Since 1996, I have tripled my money every three years or so, on average. In 2009, I started sharing my Wall Street expertise with Main Street investors. That led to the creation of my popular "Poised To Triple" series, which is followed by 5,000 readers on Seeking Alpha. It also led to the founding of PTT Research.
In total, I have presented 21 official picks to triple. Ten have successfully done so. Four of our picks are still in play, making our current "Triple Hit Rate" 10 for 17 or 59%.
To find triples, I adhere to a strict set of methods, including the development of fundamental risk/reward charts. Another method is to identify large, fast-growing ecosystems and figuring out who is likely to play into them.
As most Apple investors know, the Cupertino giant is quickly expanding its iOS ecosystem to counter the onslaught of Google and Samsung.
As a result, many smaller vendors get to share in the rewards of iOS proliferation. Conversely, Apple benefits from being able to tout the richness of its environment. In this article, I will discuss three public companies that are helping to drive the proliferation of Apple devices and the impact for all parties involved.
Vendor #1 - Glu Mobile (NASDAQ:GLUU)
GLUU is an emerging play on mobile gaming. Ever since the emergence of the iPhone, GLUU has been working to transition its legacy feature-phone know how to the smart phone ecosystem.
It took years of work and millions in investment, but with the breakout success of Deer Hunter 2014 on the iPhone, it appears that GLUU has finally cracked the code on how to profit on this platform. Don't mistake Deer Hunter for a one-hit wonder. GLUU's platform reinvigorated this aging franchise -- imagine what it will do with the new and exciting titles coming in 2014.
Because of the challenges involved with replicating a platform like this, I believe GLUU has created a formidable barrier to entry which will be very difficult for outside competitors to challenge.
This is part of the reason why they are so important for Apple. By figuring out how to create profitable gaming content for iOS devices, GLUU will now focus on generating more content, which will lead to greater usage of iOS devices.
We have started to see improving Wall Street sentiment for GLUU, including last week's call by Doug Creutz at Cowen & Company, who named GLUU his "Top Gaming Pick 2014". If we're right, GLUU will offer a growing number of successful games and Apple will be selling more iPhones, iPads, and eventually iTVs (when it finally comes to market) on which to play them.
Top vendors in the console gaming space, like Electronic Arts (NASDAQ:EA) and Activision (NASDAQ:ATVI) can achieve valuations of $20 billion. Secondary vendors, like Take-Two Interactive (NASDAQ:TTWO) routinely achieve $2 billion valuations. At present, Glu Mobile sports a valuation of just $300 million. This presents the long-term potential for it to be a 60+ bagger.
However, one must walk before learning to run. Accordingly, we are looking for GLUU to expand its revenue base in excess of analyst estimates over the next 12-18 months, thus justifying the first $1 billion of its eventual market cap, a triple from current levels.
Vendor #2 - Pixelworks (NASDAQ:PXLW)
Speaking of iTV, Pixelworks became one of my picks to triple because of its unique position in the video processing space. Last week, the company announced that it will present its latest technology at the iconic CES technology conference this coming week (January 7-10). Its most recent R&D efforts will bring cinematic picture quality to mobile devices, a major expansion from its television roots.
With Samsung's (OTC:SSNLF) strength in the television market, Apple needs to counteract. I believe that PXLW could be the solution, just as I correctly predicted that Himax (NASDAQ:HIMX) would be the solution for Google (NASDAQ:GOOG) Glass. It has long been rumored that Apple will unveil 4K Ultra HD TVs in 2014. CES would be a great place to make the move. I obviously can't guarantee the timing, but I believe that PXLW is ultimately the most qualified vendor to supply AAPL with UltraHD technology.
As Ultra HD and other catalysts I have previously discussed unfold in 2014, I believe that PXLW will attract an expanding base of investors. If so, its shares should follow suit and rise from my initiation price of $3.24 toward $10 in the coming year.
Vendor #3 - Techprecision (OTCQB:TPCS)
That news added to the momentum catalyzed by the large sapphire furnace order TPCS received from GT Advanced Technologies (NASDAQ:GTAT). Those furnaces will be used as part of a $578 million deal to supply Apple with commercial-grade sapphire, presumably for products like the iPhone and iWatch.
We believe that AAPL will be leveraging sapphire as a competitive differentiator in its ongoing war against Samsung. Samsung has hitched its wagon to Corning's Gorilla Glass, but sapphire is 2.5x harder than Gorilla Glass. In addition, the cost of sapphire components is quickly closing the gap on Gorilla Glass. Soon, the benefits will far outweigh the added cost.
As a result, I expect that AAPL will require a growing amount of sapphire in the coming year, driving greater demand for TPCS's sapphire furnaces. Of course, I could have also highlighted GTAT, but its shares have already risen to a level from which it will be difficult to triple. In contrast, shares of TPCS still have that potential, even after its recent rally.
Of course, that rally heightens the risk for a pullback, which is part of the reason I continue to classify it as speculative. Investors should consider this as a high risk / high reward play. If it loses traction with GT or its aforementioned milestone win, the shares will surely tumble. However, continued traction should solidify its financial standing, pushing the shares toward $3 over the coming 24-months.
In conclusion, Apple's (NASDAQ:AAPL) iOS operating system clearly fits the description of a large and fast-growing ecosystem. Companies like Apple foster the growth of ecosystem partners because entire ecosystems of this scale are virtually impossible to grow organically, even for companies as large as Apple.
So far, so good. AAPL's shares have rebounded mightily from its 52-week low of $385. Tripling from that level will take awhile for AAPL to achieve, but we believe it is putting the pieces in place to justify strong performance over time. In the meantime, investors can seek quicker returns by looking to ecosystem players like GLUU, PXLW, and TPCS.