SiRF Technology Holdings (SIRF – NASDAQ)
Dear Bottarelli Research Member,
We have sure seen some very nice upside movement in our picks this week!
Let’s remain on course – and keep the gains coming – by continuing to invest in the very best small-cap stocks with explosive growth potential, especially heading into the strongest three months of the year.
Now, I still believe that metals will be very strong (with silver outpacing gold) because of the shortage of the commodity worldwide. I’ll have more on this in the next few weeks. But for today, I’d like to dive head first into one of the most explosive sectors out there: GPS Navigation.
If you’re a Bottarelli Research Options member, then you’re aware of Garmin (GRMN – NASDAQ). This stock has been on fire, and Bryan has done very well playing GRMN call options for tremendous short-term returns. But as a small-cap investor, we need to be aware that GRMN is not alone in the GPS navigational space. Just this week, for example, it was reported that Navteq (NVT – NYSE) was “in talks” with Nokia about a buyout offer. This is huge news which caused quite a big stir in the GPS sector, as GRMN lost over $20.00 on the news. Check out the chart:
I personally don’t think Nokia will be alone in trying to corner the huge GPS market. I fully expect to see more consolidation – especially since mobile GPS is attracting a lot of attention both here and abroad. That’s why I’m issuing you today’s newest recommendation. You see, this company is positioned to profit no matter what GPS mergers or acquisitions take place. As a result, this investment puts you in a wonderful position to enjoy explosive GPS growth without suffering through any weekly set-backs like we just saw in Garmin.
I’ve had this week’s small-cap pick firm on my radar for about three weeks now. I’m very familiar with their products and technology, which use GPS and Bluetooth technology to enable a wide range of products to use location-awareness services.
Based on recent technical and news-driven events, I now feel that the timing is perfect to enter a position.
In July, they signed a licensing agreement with Intel (INTC – NASDAQ) for next-generation mobile devices. Then in August, they bought out a privately held company called Centrality Communications – which offers them breakthrough GPS performance technology that’s so powerful, it works in places where standard cell phone coverage is non-existent.
In fact, I just saw this powerful technology with my own eyes. You see, I was recently driving through a tunnel, which caused my cell phone to lose its signal. But my GPS system, powered by this company’s technology, maintained its coverage and tracked my location throughout the entirety of the tunnel. I was very impressed.
With second quarter earnings up 25% over the last 6 months, and with momentum rapidly growing in this hot sector, this company is positioned to hand us some rather significant gains. The stock is bouncing strongly off of the lows for the year, and it has just given me every technical crossover for which I meticulously scan. Therefore, the time to act is now.
The company is called SiRF Technology Holdings (SIRF – NASDAQ) and investing in them today will get us positioned in the next major GPS winner before Wall Street catches on. The stock has performed very well this week, so let’s nibble here and use any pullbacks to establish a position at or under $24.50 per share.
I’ll turn things over to Bryan for the complete details in just a moment, but first let’s cover some position updates…
UPDATES
Raptor Networks Technology (RPTN.OB): Although they’re off the highs for the year, they just announced the first sale of their “distributed core” network switches to the Department of Defense. This is great news. Plus, they’ll be featuring their technology at the Broadband World Forum in Berlin, giving them global attention at a conference that is known for introducing cutting edge technology to the entire world.
Metalline Mining (MMG – AMEX): Although MMG has drifted back off its highs, do not underestimate this gem. I am very bullish on silver, and these guys found a sizable silver deposit when they were not even looking for it! We already know about the zinc they have, and we’ll get a complete report in Q4. But now, they’re also expanding drill holes to see just how much silver they have, which could be a tremendous upside trigger. Make no mistake, I am very bullish on MMG.
Crystallex International (KRY – AMEX): The reason KRY has not taken off yet is the fact that they’re doing business in Venezuela. But to my eye, this could set the stage for a terrific opportunity. You see, KRY has told me that they’ve worked out all the problems with Venezuela’s government, which is certainly positive. Keep in mind that they are sitting on what could be 16.86 million ounces of proven and probable gold. This is huge, so let’s be patient on this one. In fact, this could be a great spot to add to your position since I don’t think it’ll be too much longer before the stock price takes off.
Star Maritime (SEA – AMEX) & Oceanfreight (OCNF – NASDAQ): Both of our dry bulk shippers are finally starting to show some strength! SEA and OCNF are both dynamic plays in different areas of the dry bulk shipping segment. Bryan and I both remain very bullish on this sector, and there are no signs of any slowdown for the rest of 2007 and all of 2008. One of my colleagues said that dry bulk shipping is like a hotel operator with 100 rooms available and 200 weary people looking to stay overnight. In this case, the rooms simply go to the highest bidder – and this analogy applies to the entire dry bulk shipping sector for the next 18 months.Now that’s some major pricing power!
Polymet Mining (PLM – AMEX): This one is really getting going, which is why I consider them a “must own” stock. Last week they reported 51% probable reserves, which leads me to believe that we’ll never see these low stock prices again. Be sure you have a position in PLM.
On that note, here’s Bryan for the full details on Sirf Technology Holdings (SIRF – NASDAQ). Have a great week!
Sincerely,
SiRF Technology Holdings (SIRF – NASDAQ) Owns the “Gorilla Position” in a Market Poised for Massive Growth in the Second Half of This Decade
“Even rumors and speculation can drive a stock through the roof.”
- Motley Fool, October 2nd 2007
To start off today’s small-cap alert, let’s do a fun little market scanning exercise…
- First, we’ll scan the entire market for companies showing at least 30% price appreciation in the past month.
- Then, to ensure that we have established small-cap firms, we’ll weed out stocks with a market capitalization less than $100 million.
- And finally, we’ll scan this list for stocks that out-perform the market by using the metric called “beta.”
By definition, beta is a measure of how a particular stock price moves in relation to the entire market. A stock with a beta of one (1) means that it moves exactly in tandem with the market. For example, if the market goes up 3%, a one-beta stock will most likely be up 3% as well. The same model also applies to the downside. If the market moves down 3%, a one-beta stock will most likely be down 3% on that day as well.
Now, I prefer to own stocks that out-perform the market by a high multiple. That’s why I follow high-beta stocks. After all, the higher the beta, the more volatile the stock. Therefore, a stock with a beta greater than one shows me that it’s more volatile than the overall market. So if the market moves up 3%, a 3-beta stock could be up 10% on this day. These are the high-momentum small-cap stocks that offer you uncommon returns. And so to conclude our stock scanning exercise, we’ll eliminate any remaining stock candidates with a beta that’s not 3 or higher.
The result of this study returns a small group of stocks. And I must tell you, the most attractive stock in this particular grouping just happens to be SiRF Technology Holdings (SIRF – NASDAQ).
Here’s the rundown…
Headquartered in San Jose, California, SiRF is characterized as a “scientific and technical instrument” company. In other words, they develop the semiconductor and software products that enable GPS and other location-awareness technologies to operate. Their chips are found in the “guts” of most major GPS devices – which is a niche segment that looks to be one of the hottest growth stories over the next 12-24 months.
Having said that, let me back up a second.
GPS stands for Global Positioning System.The technology was originally developed by the United States Department of Defense, and it uses more than 24 satellites in orbit around the earth to provide “always-on” location information.
These 24 satellites are managed by the United States Air Force 50th Space Wing at the cost of $750 million per year. But despite this massive operational cost, GPS technology is free of charge to any GPS receiver anywhere in the world. Because the U.S. Government kindly foots the bill for this massive technology expense, the companies that manufacture and sell GPS products sidestep a massive overhead cost. In fact, this free $750 million service charge is a situation unlike anything I’ve ever seen before – offering a remarkable benefit to all GPS-related firms.
Getting back to SiRF, they’ve been one of the very first companies to develop chips that facilitate the GPS technology platform – which is why they currently enjoy an extensive and superior patent and intellectual property portfolio. For example, conventional GPS technology can only locate your whereabouts in certain “hot spot” areas, but SiRF’s technology continues to seamlessly track locations under dense foliage, steep ravines, “urban canyons” and even many indoor environments!
Because their GPS chips are the best available chips on the market, SiRF’s technology has a much wider range of applications. Aside from the standard mobile consumer devices (such as automobile navigation systems), SiRF’s location-awareness chips can guide everything from a space shuttle to handheld devices used by backpackers. And that’s the important aspect of this investment opportunity.
You see, when SiRF first introduced its revolutionary GPS chips back in 1995, they were priced at $49 (which is ridiculously high by today’s standards). But over the next 12 years of applying Moore’s Law, each new generation of SiRF GPS chips has continued to get smaller, more powerful, more reliable, and cheaper. As a result, GPS chips have come down from $50 in 1995 to less than $10 today. This has lowered the price of GPS devices to as low as $139, which means that this technology is now squarely in that all-important consumer electronics “sweet spot.” In other words, the attractive GPS price points that are now available mean that GPS technology is finally ready to gain mainstream appeal. And as a result, the tremendous upside growth of GPS devices is just getting started.
And make no mistake: SiRF owns the coveted “gorilla position” in this market. In fact, when you look at the market breakdown and potential below, you’ll see that the GPS chip market is poised for massive growth in the second half of this decade.
FULL MARKET BREAKDOWN & POTENTIAL
Automotive: Characterized by BMW’s in-dash navigation systems or General Motors’ OnStar services, this market is poised for serious growth over the next several years. Nearly 8 million GPS chips were embedded in in-dash navigation systems in 2005, and by 2010, manufacturers expect to ship close to 18 million in-dash navigation systems. That’s 125% growth over the next two years – amounting to a $12 billion market for automotive GPS. In fact, most automakers expect to install GPS capabilities with nearly every make and model they sell by the end of this decade.
Mobile Communications: Characterized by cell phones and smartphones, the next generation mobile phone is expected to have voice, video, camera, MP3, and GPS chips as standard equipment. As smartphone sales are projected to grow from 16.1 million units in Q4 2005 to one billion units in 2010, GPS products within these devices are forecasted to break $1.6 billion by 2010.
Mobile Computing: Characterized bylaptops, notebooks, and handheld PDA devices, GPS technology is gaining attention from vendors and products such as Dell’s newest PDA, Microsoft’s Origami PC, and HP’s iPaq. In fact, nearly every manufacturer within this market segment has announced plans to incorporate GPS as a standard feature, which will ultimately lead to brisk GPS chip sales.
Handheld GPS: Characterized byportable navigation devices like TomTom, Garmin and Magellan, shipments in North America soared to 15 million in 2005. As popularity of GPS for navigational and recreational use continues growing, analysts expect handheld GPS devices to rake in $2.5 billion worldwide in 2010.
Now here’s the thing: SiRF chips are found in all four of these exploding market sectors. All told, SiRF currently provides chips to major companies like General Motors, LG Electronics, Matsushita, Microsoft, Mitac, Motorola, NAVMAN, Nextel, Nokia, Research In Motion, SK Telecom, and T-Mobile. That’s quite a laundry-list of top-line companies.
That’s why market research company IDC published a report on September 27th that estimated that the entire consumer navigation market would grow 53% worldwide in 2007 – with Western Europe ranking as the largest growth market, followed by the U.S.
Add it all up, and falling prices of GPS devices has now put this technology in the consumer “sweet spot” for rapid expansion. At the same time, the startling array of consumer devices that now demand SiRF’s GPS chips have some experts estimating that the worldwide location awareness market could reach $35 billion by 2010.
In fact, Credit Suisse just said that sales of devices that need GPS chips (such as Garmin and TomTom) are on a major growth trajectory. They expect to see very strong holiday sales as consumers begin taking advantage of reduced prices to buy personal navigation devices like never before. And for SiRF, this is fantastic news.
With revenues topping $165 million in 2005 and growing 98% from Q4 2004 to Q4 2005, SiRF is definitely the “Big Kahuna” of GPS chips that’s just now starting to hit its stride. With total cash of $210 million compared to total debt of only $115,000, the current stock price carries $3.95 of total cash per share. With trailing three month revenues of $275 million (and quarterly revenue growth of 23%), SiRF looks perfectly positioned to enjoy incredible upside appreciation over the next 12 to 24 months.
REMEMBER: The beauty of this play is that no matter if Garmin or TomTom or Magellan becomes the dominant GPS device, the real winner will be the maker of GPS chips – and that’s SiRF. Sure, GRMN gets all the investor attention right now, but the future potential of GPS technology involves the full spectrum of GPS capabilities, not just consumer-based automotive navigation. With additional exposure to the mobile computer and mobile communications markets, this paints an explosive upside future for SiRF.
All things considered, let’s establish a position now and ride this powerful GPS momentum over the next 12 to 24 months.
PLAY: Buy shares of SiRF Technology Holdings (SIRF – NASDAQ) at or under $24.50, good for the week.
Sincerely,
© 2012 CSR Group, LLC. All rights reserved. Published in USA.
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