I didn’t think they could manage it but they did it again. Well, actually, I thought they could; but surely with this much storied potential and decades of effort they were due for some good news. It is earnings season and three of my investments announced their earnings within the last few weeks. All of the companies had successes to celebrate. Only one of the stocks rose. The others definitely didn’t. Good news and positive management is not enough; especially, when investors were expecting better news and don’t care about management’s mood. My mood hung on the balance while I waited for today’s news from MVIS. It had great potential. Evidently, it continues to have great potential; eventually.
If investing was unemotional it wouldn’t require humans. That’s one reason to trust the computers, the math, and the data. Computers, math, and data, however, are not very good at understanding potential. Prediction and estimation is much more difficult than analysis and review. Hindsight is easy, and a skill computers excel at. Foresight is difficult, and a skill humans can claim but only imperfectly.
I am human. I am imperfect. I also am an investor. Large companies with lots of data and long histories are easier for computers to analyze. Rather than try to compete directly with them, or at least their institutional users, I focus on companies that are small because they have less data and can have impressive futures. Find their disadvantage and try to turn it into my advantage. Large financial institutions fight the equivalent of major battles. Individual investors can benefit from fighting skirmishes. The potential of investing in small companies is when they grow enough to catch the attention of the institutional investors. Buy stocks that are overlooked. Wait for them to become popular. Sell when the stock has risen enough, and possibly sell at a premium. That’s the plan. That’s how I’ve invested for decades. And then my Triple Whammy hit and only now is beginning to recover.
I’ve written about AMSC, GIG, and MVIS before. I’ve held each for years. Each was purchased before they were selling products. Each is now selling major commercial products and trending towards profitability. AMSC’s revenues grew 52%. GIG’s revenues grew 23%. MVIS’s revenues grew 150%. This is all good. Some of it even looks great. Since earnings were reported: AMSC’s stock was down 14.7%, GIG’s stock was up 16.7%, and in one day MVIS was down 9.3%. The company with the smallest revenue growth is the stock that went up.
Management was positive in every case. Of course, AMSC’s CEO makes $1.04M per year, GIG’s CEO makes $0.886M per year, and MVIS’s CEO makes $0.444M per year. They aren’t in the category of the mega-wealthy, but those salaries put them all in the 1% in America. With positive news in their companies, and compensation better than 99% of the populace, it might be easy to feel positive and confident. The investors can feel differently.
Even though it can seem capricious, the stocks moved based on basics, though not necessarily based on math. AMSC is making more money because of their wind power business, but there are doubts that they’ll win the intellectual property case in China, and the key technology that started the company, superconducting cables, isn’t sweeping through the industry. Maybe it just needs a bit more time. GIG is making more money (ironically, partly because of the technology they acquired from MVIS), but the key may be that they just became profitable as measured by one of the stricter accounting standards (GAAP). MVIS’s revenues sound great. A 150% increase is a dream number, but investors were expecting more revenue, more product releases this year, something besides RoBoHoN, and smoother operations.
I listened to MVIS’s conference call (CC) as it happened because there was so much potential discussed in previous presentations. Congratulations on Celluon launching two devices. Congratulation on Sony launching a direct competitor to one of Celluon’s devices. Congratulations to Sharp for inventing a robot mobile phone, that’s also mobile enough to walk. What investors haven’t seen, but have heard discussed were additional products from Celluon, additional products from Sony, products from several customers (OEMs) that were privately impressing people back in January back at CES, Head Up Displays (HUDs) from two auto companies, and a inventory management tool for UPS. There’s also been hope that MicroVision was involved in Lenovo’s Smartcast and the crowdsourced Cicret. Unfortunately, there was no news about specific new products and there was a supply line problem with the Sony product. Technologically, there is great progress. Business operations are being managed well considering the new technologies. Investor relations are evidently being handled less professionally because the news was met with a sell-off.
One comment from the conference call surprised me. It turns out that MicroVision has yet to look inside the device Sony is selling. I can understand a small company not having enough resources to disassemble every competitor’s product, despite the valuable competitive knowledge available; but to not even investigate how the company’s components are being used it a massive oversight. Design specs, quality inspections, and trusting your business partners are all useful; but so is real world experience and making sure your contribution is being used the way you expect. That’s key to continuous product improvement. It is also more than a disappointment, and a worrying insight into MicroVision’s business practices.
I own more than these three stocks. Check my semi-annual portfolio review if you want to see the rest. These three happened to announce earnings within a short enough time and in technological industries that it was convenient to compare them. I concentrate on MVIS because the company has the greatest potential, in my estimation. GIG is harder to understand because the technology is harder to understand, the products and their markets are harder to understand, and the company’s merger and acquisition strategy makes the finances harder to understand. AMSC has always had the issue of selling a disruptive technology to a conservative industry, and then had the complication of intellectual property theft, the subsequent loss of a major customer, and a change in management and strategy. Three companies. Three disruptive technologies. Three management teams. Only one is succeeding in a way appreciated by the investment community. These three plus the others in my portfolio demonstrate why diversification is beneficial. There was and is no way to know which ones will succeed commercially, and as investments.
Despite MVIS’ great potential, I am considering selling some MVIS to buy some GIG. The day before MicroVision was going to announce earnings I decided to buy a few shares with some of my remaining, small, reserve. On those shares I lost about what some people spend on lunch. As someone commented, it looked like an emotional decision. Of course it was. I am human. To suggest I am acting without emotion is denying reality. At some level, their comment was emotional. Every person and their emotions, make personal finance personal. If we didn’t have needs, wants, and desires we wouldn’t be human. As if it wasn’t enough to manage the data, histories, futures, analyses, and estimates of investing, it is also necessary to manage the investor, especially when it is personal.
Today’s MVIS news was objectively positive. Their business is much better now that it was last year. For some investors, however, it wasn’t good enough, objectively; and definitely wasn’t good enough subjectively. They expected more, didn’t get it, and sold. I expected more, intend to sell some because it looks like others in my portfolio are objectively better; but will hold the majority of my MVIS shares because objectively and subjectively I think their issues are temporary. Surely, MVIS won’t under-deliver again. GIG didn’t. Right?
Thanks for the thoughts Tom. I plan to hold until hell freezes over or the Russian investors put an end to it all. Mike Powell
I’m glad you mentioned the lack of inspection of the MCPL1. I was also taken aback when I heard AT say that. One thing that was mentioned in the call that I found promising was the statement that MicroVision had already established how they could increase lumens for the hardware “… well beyond the current …”. That was a positive sign, and I think Sony is probably driving miniaturization, efficiency, and functionality improvements with their (probably too heavy) clout with MVIS. We shall see.