globe at a spectacular pace.

These burgeoning technologies are world-altering phenomena the likes of which the planet has not seen since Thomas Edison demonstrated his new electric streetlights in 1879.

I expect them to introduce sweeping technological advancements that will impact our daily lives in ways we can’t yet comprehend.

Already, electric vehicles are stealing market share from gas-fired vehicles, while renewable power technologies are grabbing market share from thermoelectric power generation thanks to utility-scale energy storage systems.

Both of these stories are very new and very big.

We’ve seen this movie before…

In 2006, cell phones were still nothing more than mobile telephones. Nokia Corp. (NOK) and Motorola Solutions Inc. (MSI) dominated the market with compact flip phones. Smaller was better. Each new cell phone design offered slightly better functionality than the preceding version, but at a lower weight and smaller size.

So if someone had asked you or me back then what a cell phone would look like in 2020, we probably would have said it would be the size of a postage stamp, weigh about two ounces, and be clipped to our ear. We could not have guessed that cell phones would increase in size and offer the functionality of a laptop computer.

And if someone had asked us back then if Apple Inc. (AAPL) stock was a better “buy” than Motorola or Nokia, we might have answered, “No way!”

That would have been a bad call.

The flip phone was about to perish, and the smartphone was about to burst onto the scene.

In January 2007, Steve Jobs announced the launch of the iPhone – and the world of mobile communication entered an entirely new paradigm.

Globally, consumers bought about 122 million smartphones in 2007. In 2019, they bought 13 times that number.

This story of breakthrough technological success has repeated itself over and over in history, especially here in the United States during the last century. Technological marvels like radios, televisions, washing machines, microwave ovens, and personal computers gained widespread acceptance at a lightning-fast pace.

The coronavirus isn’t going to stop that.

In this report, I’ll show you how and why five technologies are growing so rapidly and profitably that they deserve the attention of every investor:

• Screen time
• Payment processing
• E-commerce
• Artificial intelligence
• Battery metals

Plus, I’ve spotted five stocks investors can use to build their wealth once the coronavirus bear market slows… and these tech trends soar.

These five trends are not merely delivering conspicuously strong revenue and earnings growth.

Their growth trajectories are gaining momentum.

These five technologies – and these five stocks – will be booming for a very long time.

Let’s take a closer look at each one of them…

Stock No. 1
The High-Tech Miner

A rapidly growing number of utilities around the globe are adding energy storage systems to their solar and wind projects. These systems, which are essentially great, big batteries, store the excess electricity these projects produce when the sun is shining or the wind is blowing.

The utilities can then feed that stored energy into the electricity grid as needed. This ability to capture and store energy for later use enables solar and wind projects to deliver electricity much more efficiently.

The energy storage boom is just beginning, but it is gaining momentum rapidly. Bloomberg New Energy Finance predicts the global energy storage market will “double six times” from now to 2030 – from a starting point of less than 5 gigawatt-hours (GWh) to 305 GWh.

To boost energy storage from where it is today to 305 GWh by 2030 would require an annualized growth rate of 40%.

That’s tremendous growth.

Bloomberg also predicts the energy storage industry will attract more than $600 billion of investment over the next 22 years. Parabolic growth trajectories of this scale are as rare as surf contests in Kansas.

Obviously, forecasts are just guesses with a fancier name. So no one can predict the exact pace at which EVs and energy storage systems will become the new normal. But the trend is quite clear.

That said, finding the best ways to invest in energy storage technology presents some big challenges.

• Many of the companies leading the electrification boom are Chinese, and their stocks trade only in Shanghai or Shenzhen.
• Many EV and energy storage market leaders are subsidiaries of much larger companies, so there is no way to invest in them directly.
• Many market “leaders” are losing money. Tesla Inc. (TSLA) is one high-profile example, but it’s hardly alone. Innovation is both expensive and risky.
• This is a battleground of competing technologies and continuous innovation. Today’s market leader could be tomorrow’s Betamax. I refer to this dynamic as “first-mover disadvantage.”

That’s why I’m recommending the tried-and-true approach of “selling shovels to miners.”

Only in this case, it is actual miners who are selling “shovels” to companies like Tesla.

You see, today’s high-tech batteries require huge amounts of metals like lithium, cobalt, copper, nickel, graphite, and vanadium.

According to calculations from the International Copper Association and IDTechEx research, the average battery-powered electric vehicle requires 183 pounds of copper. That’s about four times the amount of copper the average internal combustion auto contains. A typical EV also requires about 120 pounds of graphite, along with significant quantities of nickel, cobalt, and lithium.

Renewable energy technologies are “metal hogs” as well. The average solar power project requires about five times as much copper per megawatt of capacity as a conventional fossil fuel plant. Offshore wind farms demand about 10 times as much.

Meanwhile, the leading energy storage technologies also require massive quantities of “battery metals.”

So the boom in EVs, renewables, and energy storage likely will create major “echo booms” in several metal markets.

That’s why, generally speaking, I believe select “low tech” mining companies provide better plays than “cutting edge” companies like Tesla.

Yes, Tesla offers a direct play on both EVs and energy storage. But that doesn’t mean it’s the best play.

Even though Tesla pioneered the EV market, it no longer has the EV market to itself. Every auto company on the planet is retooling to compete with Tesla by producing an entire fleet of EVs at different price points.

That’s bad news for Tesla, but great news for battery metal miners.

All of those automakers – and all the battery makers and renewable energy producers – will need their metals.

So, as EVs gain momentum, demand for “electric metals” could go parabolic…

The Play to Make

The terms “artificial intelligence” and “copper miner” do not obviously relate to one another.

But in the case of Freeport-McMoRan Inc. (FCX), they do. And this connection is one of three powerful reasons why the stock has become a compelling investment.

Freeport-McMoRan, one of the world’s largest copper producers, has been testing an artificial intelligence (AI), or “machine learning,” model at its Bagdad copper mine in Arizona.

This machine-learning model uses data from sensors around the mine to “tailor” the ore-processing method to each of the seven distinct types of ore that come from the Bagdad mine.

This test has been “a remarkable success,” according to Freeport CEO Richard Adkerson. So the company is now planning to roll out its new technology across all of its operations in the Americas.

By doing so, Freeport expects to increase its annual copper production by a hefty 5%.

The machine learning program is just one of three major initiatives that Freeport says will boost its copper production by 30% in 2020.

The other two production drivers are:

• Ramping up Freeport’s new underground mining operations at its massive Grasberg mine in Indonesia.
• Bringing the company’s new Lone Star copper development in Arizona into production.

Combined, these three initiatives should produce a significant jump in earnings, even with no change in current copper or gold prices. At a minimum, the company should earn about $0.50 a share in 2020 and $1.30 in 2021.

Those results would give Freeport’s stock a price-to-earnings (P/E) ratio of 21 in 2020, and it would then fall to just eight times earnings in 2021.

I believe these results are likely to surprise on the upside, as the copper price breaks out.

Stock No. 2
The “Shelter in Place” Play

Consider Junior “sheltering in place” down in the basement playing “Call of Duty” pretty much all day long after he finishes up his at-home schoolwork by noon.

Now consider Dad setting up alongside Junior after getting furloughed alongside tens of millions of other folks this month.

Meanwhile, upstairs Mom is binging Netflix, and Sis is fiddling with Instagram on her tablet.

Over the past year, I’ve pinpointed a trend I believed would fuel a powerful, long-term investment opportunity. I called it the “Screen Time Megatrend.”

The coronavirus epidemic is supercharging that trend.

Video gaming can be a solo activity. But increasingly, gaming involves online competition among gamers who may or may not know one another.

As this mode of competition has gained complexity and popularity, it came to resemble a sporting activity that is as intense as any outdoor sport.

Professional gaming, known as “eSports,” is an up-and-coming international phenomenon, complete with gaming arenas and teams of e-athletes.

Every facet of the gaming world is growing rapidly, and the coronavirus epidemic will likely accelerate the industry’s growth.

In this post-coronavirus world, the “Screen Time Megatrend” could also be called the “Shelter in Place Megatrend.”

No matter what you call it, we’re talking about a societal migration from face time to screen time.

2.5 Billion Gamers Spending $150 Billion

Millennials are the first of the “screen time” generations. Many similar generations are sure to follow.

Think about it: Almost every aspect of life that we and our parents conducted by moving from Place A to Place B and/or speaking directly to another human being has migrated to a screen.

This phenomenon was becoming the “new normal” even before the coronavirus burst onto the scene. But thanks to shutdowns and shelter-in-place practices around the world, the screen-time megatrend caught a powerful tailwind.

Because of the virus, billions of folks were forced to shift some portion of their lifestyle from face-to-face interaction to face-to-screen modes. That shift has been jarring for some of us, but utterly seamless, even pleasant, for many members of younger generations.

Gamers, in particular, didn’t skip a beat. After all, they invented the screen-based, shelter-in-place lifestyle!

Based on anecdotal evidence, the ranks of gamers worldwide has swelled significantly during the COVID-19 epidemic. After the crisis passes, most of these new converts will probably reduce their gaming time… but they won’t eliminate it.

In other words, what Wall Street analysts call the “addressable market” of video gamers has probably increased by tens of millions during the last few months.

Even before “sheltering in place” became a thing, literally billions of people throughout the U.S., China, Japan, and elsewhere were spending multiple hours per day playing video games of one kind or another.

According to Newzoo’s “Global Games Market Report,” 2.5 billion gamers across the globe spent about $150 billion on games in 2019.

China holds the title for largest gaming country, both by revenues and number of players. The number of active online gamers in China has reached an astonishing 600 million people – or roughly double the U.S. population.

North America is the second-largest gaming region. Last year, these gamers spent more than $32 billion on their pastime. For perspective, that figure is triple the amount Americans spent on movie theater tickets.

And as I mentioned above, online gaming has given birth to the professional eSports phenomenon.

As its name implies, eSports are video-game-based competitions between two or more “e-athletes.” These new sports already boast a global audience of nearly 500 billion people, while also generating nearly $1 billion in total revenue.

This screen-time phenomenon has created a multitrillion-dollar megatrend… and the best opportunities are just getting underway.

Not Just Gaming

Founded in 1993, Nvidia Corp. (NVDA) started as a computer gaming-focused company. It focused on specialized chips that could convert PCs into de facto advanced gaming consoles.

In the late 1990s, Nvidia debuted the first graphics processing unit (GPU). It was a single chip that could render moving images with dazzling detail.

Nvidia’s first GPU could render 10 million shapes and images per second. Today’s GPUs can handle 7 billion per second. No wonder Junior and Dad are spending so much time in the basement. Sounds fun!

Today, in fact, all roads lead to Nvidia. Thanks to the company’s dominance of the GPU market, it is at the very center of several powerful multidecade growth waves, including gaming, data centers, autonomous vehicles, artificial intelligence, and machine learning.

The coronavirus has pounded the stock market indices overall. But not all sectors are feeling equal amounts of pain. Believe it or not, as of this writing, the tech-heavy Nasdaq 100 is up a few percentage points over the past six months, with stocks like Nvidia leading the way.

In fact, Nvidia stock is up year-to-date, and it is up roughly 40% over the past 12 months. It has managed to achieve these stellar returns for a couple of reasons.

For one, rock-solid balance sheet, with more than $8 billion in net cash. This means that it can cover all its debts and have plenty of funds left over..

Even after the recent selloff, Nvidia isn’t cheap based on near-term earnings. Nvidia has earned between $4.59 per share and $6.81 per share of profits over the last three years, meaning the stock is trading around the 40x to 60x earnings range based on recent years’ results. And 2020 earnings won’t be a blowout figure either.

If you look past the current crisis, however, the picture changes entirely. Look to the next waves of technological disruption, and Nvidia stock seems like a steal. Over the next three to five years, as videoconferencing and gaming take off, Nvidia will see exponentially more demand for its products.

So, Nvidia has plenty of staying power to ride out any near-term crisis. Nvidia thus has a high degree of safety, while offering tremendous leverage to several emerging super-trends that could transform the next decade.

Stock No. 3
The Square of Brazil

Digital and card payments are the future. Gone are the days of cash and coins… and here are the days of credit cards and e-payments.

As an enabler of noncash payments across multiple channels, Square Inc. (SQ) is at the core of this transition. Its mobile devices, which attach to a smartphone, allow retailers of all shapes and sizes to affordably and easily process card payments. It has an online presence through software that does the same thing for e-payments.

Overall, everywhere the consumer is these days, Square is there, too, making it easier and more convenient than ever to buy and sell things.

Square soared as much as 1,000% after its 2015 initial public offering – and is still up nearly 300% from its IPO price.

I see this stock taking off on a similarly profitable path…

PagSeguro Digital Ltd. (PAGS) serves millions of entrepreneurs and small merchants in Brazil, so it is well positioned to prosper from renewed economic vitality in the country.

Even in the slow-growth environment of the last couple years, PagSeguro has progressed impressively. But this trajectory could go parabolic in a fast-growing economy.

The company describes itself as “a disruptive provider of financial technology solutions focused primarily on Micro-Merchants, Small Companies, and Medium-Sized Companies, or SMEs, in Brazil.” Before PagSeguro, many of these small merchants were overlooked by Brazilian banks.

PagSeguro enables small merchants to process digital transactions without having to use banking or credit card intermediaries. To provide this service, like Square, it sells merchants a small electronic device, called a Minizinha, that can process 37 different types of payments or “cash-in methods.” The São Paulo-based company also processes eight different types of “cash-out transactions.”

PagSeguro’s typical entry-level customers are previously cash-only small merchants. By using PagSeguro’s services, these merchants can expand their range of payment processing capabilities without having to establish banking and/or credit card relationships.

In effect, PagSeguro is pioneering a new market in Brazil – and it is doing so at a rapid clip. In less than three years, the company has nearly tripled its count of active merchants from 1.4 million to 5.3 million.

Despite this breakneck growth, PagSeguro believes it has barely scratched the surface of its potential target market. Using a metric it calls “Total Payment Volume Opportunity,” the company believes it has captured just 3% of the total market.

Plenty of Room for Growth

Although PagSeguro has added 5.3 million customers to its platform so far, roughly 12 million small merchants are operating in Brazil. So that means PagSeguro could attract some meaningful percentage of the 6.7 million small merchants that have not yet become customers.

The nationwide growth of digital commerce also provides a large opportunity for growth. In Brazil, e-commerce accounts for only 3.5% of retail sales, compared to 11.4% in the United States. But Brazilians are catching up quickly to their U.S. counterparts.

Digital banking is another major growth opportunity that PagSeguro is pursuing.

According to a research report prepared by Deloitte on behalf of the Brazilian Federation of Banks (Febraban), money transfer via mobile banking surged 119% during 2018, with 40% of all online banking transactions being made on smartphones or tablets. This robust growth of online banking is one obvious reason why PagSeguro is moving aggressively into that market.

Following the business model that Square developed here in the United States, PagSeguro is beginning to offer a suite of digital banking services through its new financial division, PagBank.

Although this strategic shift entails risk, it is a risk that offers commensurate reward. The company estimates that the market for its banking services is roughly 14 times bigger than the market for its payment processing services.

In other words, PagSeguro executives believe the banking market is too big to ignore, especially because the company already possesses a banking-like relationship with millions of merchants. They believe PagBank is a natural upsell from the company’s existing services, and that it completes the fintech “ecosystem” PagSeguro can offer its clients.

On a recent conference call, CEO Ricardo Dutra declared the following:

In the same way we disrupted the payments business and promoted the inclusion of millions of Brazilians who were underserved, we believe now we will lead their inclusion into the banking system. There are lots of customers unsatisfied with their banks, but our focus will be the millions of underbanked Brazilians. It is the same scenario we had in the payments business six years ago: millions of Brazilians underserved by incumbent banks, most of them with smartphones and [high-speed internet] connections eager to be included into the financial system.

The PagBank ventures are so new that they are not yet making a significant contribution to the company’s operating results. But PagSeguro’s core payment processing operations continue to grow rapidly.

The company delivered another impressive earnings report on February 27. Here are a few year-over-year growth highlights from that fourth-quarter report:

• Total payments volume surged nearly 40%.
• The client base grew to 5.3 million merchants – an addition of more than 1 million during the previous 12 months.
• Revenues jumped 38%.
• Earnings grew 27%.

Lastly, the number of PagBank customers jumped 47% during the quarter to 2.7 million.

Looking ahead, analysts predict the company will more than double its earnings over the next three years.

Obviously, when analyzing a company that is growing quickly by targeting and developing a brand-new market, forward earnings estimates could prove to be way off the mark. Perhaps too high… perhaps too low.

But this much is certain: PagSeguro is a fast-growing company with tremendous potential. I consider it an outstanding long-term investment.

Stock No. 4
A Retail Survivor

Lululemon Athletica Inc. (LULU) stock is back on the upswing. Yes, Lululemon stock got clobbered during the March crash — shares declined by as much as 50%. But they have recovered swiftly. There’s good reason for that.

Looking at the retail scene, you have a wide variety of companies ranging from those on life support to those that will undoubtedly come out of this all right.

Lululemon is in the survivor category. It will make it through this crisis and be in good shape on the other side.

Yes, the current situation in retail is brutal. But Lulu is a best-of-breed retailer with three key strengths that are especially valuable right now.

An Excellent Balance Sheet

Lululemon has a fantastic balance sheet. In fact, it has a net cash position in its treasury. This means that if you add up the company’s cash and short-term investments, they exceed its liabilities.

Recently, Lululemon had $1.1 billion of cash on hand. Counting inventory, pre-paid expenses, and other such items, it had $1.8 billion in current assets. Against that, Lululemon had just $620 million in current liabilities, meaning it has its short-term obligations covered several times over.

Notably, Lululemon’s cash balance doubled last quarter; the company’s strong holiday season allowed it to build a large cushion heading into this economic shock. Also, consider that the company has no long-term debt whatsoever. The company’s biggest liability, at $611 million, is the leases on its stores.

However, Lululemon should be able to negotiate discounts on those thanks to the crisis. Even the strongest athletic brands, like Nike Inc. (NKE), are demanding stiff rent concessions, Lululemon should be able to as well, which will generate further shareholder value. In any case, Lululemon can withstand adversity for a long while.

Strong International Operations

Another reason to favor Lululemon stock is that it has a vibrant international operation. This makes it superior to many of the other retail names that have plunged lately. If the U.S. comes out of quarantine quickly, the more domestic-focused companies can recover in good time. But it’s riskier to invest in those sorts of firms.

Lululemon, by contrast, has an extensive array of stores around the globe. It has more than three dozen stores in Australia along with a rapidly growing presence in China, East Asia, and Europe. This gives Lululemon an edge. While the virus is still raging in much of the world, it has started to subside in much of Asia.

As Lululemon CEO Calvin McDonald noted on a recent conference call, nearly all of Lululemon’s stores in China are open. And nearly all their other Asian stores are doing business as well. While it will take a while to reach full speed, economic data out of China is showing a considerable rebound from just a few weeks ago.

Direct-to-Consumer Channel

Even if Lululemon doesn’t have all its stores open for a while, it has another way to reach its clients: e-commerce and the internet. Over the past few years, Lululemon has built a robust direct-to-consumer sales channel. So in-store sales are not as essential as they are for many other retailers.

In 2019, Lululemon laid out its “Power of Three” plan for the company. Over the next five years, it will build its business in three ways: product innovation, international market expansion, and growing direct-to-consumer sales. To that last point, in 2019, Lululemon pulled in 29% of its revenues via direct-to-consumer sales. This figure could grow toward 50% in coming years.

Lululemon is investing heavily in platforms such as its loyalty program and an order online/pick up in store offering to drive its digital presence. Meanwhile, with many brick-and-mortar stores closed for now, the digital channel gives Lululemon a steady revenue source even in these trying times.

The Takeaway

Lululemon now enjoys a tremendous opportunity. This is the biggest crisis for retail in ages, and many companies came into it flat-footed.

They carried too much debt, they didn’t have enough international presence, or they lacked a strong omni-channel approach to reach consumers away from their physical stores. Athletic wear rivals that lack these traits have seen their stocks implode recently.

Given its strengths in these areas, Lululemon stock is already outperforming the competition. And it should enjoy further gains going forward. With its three advantages over rivals, the company is poised to benefit from turmoil within the retail industry.

Stock No. 5
The Smart Pick

Artificial intelligence is now seeping into every aspect of our lives, from how we interact with our voice-activated digital assistants to how biopharmaceutical companies find new drugs.

A recent study by Accenture found that in 12 advanced economies with combined GDPs of roughly $61 trillion, AI can double economic growth by 2035. Part of that bump will come from a 40% boost in productivity.

And that’s leading to a whole lot of spending – and opportunities to make money – on AI technologies.

Worldwide spending on AI systems will climb 44% in 2019 to $35.8 billion, with some $13.5 billion going to AI software platforms and AI apps, according to IDC. Gartner estimates that spending on AI will grow at an average compound annual growth rate of 18%, reaching $383.5 billion in 2020.

You can drive a tractor trailer between those two estimates – but clearly, AI has quickly become red-hot … and a massive profit opportunity.

Yet, AI is not easy to develop. Huge amounts of data must be accessed to find patterns. Moreover, top-notch data scientists must be hired to work on AI. As should be no surprise, this kind of talent is in short supply nowadays.

Because of all this, usually only huge global corporations focus on AI.

However, I’ve spotted a smaller tech company that first made its mark by providing the “eyes” of the GoPro Inc. (GPRO) sports camera systems.

But as the GoPro fad started to fade, this company pivoted its business toward two primary applications: professional security cameras and “computer vision” for automotive artificial intelligence.

Both of these segments are performing well, but the computer vision (CV) operations provide most of this stock’s appeal.

The CV family of products from Ambarella Inc. (AMBA) empowers a wide variety of automotive applications. To generalize, these products provide “sight” to the computers that run autonomous functions for automobiles.

Already, the company’s products empower technologies like active driver monitoring systems (ADMS), blind-spot detection, and automated parking systems.

Longer term, the opportunities are vast. Ambarella is collaborating, for example, with a Chinese company named Momenta to produce a cutting-edge, high-definition mapping platform to be used by autonomous vehicles.

This platform combines Ambarella’s CVflow computer vision system on a chip (SoC) with Momenta’s deep learning algorithms to provide HD real-time mapping solutions for autonomous vehicles.

As autonomous vehicle technology continues to advance from the laboratory to the showroom floor, the market opportunity for Ambarella will become enormous.

This opportunity is not likely to make a significant contribution to Ambarella’s earnings over the near term. But as the company gains “design wins” from original equipment manufacturers and/or valuable alliances within the autonomous vehicle universe, its stock could gain significant momentum… even in advance of significant earnings growth.

Based on consensus earnings estimates, the stock is far from cheap. It is selling for nearly 100 times 2020 earnings and 60 times 2021 earnings.

But these near-term earnings expectations are not the reason to consider buying the stock.

The reason to buy the stock is that it will likely be a leader of the massive global transformation from cars with self-driving capabilities to truly autonomous transport.

I don’t know what that’s worth, but I believe it will be worth a lot more than the company’s current market value.

Summing Up

I’ll be bringing you analysis like this week in and week out in Smart Money.

I’ll be looking at the global macro environment and sharing with you the best strategies to make the most of it. I’ll also pick the right stocks – and tell you at what levels they’re attractive.

I’m using all the knowledge I’ve gained in 30+ years in the market to track the world’s biggest macroeconomic and geopolitical events – and to help investors like you make big gains from those emerging opportunities.

Welcome aboard!

Regards,

Eric Fry
Editor, Smart Money