technology opportunitymedia.angelnexus.com/pdf/tao/tao-november-2016-f3f.pdfnovember 2016 issue 6...

November 2016

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In this Week’s Issue:

• Winter Cleaning

• Big News for Himax (NASDAQ: HIMX)

• The Return of American Manufacturing

• Three New Industrial Robot Recommendations

• Company News and Position Updates

Winter CleaningAs the year comes to a close, we’re going to continue to clean up and rebalance our portfolio. Last month we closed a number of double-digit winning positions in the semiconductor industry with smartphone headwinds on the horizon. This month we’ll be shedding a more sporadic group of companies that have either fallen out of favor or simply lost their upside appeal.

We do this at the end of the year for two main reasons: First, we encourage readers to consider harvesting any losses before January to reduce taxable income. Second, while we would love to give continuous coverage on every stock we recommend, it’s only possible to watch so many companies at a time. By reducing our total number of positions, we can better follow and provide information on the stocks we do own.

We will likely be closing out a few more positions come December, but here’s the sell list for this month:

• Sell GoPro Inc. (NASDAQ: GPRO)

• Sell Crown Castle International (NYSE: CCI)

• Sell Infinera Corporation (NASDAQ: INFN)

• Sell CalAmp Corp. (NASDAQ: CAMP)

• Sell Photronics Inc. (NASDAQ: PLAB)

Note: After closing these positions, our closed portfolio will be at about a 70% win rate for the year. With the S&P 500 up ~6.5% year to date, we’re on track to outpace the broader market by a considerable margin, as we’ve done since our inception.

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If you’ve done well in the markets this year with the help of Technology and Opportunity, or simply have some feedback (good or bad), I strongly encourage you to write in with any words of encouragement or testimonial. If we decide to use what you have to say in any of our promotions, we’ll tack on a free year to your current subscription as a sign of our appreciation.

Big News for Himax (NASDAQ: HIMX)

Our iPhone Killer stock Himax has cooled off quite dramatically over the last two months, in part because a lot of hype had been circulating the stock since we first began covering it earlier this year. Profit-takers have kept shares from continuing what was, at first, an incredibly rapid ascent.

For long-term investors, this should be viewed as nothing more than a buying opportunity. Intel wasn’t built in a day. Neither was Qualcomm, Nvidia, or any other semiconductor firm. It will take time for the AR/VR trend to take hold. It will take time for Himax to grow to the size we’re predicting.

In light of short-term price fluctuations, Himax has positive news at its back. First, the company reported an earnings beat late last week, showing revenue at $218.1 million (up 32% from $165.6 million in the same period last year) and net income of $0.11 per share. Jointly, Himax is projecting net revenue growth of 11.5% to 17.6% for the current quarter.

Even more compelling, though, are the emerging rumors that Apple (NASDAQ: AAPL) has begun looking into “smart glasses” as part of a wearables push. Here’s the reporting from Bloomberg:

Apple has talked about its glasses project with potential suppliers, according to people familiar with those discussions. The company has ordered small quantities of near-eye displays from one supplier for testing, the people said. Apple hasn’t ordered enough components so far to indicate imminent mass-production, one of the people added.

Considering Himax’s dominance in near-eye display, we can only assume that it’s the potential supplier these sources are referring to. There’s speculation involved here, but we’d give it a 75% chance Himax is now in discussions with Apple. If this is confirmed, the news alone would send shares flying.

If Apple were to proceed with the device, it wouldn’t be introduced until 2018 at the earliest, but the news is good for Himax nonetheless. Even if the company is not the prospective supplier as we expect, a rising tide still lifts all ships. The future is bright for Himax, there’s little doubt.

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The Return of American Manufacturing

(Note: This section will be available in a separate report in the “Reports” section of our Members website)

For the past 40 years, the once great American manufacturing machine has been leaking jobs at an astonishing rate. Since the peak in 1979, we’ve lost a total of 7.5 million manufacturing jobs and counting.

That’s more positions lost than the populations of Maine, Mississippi, and Iowa, combined.

And the trend appears to be accelerating at a dangerously fast speed... After all, in the 2000s alone, we lost 5.7 million manufacturing jobs.

From 1998–2008, a whopping 51,000 plants closed. Jobs were moved somewhere else, and communities were hurt by losing their livelihoods.

Today, our once proud industrial towns have been forced to adapt to survive or have turned into barren wastelands... But thanks to three American-led trends and innovations, manufacturing is coming back to America in a big way.

In the coming years, “Made in America” tags will no longer be an anomaly... No longer will our favorite gadgets and clothes be exclusively manufactured in the Far East.

In fact, we can already see signs of this “reshoring” trend taking hold already...

Just take a look at these recent headlines:

• “How made in the USA is making a comeback” — Time

• “The return of the ‘Made in America’ label?” — BBC

• “The surprising truth about American manufacturing” — Christian Science Monitor

• “US manufacturing grows at fastest pace in more than a year” — Bloomberg

• “American manufacturing is not in decline” — USA Today

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The Dawn of the New American Manufacturing Empire

For nearly a century, American manufacturing revolutionized the world. From Eli Whitney’s cotton gin to Ford’s assembly line in Detroit, America has not only been a hardworking and dedicated nation, but it’s changed how the world makes things...

During its golden years as a manufacturing powerhouse, the U.S. built products of unparalleled quality... Products that the world was clamoring for.

That is, until trade policy and globalization changed everything...

• In 1965, manufacturing accounted for 53% of the economy

• By 1988, it only accounted for 39%

• And in 2004, it accounted for just 9%

These days, the U.S. imports twice as much as it exports. Instead of strong, industrial towns, we have a trade deficit that has grown to an unprecedented $800 billion on an annualized basis.

But the good news is that while manufacturing may have largely left the U.S. some time ago, ingenuity didn’t. And thanks to three trends powering one undervalued sector of the market, America will once again revolutionize manufacturing...

Factories will proudly say their goods are made in America, and the economy at large will profit handsomely.

As BBC reports, “An almost perfect storm of factors is boosting American manufacturing.”

Why? Because three specific trends are helping move factories out of China and back to the USA.

Trend #1: Rock-Bottom Energy Prices

Our first trend starts with an innovation dreamt up by Civil War veteran Col. Edward A. L. Roberts...

His 1865 patent for an “exploding torpedo” wasn’t to be used as an instrument of war... rather, it was the precursor to hydraulic fracturing, or fracking. And while variations of this drilling technique were used for over a hundred years, it wasn’t a full-scale revolution until George P.

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Mitchell, a Texan engineer, came along.

Mitchell recognized that a wealth of petroleum and natural gas was “locked up” in shale deposits. He wasn’t the only one to recognize how much energy was stored away in these deposits, but until Mitchell came along, no one could figure out an economical way of capturing that energy.

But thanks to his ingenuity, modern-day fracking was born, and all that energy previously trapped in shale deposits is now available.

I’m sure you’ve noticed the effects...

• The U.S. is now much less dependent on foreign energy...

• Millions of jobs were created...

• The price of gasoline plummeted...

• We’ve decreased our reliance on coal...

Fracking has also turned ordinary Americans into millionaires. Farmers leasing land to drillers have found their net worth extended by several zeroes overnight, while savvy investors have seen gains of over 13,000% with Cheniere, over 10,000% on EQT, and over 8,000% on Devon.

Of course, it’s too late by now to make monster gains on fracking, but this American-born innovation will pave the way for equally explosive gains in one overlooked sector...

So what does fracking have to do with manufacturing?

Simple: The fracking revolution has blessed the U.S. with rock-bottom energy prices. Let’s take a look at some hard numbers:

For natural gas, we pay about $2.65 per million BTU — the lowest price in the world. Europeans pay about twice that, and Japan pays approximately $6.25 per million BTU.

As for gasoline, in the U.S., we pay just $2.48 per gallon. In Hong Kong, they pay an incredible $6.92. In England, gas is $5.49 per gallon, and Germans pay $5.47.

The cost of electricity is also at historical lows. According to the American Enterprise Institute, “The cost of electricity to industrial users in the U.S. is lower this year than almost any year in history.”

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As BBC reports, “The shale revolution has lowered energy costs and made [U.S. manufacturing] look competitive again.”

Time agrees, writing, “U.S. factories increasingly have access to cheap energy thanks to oil and gas from the shale boom. For companies outside the U.S., it’s the opposite.”

Of course, this is great news for American manufacturers. It keeps operational costs low, especially in today’s machine-driven factories.

Trend #2: Demand for Quality and Innovation

To me, there is no question about it. America is great because we’ve always had great ideas.

Thanks to the U.S., our world has...

• Airplanes

• Air conditioning

• The artificial heart

• The Internet and mobile phones

• The assembly line

• Movies, television, and video games

• The transistor and personal computers

• 3D printing

The list goes on and on...

And these inventions have allowed humanity to be healthier, happier, and more productive...

Not to mention making timely investors quite rich, with over 6,000% gains on 3D printing, over 2,000% gains on the mobile phone, and over 5,000% gains on the transistor and personal computers.

But when American ideas are shipped overseas to be manufactured, a lot can go wrong. You

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see, lax regulations in places like China help businesses cut costs and get away with some things that wouldn’t fly here.

Everyone knows China is famous for knockoffs, with humorous “brand names” like Dolce & Banana, KFG fried chicken, and the HiPhone...

But it isn’t just the copycats that businesses need to worry about... Quality control is important, too.

Recently, asbestos was found in roofing panels imported from China. Lead paint has been found in children’s toys. Toxic pet food led to the deaths of over a hundred cats and dogs. And contaminated frozen berries led to an outbreak of hepatitis A infections.

And that’s exactly why more American companies are turning away from offshoring and back to their home roots.

As the Wall Street Journal reports, “More companies want to protect designs from overseas copycats, keep closer tabs on quality control, and avoid potential disruption in supply chains that span oceans.”

And then there’s trend number three...

Trend #3: Rising Wages Abroad

Perhaps even more important than quality control or energy prices is the efficiency of the American workforce.

You may not know this, but our workforce is able to compete with lower-paid foreign alternatives because quality wins over quantity.

As Time reports, “Increasingly, the cost arbitrage done by companies when deciding where to put jobs isn’t just about hourly pay. It’s also about relative labor productivity — which has been rising sharply in the US over the past decade while remaining flat in China.”

In fact, from 1973 to 2014, American worker productivity increased 72.2%!

But while labor productivity is flat in China, its once rock-bottom wages aren’t flat at all... They are rapidly growing.

You see, in recent years, China’s cheap labor base has helped its economy grow very quickly...

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But as a consequence of that growth, a middle class has risen, pushing wages higher.

According to the Hackett Group, “The cost gap between the United States and China has shrunk by nearly 50% over the past eight years... This trend is largely driven by rising labor costs in China.”

Economists at MIT, the University of Zurich, and UC, San Diego, believe that “the great China trade experiment may soon be over, if it is not already... Rapidly rising real wages indicate that the end of cheap labor in China is at hand.”

And Time reports that “workers from China to India are demanding and getting bigger paychecks, while U.S. companies have won massive concessions from unions over the past decade. Suddenly the math on outsourcing doesn’t look quite as attractive.”

So in addition to rock-bottom energy prices and strong IP protection, the U.S. is also now competitive in labor, and as these trends have taken hold, the American manufacturing empire has been quietly staging a remarkable turnaround.

And it’s all thanks to the one overlooked and undervalued sector I’ve been telling you about...

Robotics: The Undervalued Sector Behind American “Reshoring”

If you haven’t already guessed... I’m talking about industrial robots. But not the kind you’re probably thinking of.

You see, these robots aren’t like anything you’ve seen before. They’re part of a truly new generation of automation.

If you still think of industrial robots as unwieldy behemoths welding car parts into place... you’d be wrong.

Today’s robots are smaller, more precise, and more flexible.

And if you are worried about robots taking American jobs, don’t be. Instead of replacing workers, they will work alongside them, making them faster and more productive.

In fact, this robot revolution will actually lead to more jobs in America, according to USA Today.

“The spread of robotics itself should make the US more productive than many other countries,

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creating more jobs,” says USA Today.

The Wall Street Journal goes into more depth, reporting that “highly automated factories create or sustain jobs in design, engineering, machine maintenance and repair, marketing, logistics and other services.”

Industry Week says, “Despite plans to invest in more automation, manufacturing executives said they also expect to add to their payrolls. Half of respondents said they expect their companies will increase U.S. employment by at least 5% over the next five years as a result of reshoring; 27% predicted a job increase of at least 10%.”

But the best news is that the robotics revolution will not only bring jobs to America — it could also offer a considerable return on your investment.

In fact, we’ve already seen some incredible gains in the robotics field.

For example, Intuitive Surgical, a company that creates robots for the medical field, handed investors a 9,036% gain...

And its share price continues to rise.

While not every robotics company will see Intuitive-like gains, I’ve come across three that each have the potential to do at least half as well.

But the opportunity to invest in industrial robots will not only stand to make you the largest gains of your life. It will also contribute to bringing back factories and jobs to the U.S.

Tech Times sums it all up nicely: “Manufacturing businesses in the United States have fallen off

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due to the lower costs and more advanced capabilities of suppliers abroad. However, with the continued rise of automation, manufacturing may soon be brought back to the United States.”

The Math on Outsourcing Has Finally Changed

The number of big-name companies that are coming back to America is robust...

Stanley Black & Decker is returning, spurning China. It recently produced a power tool in the U.S. for the first time in over 25 years.

Apple, once inextricably linked with Chinese companies like Foxconn, is assembling one of its Mac lines in the U.S...

Airbus will be building jets in Alabama, while Nissan is building cars in Tennessee.

K’nex Brands LP has returned most production of its toys — including the iconic Lincoln Logs — back to the U.S.

Whirlpool, Caterpillar, and Ford are all part of the “reshoring” trend.

Even Wal-Mart, which spearheaded the global sourcing movement, has pledged to increase spending with American suppliers by $50 billion over the next decade...

And here’s the kicker: it’ll be saving money by doing so.

You see, this isn’t patriotic charity... This is common sense.

The math on outsourcing has finally changed.

As Industry Week reports, “Among companies expecting to increase production capacity in the next five years for goods consumed in the U.S., 31% reported they plan to do so in the United States, while 20% said they plan to add capacity in China... BCG researchers called the reversal ‘striking.’”

We’re even outpacing Mexico:

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And as I previously mentioned, the return of manufacturing is a very big deal for the U.S. economy as a whole.

As Time reports, “Manufacturing represents a whopping 67% of private-sector R&D spending as well as 30% of the country’s productivity growth. Every $1 of manufacturing activity returns $1.48 to the economy.”

But while all Americans can expect to indirectly benefit from “reshoring,” you can expect to do a lot better by investing in the sector behind the revival.

As promised, here are the three companies leading the charge...

Industrial Robot Stock #1: Teradyne (NYSE: TER)

It used to be that robots were too dangerous for humans to work with in close quarters, but collaborative robots, or “cobots,” are changing that. Our first industrial robotics stock, Teradyne (NYSE: TER), is the worldwide leader in this effort.

Teradyne has historically been a developer and supplier of automatic test equipment (ATE), but it recently purchased a company by the name of Universal Robotics, the world leader in customizable collaborative robots.

With an intuitive interface (no programming experience needed) and an estimated return on investment of just three to eight months, UR robots are a no-brainer for U.S. factories seeking to

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gain an edge. A UR robot can automate virtually anything, from assembly to painting to labeling to injection molding. You name it... welding, packaging, polishing — the list goes on.

Teradyne offers a full line, with its UR3, UR5, and UR10 robotic arms. The robots are easy to program, set up, and are flexible for redeployment.

High-profile customers include Samsung, Qualcomm, Intel, Analog Devices, Texas Instruments, and IBM.

As for the numbers, Teradyne looks very good on the fundamental side and is priced with the expectation of growth.

First-half sales in 2016 were Teradyne’s highest since 2001. At a market cap of $4.62 billion, the firm trades at a price-to-sales ratio of 2.78 and a price-to-earnings ratio of 58.9. Assets are 4X liabilities.

This makes Teradyne just a little pricey right now, but with $896 million in cash and zero debt, Teradyne’s enterprise value is actually a bit lower at $3.75 billion. Adjusting for cash, the enterprise trades at a more reasonable price-to-sales ratio of 2.2.

The firm also provides a small dividend at 1.1%.

We rate Teradyne (NYSE: TER) a “Buy” under $25.00. The risk level is “Medium.”

Industrial Robot Stock #2: Brooks Automation (NASDAQ: BRKS)

Brooks Automation is a uniquely positioned robotics stock, as it allows us to play both consumer technology and biotech at the same time. The firm is headquartered in Chelmsford,

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MA, with direct operations in North America, Europe, and Asia.

Brooks provides both automation and cryogenic solutions for multiple markets including semiconductor manufacturing and life sciences. Its robots help companies automate the storage, retrieval, and testing of biologic samples so scientists don’t have to. This all is done to ensure consistency and help fight against accidental contamination or injury.

Right now Brooks is experiencing strong growth in its biological preservation and storage segments, at about 20–30% annually. This growth is being driven by increased sequencing capacity, falling costs to sequence a human genome, increases in population sequencing initiatives, and the number of DNA sequences being cited in publications.

Brooks is also involved in the semiconductor industry and display manufacturing. Its machines perform wafer automation services such as sorting and handling. The firm is also involved in asset tracking and RFID.

Its semiconductor products include (to name a few):

• Wafer Handling Robotics/Systems

• Semiconductor Contamination Control

• Factory Automation Solutions

• Alignment and Calibration Tools

• Cryopumps and Compressors

Brooks has a number of big-name customers including Micron, Samsung, Applied Materials, Toshiba, Infineon, and Cannon. In total, the firm has over 200 OEMs on board.

With annual revenue of $550 million and a market cap of $890 million, Brooks trades at a price-to-sales ratio of 1.6, which is more than reasonable in today’s market.

Sales growth is trending upward, though the firm has struggled with profitability in previous quarters due to the cyclical nature of its capital-equipment business. This has made Brooks stock somewhat volatile, but has jointly pressured shares to an attractive price range.

Profit margin for Brooks last came in at 5.8% in the most recent quarter, which is good for capital equipment. The firm offers a 3.11% dividend yield, making it as much of an income play as it is a growth stock.

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We rate Brooks Automation (NASDAQ: BRKS) a “Buy” under $14.50. The risk level is “Medium.”

Industrial Robot Stock #3: Faro Technologies (NASDAQ: FARO)

Faro Technologies (NASDAQ: FARO) designs, develops, and manufactures software-driven, 3D measurement/imaging systems.

Putting things as simply as possible, Faro enables manufacturers to inspect components and assemblies, plan production, document large volume spaces or structures in 3D, and, in turn, maximize efficiencies.

Faro’s products are used by manufacturers in quality control, scanning for errors. They are also useful for design and engineering with applications in 3D printing and reverse-engineering. Its imaging systems are even used in crime scene analysis and crash re-creation.

Faro’s measurement devices can examine and extract information from an object or part, ultimately enabling engineers to analyze each component of the object in great detail.

With more than 10,000 customers worldwide, Faro has a well-established revenue base. Major clients include Boeing, BMW, KUKA, Airbus, Bosch, Audi, and Siemens, to name just a few. Companies such as Andritz Iggesund use Faro’s measurement arms as inspection tools for product verification and separately use its CAD (computer-aided design) to initially develop their products.

Here’s the full list of applications for Faro’s 3D measurement solutions:

• Accident Reconstruction

• Alignment

http://www.faro.com/en-us/solutions/applications

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• As-Built Documentation

• Asset and Facility Management

• Building Information Modeling

• CAD-Based Inspection

• Crime Scene Analysis

• Dimensional Analysis

• First Article Inspection

• Incoming Inspection

• In-Process Inspection

• Large Part Inspection

• Machine Calibration

• Non-Contact Inspection

• Reverse Engineering

• Robot Calibration

• Tool Building & Setup

• Virtual Simulation

As for the numbers, Faro is pretty solid. At a market cap of ~$500 million and trailing twelve-month revenue of $325 million, the firm is priced at a reasonable P/S ratio of 1.55.

Faro’s price-to-earning ratio leaves some to be desired at 31.08, but remains on par with today’s tech market.

The balance sheet is strong, with assets at 5.4X liabilities, $153 million cash on hand, and no long-term debt.

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The income statement is robust, showing 9.78% growth year over year and net income of $16.45 million. Gross margins are 53.62%, while profit margins are thin but workable at 1.37% (currently at the low of a five-year range).

In 2016, Faro bounced off a five-year low at about $21.50. It has since risen upwards of $30 a share.

We rate Faro Technologies (NASDAQ: FARO) a “Buy” under $36.00. The risk level is “Medium-Low.”

Portfolio Snapshot and Updates

ABB Ltd. (NYSE: ABB)

Snapshot:

ABB Group is a multinational industrial automation corporation headquartered in Zürich, Switzerland. The company operates primarily in robotics and power/automation technologies. It ranks as a top 200 Forbes company and is one of the largest engineering firms in the world, with over 135,000 employees, operations in ~100 countries, and annual revenue over $35 billion.

ABB is a company focused on keeping up with technological innovation. A diversified global powerhouse, the firm is found at the center of current developments in fields such as (but not limited to) clean energy, smart grids, microgrids (localized, independent grids), robotics, industrial asset effectiveness, and sustainable transport.

Updates:

ABB reported third-quarter earnings late last month, showing a net profit of $568 million for the three months ended September 30, down slightly from $577 million last year. The figure beat forecasts of $555 million. Revenue from orders fell to $7.53 billion from $8.77 billion.

Here’s the breakdown by ABB’s segments:

• Discrete Automation & Motion: Down 1% to $2.2 billion. Attributable to declining capital expenditures in process industries, including oil and gas.

• Electrification Products: Down 2% to $2.3 million. Attributable to poor performance in

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the Americas and AMEA region.

• Process Automation: Down 8% to $1.5 billion. Attributable to discretionary spending in oil & gas and related sectors.

• Power Grids: Down 6% to $2.6 billion. Attributable to currency fluctuations and adverse timing of orders.

All told, ABB had a mixed quarter in the face of challenging macro-conditions that will likely persist in the near term. This includes current softness in industrial production and energy markets especially, but long term, we still like ABB moving forward.

ABB signed a few key partnerships this quarter. The first was with engineering and construction firm Fluor Corporation, where ABB will assist in engineering, procurement, and construction for electrical substation projects.

Second is an agreement to partner with Aibel to deliver offshore wind integration solutions, where ABB will assist on high-voltage direct current technology.

Effective January 1st, ABB will also restructure its business into four segments: Electrification Products, Robotics and Motion, Industrial Automation, and Power Grids.

We rate ABB Ltd. (NYSE: ABB) a “Hold” under $22.50. The risk level is “Low.”

Amazon Inc. (NASDAQ: AMZN)

Snapshot:

Amazon is an American e-commerce and cloud computing company. It is the largest Internet-based retailer in the United States and the world’s largest provider of cloud infrastructure services. The company also produces consumer electronics and sells digital media content.

Updates:

Amazon reported third-quarter earnings late last month showing 29% revenue growth, led by Amazon Web Services, which recorded its sixth consecutive quarter of above 50% growth. AWS was followed by Amazon’s international segment, which posted year-over-year growth of 28.3%, and North American retail, which came out with 25.8% growth.

Amazon jointly announced it is planning to ramp up its investments, specifically in fulfillment

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centers and video content for Prime Video, which is likely to eat into its margins. The stock has pulled back as profit is expected to retreat, but Amazon has a long history of its investments paying off. Better to see continued growth than a tampering of ambition.

Additionally, Amazon announced earlier this week that it has added 20 metro areas to its Home Services package. In these newly defined areas, customers purchasing items on Amazon that require assembly or installation can include those services as part of their checkout process. Amazon so far holds a 4.7/5 satisfaction rating on its Home Services, which is a compelling argument for the expansion.

The full list of new metro areas includes: Santa Rosa, California; Ventura County, California; Boulder, Colorado; Greater Bridgeport, Connecticut; New Haven, Connecticut; Brevard County, Florida; Cape Coral, Florida; Sarasota, Florida; Indianapolis, Indiana; Ann Arbor, Michigan; Raleigh, North Carolina; Trenton, New Jersey; Las Vegas, Nevada; Cleveland, Ohio; Allentown, Pennsylvania; Lehigh Valley, Pennsylvania; San Antonio, Texas; Milwaukee, Wisconsin; Richmond, Virginia; and Hampton Roads Virginia/North Carolina.

We rate Amazon (NASDAQ: AMZN) a “Hold”. The risk level is “Low.”

Amtech Systems (NASDAQ: ASYS)

Snapshot:

Amtech Systems is a supplier of solar panel and semiconductor capital equipment with a global presence in North America, Europe, and Asia. Amtech’s products and services include silicon wafer handling automation, thermal processing, and various products used for fabricating solar cells and semiconductor devices.

Updates:

Amtech’s fourth quarter results are out on Thursday, November 17. We won’t have time to digest the call until next issue so keep a look out next month. If there’s any pertinent news we’ll reach out with an interim update.

We rate Amtech Systems (NASDAQ: ASYS) a “Buy” under $7. The risk level is “Medium.”

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Cellectis S.A. (NASDAQ: CLLS)

Snapshot:

Cellectis is a genome engineering company that is developing immunotherapies for cancer using a gene-editing method known as TALEN (transcription activator-like effector nucleases) and pioneering agricultural biotech using a revolutionary gene-editing method known as CRISPR through its wholly owned subsidiary Calyxt.

Of the two technologies above, CRISPR is the one that grabs the headlines and currently warrants the most hype. Cellectis’s efforts in immunotherapy are undoubtedly of great importance to the firm, but we ultimately see the biggest speculative upside in its agricultural arm Calyxt, which has been granted an exclusive license agreement with the University of Minnesota for worldwide rights to patent family WO/2014/144155 entitled “Engineering Plant Genomes Using CRISPR/Cas Systems.”

Updates:

No pertinent news or updates for Cellectis this month.

Cellectis S.A. (NASDAQ: CLLS) is a “Buy” under $25.00. The risk level is “Medium.”

Editas Medicine (NASDAQ: EDIT)

Snapshot:

Editas Medicine is a genetic engineering company that originally spawned from five scientific founders considered world leaders in the fields of genome editing with specific expertise in CRISPR/Cas9 and TALEN technology. The all-star group of academics includes Feng Zhang of MIT, George Church and J. Keith Joung of Harvard Medical School, David R. Liu of Howard Hughes Medical Institute, and Jennifer Doudna of Berkeley.

Updates:

Editas reported third-quarter earnings early last week, beating on the bottom line and showing revenue in line with expectations. As a development-stage firm, the top and bottom lines are negligible for Editas. Where we really want to focus is on operations.

During the quarter, Editas appointed Charles Albright, PhD, as Chief Scientific Officer. Dr. Albright brings more than 25 years of life sciences industry and academic leadership

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experience. He has advanced multiple medicines into the clinic over the course of his career, most recently as VP at Bristol-Myers Squibb. Previously, Dr. Albright has also held positions at Incyte Corporation and DuPont Pharmaceuticals and was an Assistant Professor of Biochemistry at Vanderbilt University.

Editas has also Appointed Gerald Cox, M.D., PhD, as Chief Medical Officer. Dr. Cox held senior clinical development roles at Sanofi Genzyme (formerly Genzyme Corporation) for over 15 years, most recently as Vice President of Rare Disease Clinical Development.

As for upcoming events, Editas will present data on its hematopoietic stem/progenitor cell program in a poster session at the 58th American Society of Hematology Annual Meeting & Exposition to be held December 3–6. It also hosted meetings with investors at the Stifel Healthcare Conference earlier this week.

Editas continues to be a waiting game through development and patent disputes.

We rate Editas Medicine (NASDAQ: EDIT) a “Buy” under $22.00. The risk level is “High.”

Fanuc Corporation (OTC: FANUY)

Snapshot:

Fanuc Corporation is a leader in industrial robotics, with a product lineup that includes factory automation systems, laser cutting, motion control, and compact motors. Fanuc serves a wide range of industries including aerospace, agriculture, construction, metal forming, and automotive manufacturing.

Updates:

No news or updates for Fanuc this issue.

Fanuc Corporation (OTC: FANUY) is a “Strong Buy” under $20.00. The risk level is “Low.”

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Flex Inc. (NASDAQ: FLEX)

Snapshot:

Flextronics International (recently re-branded as Flex) provides customized electronics manufacturing services (EMS) to original equipment manufacturers (OEMs) in the electronics industry. The company also supports supply chain efforts through services packaging, transportation, design, maintenance, repairs, etc.

Over the years, Flex has developed a long customer list of recognizable OEMs including Cisco Systems, Dell, Eastman Kodak Company, Ericsson Telephone Company, Hewlett-Packard, Kyocera, Microsoft, Motorola, Nortel Networks, Sony-Ericsson, and Xerox.

Updates:

Flex reported second-quarter fiscal 2017 results on Thursday, October 27 after market close, with performance coming in line with guidance.

Revenue totaled $6 billion, while adjusted operating income was $197 million, above the midpoint of guidance. Adjusted net income was $152 million.

Flex took a one-time hit in the quarter, losing SunEdison to bankruptcy, but thanks to diversification efforts, the firm remains in good shape and continues partnerships with other key firms.

Here’s Mike McNamara regarding this topic on the call:

Nike also firmly remains on track, as we continue to collaborate on driving automation and manufacturing advancements with them. In Nike’s most recent annual report dated July of this year, CEO Mark Parker said that Nike was, and I quote, partnering with innovators who help and accelerate systematic change at scale. With Flex, Nike is driving the modernization of footwear manufacturing process across its supply chain. This quote perfectly encapsulates the strategic partnership we have. Our teams again remain extremely engaged as we drive forward the modernization of partner manufacturing together.

Both Bose and Nike are providing a strong foundation, supporting the richer business mix shift underway in CTG. Even more powerful is that our portfolio evolution results in a greater concentration of our earnings into those longer product lifecycle businesses and improves our earnings stability. This quarter, from the adjusted operating profit perspective, you see our HRS and IEI businesses combined to generate 52% total Flex

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operating profit, which reflects 12% growth year over year. Our customer diversification is the best we have ever experienced, with our top-10 customers accounting for only 42% of sales, and this was the third straight quarter with no 10%-plus customers.

Flex still has no near-term debt maturities and a strong financial condition with over $3 billion in liquidity and over $1.5 billion in cash. Jointly, the firm reported its 12th straight quarter of year-over-year adjusted operating margin expansion

Flex expects revenue in the range of $6 billion to $6.4 billion for the fiscal third quarter. The company remains a long-term hold.

Flex Inc. (NASDAQ: FLEX) is a “Buy” under $13.50. The risk level is “Medium.”

FuelCell Energy (NASDAQ: FCEL)

Snapshot:

FuelCell is an integrated fuel cell company that designs, manufactures, installs, operates, and services stationary fuel cell power plants. Specifically, the company provides distributed power generation for electric utilities, commercial and industrial customers, universities, and government entities around the world.

Updates:

FuelCell Energy took a near -40% hit after disclosing its Beacon Falls Energy Park project was not selected for contract negotiations under the New England Clean Energy request for proposals late last month. FuelCell had hoped to manufacture and sell the fuel cell power plants to the landowner and would then operate and maintain the plants under a long-term service agreement.

This is a pretty big hit for FuelCell, but it’s not a nail in the coffin, as a number of other projects are still underway. A 40% drop is a buying opportunity if you still like FuelCell long term, but keep in mind this has always been a high-risk venture.

FuelCell. (NASDAQ: FCEL) is a “Buy” under $4.00. The risk level is “Medium-High.”

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Himax Technologies, Inc. (NASDAQ: HIMX)

Snapshot:

Himax Technologies, Inc. is a fabless semiconductor company headquartered in Tainan City, Taiwan. The company seems to have intentions to infiltrate the world of virtual and augmented computing. Facebook uses its video processing chips for the Oculus Rift, while Microsoft and Google use its near-field displays for the HoloLens and Project Aura (previously Google Glass).

Updates:

See update above.

Himax (NASDAQ: HIMX) is a “Buy” under $10.00. The risk level is “Medium.”

Intellia Therapeutics (NASDAQ: NTLA)

Snapshot:

Intellia is a genetic engineering firm that uses CRISPR technologies licensed from Jennifer Doudna, who serves as a scientific advisor for the firm. Intellia represents a potential hedge against another one of our holdings, Editas Medicine, as the two companies are engaged in an important patent dispute over the groundbreaking precision genome editing tech.

Updates:

No news or updates for Intellia this month aside from third-quarter results. The firm reported $290.6 million in cash and equivalents, net loss of $7.5 million, and collaboration revenue of $4.9 million. As with Editas, Intellia is largely a waiting game through development and patent disputes.

Intellia Therapeutics (NASDAQ: NTLA) is a “Buy” under $22.00. The risk level is “High.”

International Business Machines (NYSE: IBM)

Snapshot:

IBM is an American multinational technology and consulting corporation, with headquarters

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in Armonk, New York. IBM manufactures and markets computer hardware, middleware, and software. The company provides infrastructure, hosting, and consulting services in areas ranging from mainframe computers to nanotechnology.

Updates:

No news or updates for IBM this month aside from the declaration of a $1.40 per share quarterly dividend (3.73% yield), in line with previous expectations. The dividend is payable December 10 to shareholders of record November 10. Jointly, IBM has authorized an additional $3 billion stock repurchase program, bringing the overall program sum to $6 billion...

For those who missed last month’s issue, IBM released its third-quarter earnings, reporting EPS of $3.29 versus estimates of $3.24 and revenues of $19.2 billion versus estimates of $19.0 billion. The positive quarter was led by continued double-digit growth in IBM’s strategic imperatives (cloud, analytics, mobility, and security), which were up 16% year over year and now represent 40% of the firm’s top line. Notably, IBM’s Cloud-as-a-Service run rate was also at $7.5 billion, up 66% year over year. While the results technically marked IBM’s 18th consecutive quarter of declining year-over-year revenues, the top line was effectively flat, which is good news for investors betting on a turnaround story. IBM is clearly showing it can be effective at growing alternative business avenues as it transitions to a post-PC environment. Long term, the firm remains a solid income play.

International Business Machines (NYSE: IBM) is a “Buy” under $140.00. The risk level is “Low–Medium.”

Iridium Communications Inc. (NASDAQ: IRDM)

Snapshot:

Iridium is a global communications provider. The company offers the world’s most extensive voice and data service through a fleet of next-generation low-orbit satellites. It is currently launching the NEXT satellite constellation to serve the machine-to-machine (M2M) communications market.

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Updates:

Iridium posted third-quarter earnings late last month, beating on both top and bottom lines and generating revenue of $112.8 million, up 6% from last year. Operational earnings were $69.7 million, an increase of 9% from last year, while operational margin remained strong, reaching 62%.

Revenue growth was fueled primarily by strength (22% increase) in government services, though commercial service revenue saw growth as well, reaching $65.3 million, 3% higher than last year. Breaking it down further, Iridium is seeing 30% growth in M2M.

As for the launch schedule for the firm’s NEXT satellite constellation, we’re basically just waiting on SpaceX. Here’s CEO Matt Desch on the call:

I want to begin today with the topic on everyone’s mind. The first launch of our Iridium NEXT satellites. We’ve been on hold since SpaceX’s launch pad incident at Cape Canaveral eight weeks ago and have been following the investigation closely to determine when SpaceX will be able to return to flight. From our participation on the accident investigation team, we believe that SpaceX is conducting a very thorough process, tracking down all possible leads, evaluating every piece of data, and exhausting every option. I will leave it to SpaceX to provide the official updates on the investigation.

To keep track of those updates, you can simply visit SpaceX’s update page here: http://www.spacex.com/news/2016/09/01/anomaly-updates

As for guidance, the company has raised the bottom end of this year’s growth outlook and now expects total service revenue growth between 5% and 6%, up from a previous range 4% to 6%. Earnings are now expected in a range of $250 million to $255 million for the full year, up from the prior range of $245 million to $255 million.

Iridium Communications Inc. (NASDAQ: IRDM) is a “Hold”. The Risk Level is ‘Medium’

iRobot Corporation (NASDAQ: IRBT)

Snapshot:

iRobot is an American robotics company that serves the consumer, medical, enterprise, and military industries. iRobot’s product functions range from home cleaning to telecommunication to various military operations. iRobot currently generates the vast majority of its revenue from

http://www.spacex.com/news/2016/09/01/anomaly-updateshttp://www.spacex.com/news/2016/09/01/anomaly-updates

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its Home Robotics division.

Updates:

iRobot Corp. reported third-quarter earnings late last month, beating analyst expectations and showing continued growth. During the quarter, revenues increased 17.4% year over year to $168.6 million, compared to a consensus of $157 million. Adjusted earnings came in at $36 million compared with $26 million last year.

iRobot’s strong quarter was driven largely by U.S. consumer growth, which was up 23% year over year. International revenue was also up 30% as the firm gained traction in Asia markets. Profitability saw improvement in part due to decreased relative operating expenses. Op ex for the quarter was 32% of revenue, down from 36% last year.

The balance sheet remains solid with $203 million in cash and investments.

As for guidance, expectations for full-year revenue and earnings have increased. The firm now expects fiscal 2016 revenue of $650 to $655 million, and net income of $38 million to $41 million.

Fourth-quarter consumer revenue is expected to come in at $202 million to $207 million, an increase of 15% to 18% from last year. Net income is expected to be $10 million to $13 million.

No doubt this was a solid quarter for iRobot. The stock remains a long-term hold.

iRobot (NASDAQ: IRBT) is a “Hold” at current prices. The risk level is “Medium.”

JinkoSolar (NYSE: JKS)

Snapshot:

JinkoSolar (NYSE: JKS) is a Chinese firm that makes a variety of photovoltaic (PV) products, including solar modules, solar cells, silicon ingots, and silicon wafers. The company operates internationally (69% outside of China) in two segments: manufacturing and solar projects.

Updates:

Jinko reported third-quarter revenues of $855.3 million this month, crushing analyst consensus of $758.9 million, up 39.0% year over year. Solar module shipments saw enormous growth year over year, up 41.6%.

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Profit was strong as well, with the company showing $35 million in net income. Gross margin came in at 22.1%, up from 20.4% sequentially.

Once again, Jinko is raising its full-year 2016 shipment guidance, this time to 6.6GW to 6.7GW from previous guidance of 6.0GW to 6.5GW. Shares gained 6% on the earnings release but remain drastically underpriced.

JinkoSolar Holding Co. is a “Strong Buy” under $18.00. The risk level is “Medium.”

Oceaneering International, Inc. (NYSE: OII)

Snapshot:

Oceaneering International provides engineering services and hardware primarily to customers operating in marine environments. The company’s services are marketed to oil and gas companies as well as the aerospace and construction industries. The company receives the bulk of its revenue from ROVs and Subsea Products.

Updates:

As our only exposure to the global oil and gas market, Oceaneering has been the worst performing stock in our portfolio by a wide margin. We’ve held onto the stock with a long-term outlook, but it hasn’t been without drawback.

Shares fell to their lowest level since July 2010 this month after Oceaneering reported a revenue decline to $549.3 million from $743.6 million. This missed the $597.2 million consensus estimate from analysts. Earnings per share, however, slightly beat consensus of $0.16, coming in at $0.17.

CEO Kevin McEvoy painted a gloomy picture for the near term, though the headwinds should be of little surprise.

Looking forward, we believe our fourth quarter results will be considerably lower than our adjusted third quarter results due to a continuation of weak demand for our services and products, exacerbated by seasonality… We expect sequentially lower operating income from each of our oilfield business segments, and slightly improved results from our non-oilfield segment Advanced Technologies. With limited visibility, our outlook for 2017 can be characterized as marginally profitable at the operating income level on a consolidated basis.

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The company has also reduced its quarterly dividend to $0.15 per share from $0.27 paid in the previous quarter, in light of the projected low level of offshore activity through 2017. The dividend is payable on Dec. 16 to shareholders of record on Nov. 25.

All that said, OII’s balance sheet is still in good shape, and the company has done a considerable job maintaining solvency in such a difficult macro environment. Oceaneering has over $440 million in cash on hand and about $800 million in total debt outstanding.

There’s plenty of runway here, but the turnaround isn’t going to happen over the next few quarters. If you still believe in the oil market, OII is a great stock to continue averaging down on. If you think oil is dead, best to avoid it.

Oceaneering International, Inc. (NYSE: OII) is a “Buy” under $35.00. The risk level is “Medium.”

Opko Health, Inc. (NYSE: OPK)

Snapshot:

Opko Health is a mid-stage biotechnology development and medical diagnostics company. OPK has a deep drug candidate pipeline spanning from kidney disease to cancer treatments. It also provides a revolutionary diagnostic test known as the 4Kscore, used in prostate cancer screening. The company’s proprietary diagnostic technologies allow doctors to keep blood-based tests in house rather than outsourcing to outside laboratories.

Updates:

OPK reported third-quarter earnings this month. Revenue increased to $298 million from $143 million in the same period last year. The increase in revenue is primarily attributable to the firm’s diagnostics business at BioReference. Net loss was $15 million.

Looking forward, preparations for the upcoming launch of RAYALDEE are now nearing completion. OPK has hired and trained 10 telemarketing sales representatives and 35 regionally based sales representatives who will be fully dedicated to selling RAYALDEE. The firm expects to continue building the sales team to mature size, around 70 to 80 reps, by mid-2017.

Despite what was a miss on the top line, OPK is up since the earnings release, presumably in anticipation of the RAYALDEE launch. The stock remains a long-term hold as commercialization is just around the corner.

Opko Health, Inc. (NYSE: OPK) is a “Buy” under $11.00. The risk level is “Medium.”

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Parker-Hannifin Corp (NYSE: PH)

Snapshot:

Parker-Hannifin is an American manufacturer specializing in motion and control technologies, which allow customers to move and position materials, machines, and equipment during manufacturing. In brief, the company serves customers by helping them maximize their automation processes — from manufacturing to waste disposal.

Parker is well diversified on the global front, with slightly more than half of its revenue coming from 45 countries overseas. Approximately 73% of sales come from Parker’s Industrials segment, 18% from Aerospace, and 8% from Climate and Industrial Control.

Updates:

Parker released fiscal 2017 first-quarter results late last month, posting an earnings beat and keeping guidance in line with previous expectations. Adjusted earnings came in at $1.61 per share, versus consensus of $1.57, an increase of 5.9% year over year.

Net revenue came in at a slight miss at $2.74 billion versus consensus of $2.77 billion. Cash and cash equivalents were reported at $1.39 billion compared with $974.2 million last year.

Quarterly orders rose 2% companywide, marking a first since December 2014. Aerospace segment orders jumped 14% and international business gained 3%. Orders for the company’s North American industrial business fell 4%, but internationally, business is strong.

As for guidance, the company expects adjusted earnings from continuing operations in the range of $6.40–$7.10 per share. This is in line with previous outlook from management.

In response to earnings, Parker has so far received upgrades from Morgan Stanley, Evercore ISI, and JP Morgan, while shares are up 11% over the last four weeks. Our view on Parker remains unchanged.

Parker-Hannifin Corp (NYSE: PH) is a “Buy” under $120.00. The risk level is “Low.”

Rockwell Automation (NYSE: ROK)

Snapshot:

Rockwell is an American provider of industrial automation solutions and equipment. This

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includes various power, control, and information systems that fall under two segments: Architecture/Software and Control Products/Solution, which work out close to a 50/50 split.

Headquartered in Milwaukee, Wisconsin, Rockwell is a Fortune 500 company that employs over 22,000 people and serves customers in more than 80 countries. Its top brands include Allen-Bradley and Rockwell Software.

Updates:

Rockwell reported fourth-quarter earnings late last month. Sales during the quarter were $1.54 billion, down 4.3% compared to the same period last year as a result of organic declines. Operating margin was 19.8%, down 1.1 points from last year.

Oil and gas and mining remained the weakest verticals for Rockwell, with oil and gas down about 25% year over year. Management remarked, however, that the market is stabilizing, which bodes well for future quarters.

Latin America was a bright spot for Rockwell, with sales up 7% and Mexico up 20% year over year. The increase in Latin America was partially offset by oil-dependent Brazil.

Europe, Middle East, and Africa were also up, albeit at a smaller 2% growth rate. Emerging markets accounted for most of that growth at 4%, while mature markets showed 1% growth.

Asia and Northern America saw declines at 5% and 7%, respectively.

2017 looks to be a turnaround for Rockwell, with the firm now projecting 2% organic growth in sales. The company sees growth in all regions, with the exception of Canada next year.

Rockwell Automation Inc. (NYSE: ROK) is a “Buy” under $125. The risk level is “Medium.”

Spectra7 Microsystems. (OTC: SPVNF) (TSX: SEV)

Snapshot:

Spectra7 manufactures semiconductor devices for consumer electronics manufacturers. The stock is a speculative play on dedicated VR hardware, as its components were recently found in a teardown of Facebook’s Oculus Rift headset. Specifically, Mackie Research Capital has found two of Spectra’s “VR 7050” chips (bi-directional low latency data) in the USB & headset connector and its “VR 7100” chip (high speed video) in the headset connector.

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Updates:

Spectra7 has reported financial results for the third quarter, showing 11% revenue growth from the year-ago period. The top line, though, remains small at just $1.0 million, and sales were below expectations.

Management attributed the miss to a supply chain issue at a VR customer, which forced them to delay purchase of Spectra7 products. With this being a temporary issue, management has reaffirmed their growth outlook of 100% year over year.

As for future opportunities, here are some interesting comments from CEO Raouf Halim:

Over the last several weeks I have had the pleasure of meeting face-to-face with several Tier 1 VR and AR vendors that will shape the industry going forward. I am pleased to say that each of these key vendors is enthusiastic about Spectra7’s patented active cable technology. Another key takeaway from these meetings was that VR and AR headsets are anticipated to remain a tethered solution for at least another five years as these products move to higher resolution 4K and 5K displays,

These conversations with Tier 1 OEMs coincide with Microsoft’s recent reveal that it will be partnering with a number of traditional PC manufacturers to create VR headsets. These headsets have been confirmed to have headset connectors, making Spectra7 a likely beneficiary.

Spectra7 also remains focused on the data center market, which we’re also equally bullish on. In brief, the company is looking to market its ultra-thin interconnectors, which would increase efficiency for data centers by reducing burden on rack spacing, air flow, and density.

Financing remains a primary concern, but Spectra7 is looking to be in much better shape after the company’s unfortunate loss earlier this year. We’re re-initiating our Buy rating and removing the speculative label. The stock, however, remains very high risk.

Spectra7 Microsystems is a “Buy” under $0.30.

Telit Communications (OTC: TTCNF)

Snapshot:

Telit Communications specializes in M2M, or machine-to-machine technology, enabling machines to communicate with each other. By leveraging its M2M capabilities, Telit has been heavily involved in the development of driverless cars, with six sales offices dedicated to the

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market in the U.S., Germany, Japan, China, and Korea. The firm sells directly to both carmakers and their suppliers.

Specifically, Telit markets several families of intelligent automotive modules offering up to 150 Mbps download and 50 Mbps upload speeds. These modules come in both cellular (long-range) and short-range variants.

Telit’s rugged, all-weather computer chips allow vehicles to perform a long list of tasks from downloading firmware updates and uploading information from sensor feeds to mining consumer data and running complex applications. Basically, Telit can provide OEMs and suppliers the brains of a driverless car.

Updates:

No news or updates this issue.

We rate Telit Communications (OTC: TTCNF) a “Buy” under $3.50. The risk level is “Medium-Low.”

Technology and Opportunity Copyright © 2016, 111 Market Place, Suite 720, Baltimore, MD 21202. All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Technology and Opportunity does not provide individual investment

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