Wolf's Pick of the Week for March 29, 2016 - ARM Holdings (ARMH)

This week we're going to look at the technology that's at the heart of every little gadget you own - the CPU, or microprocessor.

Microprocessors are a commodity device - we know that they are in our computers, phones, tablets, and smart watches - but they are also omnipresent in our cars, controlling and monitoring our engines, brakes, and entertainment systems.  Modern appliances (washers, dryers, microwaves, dishwashers, ovens, even toasters) have them.  Many children's toys have them.  The Maker community has been taken by storm in the past few years by the release of embedded controllers (really just small CPU boards) such as the Arduino and the Raspberry Pi, which allow hobbyists to build sophisticated electronics devices of all sorts.

So if CPU's are a commodity - meaning that the market is well developed and not emerging - can we still make money by investing in them?

Cellphonus Rex

The answer is "yes."  For one thing, The Internet of Things is just around the corner, and we're soon going to see microprocessors deployed in everything.  For another, we have emerging markets in many countries including Brazil, South Korea, and China, where more and more consumers are gaining access (both physically and financially) to luxury items like consumer electronics.  Lastly, witness our culture of obsolescence - we're all trained from an early age to want the latest, greatest device.  Cell phone two years old?  You're a dinosaur, man, trade it in!  Tablet or computer too slow, screen too small?  Trade it in!  The turnover rate in consumer electronics alone will ensure that CPU manufacturers will be very, very busy for a long time to come.

There are many CPU manufacturers.  Some you've heard of:

Intel (INTC)
AMD (AMD)
Motorola (MSI)
Texas Instruments (TXN)
IBM (IBM)

Others you may have heard of, but weren't aware that they make CPUs:

Qualcomm (QCOM)
Broadcomm (AVGO)
Samsung
Apple (AAPL)

Others you may simply not even know exist:

ARM Holdings (ARMH), which was mentioned in my previous article on the Internet of Things
NXP/Freescale Semiconductor (NXPI)

There are more, but the big players are all mentioned above.  So which of these are the most interesting in terms of future growth potential?  One of the ones you've probably never heard of - ARM Holdings (ARMH).

To be fair, ARM Holdings doesn't actually manufacture CPUs - they design them, then license those designs to other companies.  Other companies like Apple, AMD, Broadcom, Samsung, Qualcomm, Texas Instruments, NVIDIA, Toshiba, Panasonic, and Fujitsu - in fact for their three product lines (the Cortex-A for high end processing, Cortex-R for embedded realtime applications, and Cortex-M for mobile applications) they have licensed their CPU designs to well over 250 different manufacturers.

Acorn Computer.  From old-computers.com

Why is ARM so successful?  They started in the 1980's as Acorn Computers, manufacturing their own coprocessors to supplement the then wildly popular MOS 6502 chip (which was used as the CPU in practically every "home computer" of that era).  While moderately successful, especially in the UK, they quickly realized that a new type of architecture was required to truly improve computer performance.  Inspired by the Berkeley RISC project white papers, they developed a true RISC (reduced instruction set chip) processor in 1985.  RISC processor use a simpler core instruction set, relying on the software and operating system to supply the complexity, which makes them more flexible and adaptable - especially when it comes to running multiple operating systems.  In the earlier days, RISC chips were also just plain faster - and consumed less power - than the CISC (complex instruction set chips) that Intel and everyone else was cranking out.

To this day the advantages of the RISC architecture hold true - as witnessed by the fact that they are able to license these chips to so many manufacturers, which use them for every conceivable application.

Licensees of ARM technology are free to improve on those designs - something Apple tends to do with every new generation of chip they put in the iPhone, iPad, and Watch.  But at core, those chips are still based on ARM technology, which means that ARM can sit back and rake in a tidy profit and sip sherry while designing the next generation of chip.  They incur none of the cost or risk in manufacturing - kind of an ideal situation if you like designing CPUs.

ARM chips are in almost every smart phone and tablet on the market.  In 2013 alone 10 billion ARM processors had been produced, and 60% of all mobile devices had at least one ARM processor.  Hard to say that ARM isn't winning!  So this is one case where you could invest in the manufacturer (Samsung, Apple, Qualcomm, etc.) and probably make money - or invest in their supplier (ARM) and definitely make money as we move into the larger Internet of Things and bring all of these technology to the newly emerging markets of Brazil, Russia, China, South Korea, etc.

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Disclaimer - I am not a financial expert and I am not responsible for any losses - or gains - you may make if you make decisions based on the information posted here.  If you do make money, please feel free to let me know!

Disclosure - Wolfgang Rumpf owns shares in Apple (AAPL) and Qualcomm (QCOM) mentioned above, and plans to purchase shares in Intel (INTC), Texas Instruments (TXN) and ARM Holdings (ARMH) within the next 12 months.

Special Issue: Five must-have tools for managing your finances

This week I'm posting the first in a series of special articles - I won't be talking about a market sector, or a particular stock.  Instead, since by now you're hopefully considering diving into the market, I thought I'd share with you some of the tools I use to help manage my investments.

In reality, investment management is really all about financial management - after all, you can't (or shouldn't) invest money in the stock market if you don't have some extra money to begin with.  So realistically you need to have tools to help you with the following things:

1.  Budgeting
2.  Debt/Asset Management
3.  Trading (including Research)
4.  Tax Preparation

And since part of good, sound financial health is knowing what your credit score is (crucial for making large purchases like automobiles or houses), let add to that list:

5.  Credit Tracking

I'm not necessarily going to talk about them in that order - but let's start with the first item - Budgeting.

There are many ways to keep a budget.  Spreadsheets are awesome.  You can also buy software specifically for tracking a budget.  And most banks now support some sort of budget tracking in their online web apps.  But really the important thing is to know how much income you have, and then decide how to parcel that out.  Most of us can do that - but the problem is that there are always unexpected expenses that crop up (repairs, accidents, doctors, etc), and sometimes even the expenses we expected are higher than anticipated.  So while planning a budget out in advance is important, it's equally important to reconcile that with what you are really spending your money on.  This also helps you plan on what to try to cut back on, leaving you with extra money for investing!

The tool I use for this is Mint.com.  Mint is a free service - just sign up with a valid email address and you're off and running.  Once you have an account, you tell Mint about your other financial accounts - bank accounts, credit cards, mortgages, loans, brokerage accounts, etc - and give it access to them.  This is all done securely, with a high level of encryption.  Once this is done, Mint can access your accounts and create a nice overview of the state of your finances - plusses and minuses.  The nice thing is that by looking at your bank account Mint can tell just where you are spending money - and now so can you.  Your spending habits are broken down into general categories - e.g. household, food, recreation - and you can tweak and customize it if necessary.  Then, every month, you can look at the way you've been spending and decide where (if anywhere) to cut back.  For example, last month I spent far more than usual on restaurants.  Not only does Mint show me this, but it even sends me an email letting me know!  You can of course set a budget amount for each of the categories, and Mint will tell you when you are getting close to - or over - the preset limit.  Mint also takes care of the Debt/Asset Management part of your finances, by giving you a nice summary of each and linking to the appropriate category.

One last perk of Mint - it will link you to offers which may help you manage your finances better - such as lower interest rate credit cards.  This is how they make their money, by the way - Mint doesn't charge you a dime.

While Mint does have links to your credit score, for Credit Tracking I like to use CreditKarma.com.  CreditKarma is another 100% free service that takes some of your personal information (again, securely) and then pulls your credit score from all 3 major bureaus.  This pull does not affect your score in any way, and you can check your score at any time, as often as you like.  CreditKarma will update your score, and more importantly it will tell you why your score is at the level it is - listing factors such as credit utilization, missed payments, etc.  And when your credit changes CreditKarma tells you why - for example, maybe your balance went up - or down - on a credit card.  CreditKarma also makes suggestions for how you can improve your score, and will link you to available offers for loan consolidation or low interest rate credit cards.

Now that you have your finances under control, lets talk about investing tools.  The first step is to set up a Brokerage Account.  A brokerage is the entity that can actually buy and sell stocks for you, and while you can do this at a Brick and Mortar company, like your bank, chances are that they will charge you significantly higher fees for trading than if you just do it yourself on a website.  There are many online brokerages to choose from, and they're all very similar - I use eTrade.com, but you should shop around (click here) and see which one you like best.  Each brokerage will have different requirements - some will have a minimum account balance, others may have a minimum number of transactions required, and all of them will charge you a commission fee per trade.  The advice and bling they offer will vary too - I choose eTrade because the $9.99 commission per trade is reasonable, and the online tools for stock evaluation, as well as the mobile apps they offer, are really nice.  Add to that the fact that eTrade talks seamlessly with my Tax Tool (below), and it's a no-brainer.

Now that you are ready to start trading, it's time to figure out which stocks to invest in.  When I am Trading I pay attention to a couple of web sites - one of which you've already read about extensively if you follow me regularly.  Dividend.com is by far the easiest place to find out which companies pay a dividend, how much that dividend is, and how regularly they've paid - or increased - it.  I like to just sort the companies by percentage yield and scroll down to about the 9% or lower mark (if you've read my previous articles you'll know why) and then jot down the companies that I think merit further investigation.

And that takes us to the next subtopic of trading - doing your Research.  Dividend.com is one stop you should make, but not all of your stocks are likely to be dividend yielders - you should also have a few stocks that are just good bets for the future - Apple (APPL), General Electric (GE), and Coke (KO) are all stocks that seem to do good for their shareholders despite their relatively low dividend yield.  But how do you choose what stock to buy?  The answer is buy companies that you know something about - in industries you know something about - and buy those companies because you think they'll do well in the future.  You should spend some extra time researching them on sites like Yahoo Finance, where you can see their press releases, or even at the Motley Fool, which is a great site for investors (I'm a member).  Eventually you'll have a big list of stocks that you want to buy - and that's where SigFig.com comes in.

SigFig is designed to be a one-stop portal for you to track your investments - it ties in to your brokerage account and gives you live, updated quotes - and values - for all the stocks in your portfolio.  It also displays the latest news on all of the companies, as well as clever widget that shows you where the stock is trading today compared to the past year - which is extremely useful when it comes to making decisions like "buy more" or "sell".  It also comes with a very handy mobile app, so you can track this data on the go.

I like SigFig so much that I not only gave it access (securely, again) to my eTrade portfolio, but I created a manual portfolio that I called "To Buy".  You guessed it - this is where I keep that list of all the stocks I want to buy in the future.  Now I can quickly and easily look at all of them and see their current price, relative to the past year, the current dividend yield, and all pertinent news.  This makes it far easier to weed through the list of all the stocks I want to buy, and pick the one I'm buying today.

There's only one more tool to talk about, and that one deals with Tax Preparation.  We all have to do it, and we all hate doing it, so why not make it as simple as possible?

I work two jobs - one is my "main" job in my home town, and for the other job I teach online at a major University in another state.  The end result of this is that I have to file not only Federal taxes and taxes in my home state, but I have to file taxes in state where my other job is based.  Add to that my portfolio and my taxes are more complex than your standard "EZ" form allows for.  That's why I love TurboTax (and if you click on that link and actually use TurboTax, you'll get 20% as a referral from me for doing so!).  TurboTax makes everything easy by literally walking you through each step of your return, asking simple questions to help make sure that you file everything correctly - and maximize your return.  That's a huge selling point right there - TurboTax walks you through every possible means of saving money and increasing your refund - very cool.  It also can speak to your brokerage account, pulling in all of your transaction and dividend data - and let me tell you, that saves you a HUGE amount of time over doing it manually!    It also can pull in W2 forms from most large employers, and best of all, once you've put all your information in, doing next year's taxes becomes trivial - all of your information on home, filing status, dependents, etc. is already there and gets imported.  I kid you not, I finished my taxes in about 45 minutes this year, and TurboTax filed everything electronically for me and made sure the refunds were deposited straight into my bank account.  It couldn't be simpler!

There are many other tools that I've not talked about - and I'm sure many of them are just as good, or possibly even better, than the ones I've mentioned here.  I've focused on the tools I use - and have used for several years - because they're the ones I know best and have come to trust.  I'm not getting any sort of compensation from any of the companies above (although if you do end up using TurboTax through that link I'll also get an Amazon Gift Card, so think about it...).

That wraps up this special edition - hope you enjoyed it!


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Disclaimer - I am not a financial expert and I am not responsible for any losses - or gains - you may make if you make decisions based on the information posted here.  If you do make money, please feel free to let me know!

Disclosure - Wolfgang Rumpf owns shares in Apple (APPL), General Electric (GE), and Coke (KO).

Wolf's Stock Pick for March 7, 2016 - Centurylink (CTL)

Not a sponsor or an ad - but a company you might want to consider investing in....

Last week I talked about Utility stocks and how they can be a steady and reliable source of income through their typically high dividend yield.  This week I'm going to discuss one specific utility company that I think should be part of your portfolio - CenturyLink (CTL).  CenturyLink is a communications/data company providing telephony, internet access, and fiber television services to residential and business clients in 36 states in the US.  According to Wikipedia, they are the third largest telecommunications provider in the United States, after AT&T (T) and Verizon (VZ).

When shopping around for utility stocks, there are several attributes to pay attention to.  The size of the company (and by this I mean market capitalization, which is a reflection of how much market share they have as well as their overall income), their dividend yield, and the consistency of dividend payout.

There are plenty of utility companies to choose from.  One of the ways I use to screen potential investment companies is to look at Dividend.com and rank the companies by dividend yield.  I usually stay away from the absurdly high dividend payers - see my article on dividend investing for why.  In the 3% - 9% dividend yield range you'll find many different utilities - power companies, telecomms, etc.  Towards the upper end of this is CenturyLink, which at $31 a share currently pays a 6.9% dividend.  I also like Frontier Telecommunications (FTR), currently about $5.67 a share, for 7.5% dividend yield, as well as Verizon (VZ) and AT&T (T), both of which offer almost a 5% dividend yield.  I own shares in all of them, in fact - but if you're just starting out with investing, I would recommend CenturyLink as a good entry point, and here's why:

Market Capitalization

Or 17.5 Billion....

As the third-largest telecomm in the US, you would assume that CenturyLink has captured a large share of the market - and you'd be correct.  Accordingly to Yahoo Financial, CenturyLink has a market cap of $17.5 Billion dollars.  That's huge - this is not a company that is going to go away quickly, if ever.  For smaller companies, a bad year or some bad decisions can irreparably damage the company, even lead to failure.  Larger companies have a lot more leeway - and while CenturyLink doesn't have the $234 Billion market cap of AT&T, or the $210 Billion market cap of Verizon, it's not by any means a "small" company.


Profitability

Looking at their annual report for 2015, CenturyLink made a profit of $434 million from net revenues of about $18 Billion.  So while they have a very large revenue stream, and are in fact profitable, their profit is only 2.5% of their total revenue.  This doesn't seem huge, especially compared to AT&T's $75.59 Billion profit on revenue of $146.8 Billion (almost 50%).  So this is a warning sign - while they are profitable, their overall profit margin is fairly low.

Debt

At first glance, CenturyLink would appear to have an extremely high amount of debt - approximately $20 Billion, according to their December 2015 Investor Relations page.  That's more debt than their market cap, which might seem like a bad thing.  It's important to remember that most telecomms are really cash flow machines - they continue bringing in a large revenue stream, and use loans they take out to expand that machine by building more infrastructure.  So the high debt is a sign of CenturyLink's investment in future revenues.  This is not at all uncommon - even the "big boys" (AT&T and Verizon) fund expansion by taking on huge debt, with the knowledge that their resulting increased revenue stream will make up for it in the long run.  And compared to AT&T's $118 Billion debt and Verizon's $103 Billion debt, Centurylink's debt is absolutely paltry.

Dividend Yield

This is a no-brainer.  CenturyLink, at $31 a share, pays 6.9%.  And like all stocks, it's somewhat cyclical, so if follow it long enough you'll see the stock price dip far enough to bring that yield up to 8% (since the dividend is paid as dollars per share, not an actual percentage - you get more when the price goes down!).  While Frontier Telecommunications offers a larger dividend, they can't beat CenturyLink's on any of the other criteria in this list.


Payout History

The Payout History is just what it sounds like - a history of dividend payouts a company has made in the past.  The important thing here is to look for consistency - sometimes companies will "skip" a dividend payout, or even reduce their dividend, if they are experiencing financial difficulties.  By looking at the payout history, you can see not only whether or not a company has consistently paid its dividend like clockwork, but you can also see whether or not that dividend changed (see below).  The best place to look for this, IMHO, is (surprise!) Dividend.com's history section.  As you can see if you click here, CenturyLink's payout history is superb - they haven't missed a dividend payment since 1993, which is as far back as their record goes at Dividend.com.

Dividend Increase

Another piece of information you can get from that Dividend.com history table for CTL is the change in dividend over their payout history.  If you look at the data for CenturyLink, you'll see that their dividend has remained unchanged since February of 2013; immediately prior to that they actually reduced their dividend payout!  Is that a warning sign?  Not necessarily.  Looking even further back you'll see that prior to that, they actually raised their dividend every year.  The cut in 2012 was a blip - the dividend was cut so that they could reduce their debt, using the cash on hand for that rather than supporting the high dividend.  That's a sign that management knows what they're doing, in my opinion.  This is part of the game - there's always a risk that a company may reduce it's dividend; in the meantime, you are still enjoying one of the higher dividends available that's not in a dividend value trap.

While Verizon and AT&T are also good contenders in all of the above areas, CenturyLink's slightly higher percentage yield is what really tips them over the edge in my mind.  Do the math and see how quickly a 6.9% yield outperforms a 5% yield with even a small investment of just $1000:

As you can see, that 1.9% makes a huge difference over time.  The $1000 invested at 6.9% has doubled by year 11 - and in fact reached the same point that the 5% investment made in 12 years in just about 8 years.  The stock price will fluctuate over time, so of course your overall profit will depend on when you sell - if you ever do.  But the earnings you make - $1227 vs $795 - those don't change.  As always I'd recommend reinvesting your dividends and holding on to the stock for the long haul, and only selling at one of the "peaks" in the stock market cycles....

The other thing to bear in mind here is that the dividend yield will change as the stock price changes (I explain this in my article on dividend investing).  So keep an eye on the stock price and dividend yield of any stocks you are interested in buying as dividend earners - again, Dividend.com is a great asset here, but there are other tools you can also use that will make your life easier.  I'll go in depth on some of those next week.

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Disclaimer - I am not a financial expert and I am not responsible for any losses - or gains - you may make if you make decisions based on the information posted here.  If you do make money, please feel free to let me know!

Disclosure - Wolfgang Rumpf owns shares in Frontier Telecommunications (FTR), Centurylink (CTL), Verizon (VZ), and AT&T (T) mentioned above.

Utility Stocks - slow and steady growth as well as retirement income: these aren't just your father's investments

This week I'm going to talk about Utility stocks.  Let's start by defining what exactly a Utility stock is.  According to Dictionary.com, a utility is:

...a public service, as a telephone or electric-light system, a streetcar or railroad line, or the like...

So a Utility stock, then, is stock in a company that is considered a public service - like the phone companies, or companies that generate electricity or provides natural gas.

Nuclear Power Plant in Dukovany.  From https://upload.wikimedia.org/wikipedia/commons/d/d3/Nuclear.power.plant.Dukovany.jpg

That definition of a Utility is just fine, really.  For probably the last 100 years folks like Warren Buffet and my Dad have made good money investing in Utility stocks and reinvesting the dividends.  Because, you see, that's what makes a Utility stock so appealing - most of them make a nice, regular profit - they're selling something that people always have to have, regardless of the state of the economy - and they pass a nice chunk of that back to their investors.  It's not at all uncommon to make anywhere from 5-8% profit per year from an investment in a Utility company.

My Dad started out buy investing in just one company - Southern Company (SO), which produces electricity for much of the South.  He was lucky in that Southern Company did well, but as soon as I knew a bit about investing and realized what he was doing, I convinced him to diversify into other stocks.  Since my father is retired, he wanted to stick with dividend income - and since he already believed in utilities, I convinced him to go for other energy companies.  Let's take a look at some of the holdings that he (and I) own:

Stock	Current Price	Dividend	Yield
CTL	30.11	0.54/share	7.10%
DUK	74.13	0.82/share	4.30%
FTR	5.43	0.10/share	7.90%
KMI	17.77	0.125/share	2.80%
SO	48.33	0.54/share	4.40%
T	37.09	0.48/share	5.10%
VZ	51.02	0.56/share	4.40%

In my opinion, telecomms are really the new "power utility".  In 2007, with the advent of the iPhone, cellular phones took a quantum leap forwards in terms of functionality and data consumption - which in turn propelled cellular stocks upwards.  They've become another one of those things we can't do without - look around you and you'll see that even folks who have less disposable income are constantly staring into their smartphone screen.  Another reason to love the telecomms - many of the companies that are considered telecomms also form the backbone of the internet - companies like CenturyLink (CTL), AT&T (T), Sprint (S), and Verizon (VZ) make quite a bit of their money by routing data for businesses as well as consumers.  And I'm pretty sure this here internet thing is here to stay.

Now, if you recall from my earlier blog post, dividend investing is the slow but sure way to make a ton of money.  So why wouldn't you just stick all of your money into the utility company with the highest yield?   Several reasons:

Some stocks pay a stupidly high dividend because they are desperate to get investors - never a good sign.  If you take a look at Dividend.com you'll find companies paying as much as 20% dividend yield - mostly real estate investment trusts.  My advice is to stay well clear of them if you value your money.

All of the stocks in the above table pay a high dividend, but aren't classified as honey traps - they have been around for a long time and have paid a dividend more or less consistently for years (decades in most cases).

Additionally, you really have to diversify - you can't put all your eggs in one basket, because if that basket breaks, you lose your eggs.  Same thing here.  I love Frontier Telecommunications (FTR), with it's high dividend and low entry price per share, but it's a smaller company - it's been around for a long time (I've been making money from it for a decade), so I feel like it's stable enough, but with a smaller customer base (they serve the rural markets that the bigger providers can't be bothered with) and smaller total market cap, it's definitely less secure than a company like AT&T (T), which is essentially "too big to fail".  Bear in mind that while each of these companies offers a service that we "have to have", we don't have to have it from any one particular company.

The idea of diversification can - and should - also be applied to each market sector (such as utilities) you invest in as well - don't put all of your money into power companies, for example - add telecomms to the mix.  One good reason for this is that, every few generations, there is a paradigm shift - a major change in the way the system of our world works, and that can drastically impact the companies that do business the "old" way.  For example - we've been generating electricity pretty much the same way forever - we use a fuel that heats water that turns into steam that turns a turbine that drives a dynamo that generates electricity.

From
http://www.engineeringexpert.net/Engineering-Expert-Witness-Blog/tag/thermodynamics

It doesn't matter if you are talking about a coal-fired plant, a gas burning plant, or a nuclear power plant - they all essentially do the same thing:  heat water until you get steam, then use that to drive a generator.  Even if we succeed in getting nuclear fusion reactors operational, they'll still just be used to heat water - nothing as exotic as a electro-plasma conduit that generates power using unexplained technobabble is anywhere in our near future.  And that pretty much means that there will always be a large, central power-generating plant, owned by a utility company that we can invest in - right?

Not necessarily - there are disruptive technologies being worked on that could change all of that.  What if you could generate all the electricity you needed locally - say, in your home - instead of having to have a central generator that then distributes power everywhere?  Think of all the infrastructure we wouldn't have to build or maintain - no more wires or transformers!  Solar and Wind power are the first things people think of when they think about getting off the grid, but there's another option that's coming along fast - fuel cells.

http://www.bloomenergy.com

Bloom Energy is betting big that their Bloom Energy Server - a large array of efficient fuel cells taht generate electricity on-demand - will become an option to central power generation and distribution.  Their systems are already being used by several large name companies, including Apple, eBay, Google, FedEx, and Macy's.  In theory, this sort of appliance could live in your basement, next to your furnace and water heater, and produce all the power you need to run your home.  If this idea takes off, the traditional utility companies may start to die off.  Granted, it will take years - decades, really - if it ever happens, but it's important to realize that nothing is forever.

So how can you future-proof your investments against such disruptive paradigm shifts?  It's not always easy to see paradigm shifts coming, so you have to pay attention.  Spend some time every day, or week, or month, researching the things you invest in - and not just financial blogs, but the science and technology sites that affect that market sector.  And when you see a potential game changer like Bloom Energy, you keep it in your sights - maybe when the have their IPO you invest in them (as of this writing Bloom Energy is still privately held), or maybe you invest in companies that provide the fuel for the fuel cells (after all, they don't make electricity of of thin air - not yet, anyway).  Companies like Kinder Morgan (KMI), for example, who make their living moving fuel from one place to another via pipelines.  As an aside, Kinder Morgan has recently moved sharply lower - they had to drop their dividend payout temporarily, but they're still as profitable as ever - and I'm betting the dividend pops back up to it's previous 7% or so before too long.  They're one I'm going to stock up on as long as the price stays as low as it is.....

Next week I'll focus in one one utility stock in particular that I think is a worthy addition to your portfolio.  Until then, do some research on your own, and leave me a message if you think you find something interesting!

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Disclaimer - I am not a financial expert and I am not responsible for any losses - or gains - you may make if you make decisions based on the information posted here.  If you do make money, please feel free to let me know!

Disclosure - Wolfgang Rumpf owns shares in Apple (APPL), Kinder Morgan (KMI), Frontier Telecommunications (FTR), Centurylink (CTL), Verizon (VZ), Southern Company (SO), Duke Energy (DUK) and AT&T (T) mentioned above.

Wolf's Stock Pick(s) for February 22, 2016 - Invensense (INVN) and Sierra Wireless (SWIR)

Normally the week after I discuss a particular market segment - like last week's Internet of Things post - I like to dive a bit deeper into one particular stock within that segment that I think is particularly well suited for investing in.  Unlike many of the other investing blogs you could be reading, I don't go into endless detail on the financials - because I'm not a financial expert.  Instead I explore why the company I'm interested in is on the cusp of something great based on my oracular powers of prognostication.

(Translation:  I'm a gadget freak who's seen lots of tech come and go, and I'd like to think I'm starting to get a hang of "what's next".  The stocks I drone on about are the stocks I think are going to ride one of those waves into prosperity - and hopefully take us along for the ride).

This week's blog is going to review not one, but two stocks that are players in the Internet of Things - two stocks which I believe complement each other nicely, both in terms of product as well as investing potential.  I briefly touched on both Invensense (INVN) and Sierra Wireless (SWIR) in last week's post on the Internet of Things (IoT).  This week we're going to talk a little more about why these two companies in particular are poised to perform well in the coming revolution.

Invensense

Source:  Invensense

Invensense is a MEMS manufacturer (we've talked about those before) - they primarily manufacture 6-axis motion sensors, which are used in everything from phones to tablets to drones.  These sensors tell those devices how they are moving through the environment by detection changes in orientation as well as compass directions.  These sensors can also be used in wearable/fitness devices like the Fitbit or Apple Watch, or to improve images taken by digital cameras by providing the information needed to compensate for motion in you or your camera - if your hands are shaking, for example, or if you are taking the photo in a moving car.  Speaking of cars, motion sensors are used extensively in modern automobiles as well - enabling stability control systems that keep you on the road even in poor-traction conditions as well as triggering air bags in sudden decelerations.  Invensense also makes audio sensors - microphones, really - that can be used to detect and record sound.  Just recently they announced another type of sensor that they are bringing to market - an improved fingerprint sensor that can actually embedded inside a screen, without blocking any of the viewing area.  Imagine having that extra space at the bottom of your iPhone as additional touchscreen instead of dedicated to the TouchID sensor/Home Button!

There are several companies that make six-axis motion sensors - notably ST Microelectronics (STM) - what makes Invensense's sensors better?  The answer is that they don't just sell sensors, they sell complete solutions.  They spend quite a bit of time on the accompanying software and API's (Application Program Interfaces) that are invoked by the devices incorporating their sensors - things like a positioning library that allows the motion-sensing chips to do a magical trick called inertial tracking, so that even when the GPS signal for the device itself is weak the Invensense 6-axis sensor can make an educated guess as to where the device is.  Just having fantastic sensors alone isn't enough - by adding in extras like their Motion Apps™ software, they enable developers - even makers - to do some pretty cool things with the data the sensors collect.  For example:  currently, gesture recognition requires that the user actually be touching a surface - e.g. an iPad screen.  The Invensense platform - sensor plus software - could, for example, enable the development of very sensitive sensor gloves that could be used to swipe your way through an interface much as Tom Cruise did in Minority Report.

Invensense stock has taken a beating the past year - it's currently around $7.35/share, which is a golden buying opportunity, in my opinion.  They are already a supplier to Samsung, Apple, and a slew of other vendors; their newer finger sensor technology is a killer piece of technology that hasn't even begun to show up in their revenue stream yet; their profits are increasing year over year.

Sierra Wireless

Source:  Sierra Wireless

While Invensenese makes the sensors for Internet of Things gadgets, Sierra Wireless makes the connectivity systems for them - primarily high-end radio chips and software (again, an entire platform that is easy to prototype with and deploy for the vendors manufacturing the Internet of Things devices) using 2G, 3G, 4G, and LTE technologies.  They also manufacture smart SIM cards that can store all of the user account information needed to communicate with one or more networks.  Their platform is designed for mobile communications - not just cell phones, but dedicated communications systems used by police forces, private companies, or rail lines to stay in close contact.  Their Legato™ platform enables powerful, secure communications using very little power - ideal for mobility.

Many of us think of Internet of Things devices as being things we keep in our houses - like the Withings Scale I mentioned last week.  It's true, many of our devices probably stay at home - and are thus almost always going to be within range of a WiFi or Bluetooth connection.  So why am I so excited about Sierra Wireless instead of, say, Texas Instruments (TXN), which manufacturers some of the best embedded Wifi/Bluetooth chips?

To be honest, I am excited about Texas Instruments, and they are on my to-buy list.  Texas Instruments, however, is a well established company, and while I do expect them to profit from the IoT revolution, Sierra Wireless' core competency is connectivity platforms - and the type of connectivity (2G through LTE) that is required for truly mobile connectivity.  That market has yet to really boom - think of how many cars are equipped with WiFi today, and how many are likely to have it over the next 10 years.  That WiFi is simply using an embedded cellular link in the car connected to a WiFi hub that rebroadcasts the signal locally - inside the car.  So any truly connected, mobile device has to have a system like the ones that Sierra Wireless manufactures.

As before, they certainly aren't the only manufacturer making cellular connectivity chips - Samsung (SMSGF), Sony (SNE), Sequans (SQNS), and Ericsson (ERIC) are just a few.  Again it's the fact that the offer a nice, easy-to-use platform that makes them so compelling.  If you've explored the links above you'll already know that their Legato™ platform is actually open source - meaning that once you buy their hardware, you have free access to a world of development resources, making it even easier for rapid prototyping and development.

The other reason I like Sierra Wireless is that they are already selling to big names like Panasonic, AsusTek, Verizon, Sprint, and AT&T.  One of the truisms I learned during my 14 years in the corporate world is that it's easy to sell to someone you've already sold to - and given that, Sierra Wireless should have a pretty solid sales pipeline for the foreseeable future.

Sierra Wireless stock has also been hit by the recent downturns in the stock market, dropping from a peak close to $49/share down to about $11 a share currently - which to me says that this is a great time to buy.  My feeling is that this stock has some serious legs, and the growth should continue for a long time to come.

That's it for this week - as always, you should alway do some homework of your own before buying any stocks.  Consider everything above a launching point for your own studies!

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Disclaimer - I am not a financial expert and I am not responsible for any losses - or gains - you may make if you make decisions based on the information posted here.  If you do make money, please feel free to let me know!

Disclosure - Wolfgang Rumpf owns shares in Apple (APPL), Invensense (INVN), ST Microelectronics (STM), and Sierra Wireless (SWIR) mentioned above, and intends to purchase shares in Texas Instruments (TXN) within 12 months.

The Internet of Things - what it is, and how to invest in it

Some day soon everything may be connected to the internet...

By now you've probably at least heard of the Internet of Things (IoT).  The term has been thrown around like confetti at a wedding, and has been the subject of several Motley Fool newsletters trying to frighten investors into reading more by declaring that the internet is dead.  Now, I like The Motley Fool - I'm actually a subscriber to their entry-level newsletter - but the hyperbole of that particular headline is just Chicken Little talk.  The Internet of Things really is just the internetification (is that a word?  Anyone?  Bueller?  Bueller?) of, well, things.

Let's start over.

By now everyone sees the power of the internet.  It lets you connect people and information seamlessly - like you, dear reader, sitting in the comfort of your home - or daily commuter train - or anywhere, really - reading this blog page that I'm writing while sitting here in my man-cave in Columbus Ohio.  We're more connected than ever through the media of the internet, and I don't buy what people say about the dehumanization of the screens - we are communicating more directly and rapidly than ever before thanks to gadgets like the iPhone, iPad, and Android phones and tablets.

FitBit Flex - http://www.fitbit.com

At the same time, we are taking advantage of advances in miniaturization technology to start strapping these gadgets to our bodies - the Fitbit might be one of the most popular of these, the Apple Watch the most glamorous - but this entire class of wearable devices is only possible because we have gotten very good at making microchips (including CPUs and communications chips like WiFi, Bluetooth, and Near-Field Communications, or NFC chips) smaller - not to mention batteries, and most importantly, sensors, all of which are crammed by the dozen into that Fitbit, Apple Watch, or Android Wear you probably have strapped to your wrist.

It's the sensors and the communications chips that are the most interesting in terms of new technology, really.  One of the coolest things about the iPhone when it first came out was the motion-sensing capability - remember the on-stage demo of Trism, where the individual playing the game on the phone could rotate the phone and change the gameplay?  We now take that for granted as we tilt and pan out way through mazes and driving games, and of course consoles like the Playstation, X-Box, and Wii all have motion sensitive controllers.  These are all made possible by the development of one very special type of chip.  These tiny little chips are MEMS chips - Micro Electro Mechanical Systems - that are capable of detecting motion (or other environmental parameters) in any direction.  There are many companies producing these chips now, some with even more sensors all packed into the same chip - e.g. accelerometer, magnetometer, compass, gyroscope, pressure and/or barometric pressure, temperature, sound, image/video - you can't buy one chip with all of these, but you can buy a 9-axis (accelerometer, gyro, and compass) sensor from companies like Invensense (INVN) or ST Microelectronics (STM), and add individual sensor chips as needed for whatever project you need.  These sensors are what make iPhone/Android motion-sensing games work, as well as auto-stabilizing drones (even my inexpensive Syma X5SW drone - all of $60 - can be tossed in the air and automatically straighten itself out, orient itself to a selected direction, compensate for wind - all because of a single 9-axis sensor).  Add this to other specialty chips like GPS and Bluetooth, WiFi, or NFC, and you have a complete sensor platform that can fit into - well, something smaller than a smartphone.

Apple Watch - http://www.apple.com/watch

And companies are building these features into everything.  Gadgets like the higher-end Fitbit, Android Wear, and Apple Watch include motion sensors, pressure sensors, microphones, and pulse-rate sensors (to monitor your heart rate) - and will soon include cameras and potentially blood pressure monitors - even glucometers to measure blood sugar levels (vital if you are diabetic).  These sensors essentially turn your smart watch into a personal medical monitor - and one that monitors your vitals 24/7, something that could lead to a major revolution in healthcare, once we can take all of that data and predict trends and outcomes from it.

We'll talk more about the health care revolution in a later blog - right now, the important thing to note is that we can now pack more sensors into something the size of a watch, and make it less intrusive and more integrated into your life than ever before.  It's not hard to imagine that every device that matters in your life may soon be able to communicate to each other device.

Nest Thermometer - http://store.nest.com

You can already buy internet-enabled thermostats like the Nest, or smart lightbulbs that you can not just turn on or off from your smartphone, but even change the color profile on - want to set your lights to "office" mode?  No problem!  Flick one setting and you can change it to "casual" lighting - or boudoir lighting - all from the same bulb.  There are smart door locks that you can control and program remotely, smart doorbells that let you see who is at your door even when you aren't home, a smart grill monitor that lets you monitor the temperature of your grill and the meats you are grilling, and even a gadget that lets you use your voice to control all your gadgets, stream music, and even buy other gadgets (the Amazon Echo).

Right now most of these gadgets more or less live independently of one another, but soon, technology like Apple Home Kit will integrate your internet-enabled devices, iPhone, and AppleTV, allowing all of these pieces to speak to each other - and to you - in a unified and consistent fashion, unobtrusively and seamlessly integrating with your life. (ostensibly the Amazon Echo will allow you to do the same thing with your Android phone).  Your thermostat may sense that you are close to home (based on your phone GPS) and start warming the house up.  Your lights will come on as you enter the house, your security system will automatically disarm, the TV will turn on to the channel it knows you tend to watch at 7pm (this kind of relates to the neural network technology we talked about last week when I tried to convince you to buy NVIDIA stock).  The smart home is not that far away!

Withings WS-30.  http://www.withings.com

Here's another, real-world example.  About two weeks ago my scale sent me an email.  Yes, you read that correctly.  One of my Christmas presents this year was a Withings WS-30 internet-enabled scale.  After a brief and utterly painless setup process involving a quick bluetooth connection to my phone, the Withings WS-30 was connected to my home Wifi - borrowing the connection details from my phone.  Now, whenever I step on the scale, my weight is automatically sent to my phone over WiFi - no more bluetooth required.  The scale even shows me my progress, as well as the day's weather forecast!  The data seamlessly transfer to Apple Health as well - so all I have to remember to do is step on the scale every morning. Whenever I want a quick health report, I look at the Apple Health app, which already tracks my exercise, steps, pulse (thanks to my Apple Watch), and a plethora of other things.

But let's get back to that email.  I didn't even realize that the Withings WS-30 was going to send me progress reports, so I was stunned to see the email in my inbox.  Granted, the tone of the email could have been, well, kinder - but nevertheless, my scale was able to summarize data and send me a valuable progress report - all I had to do was to remember to step on the damn thing every now and then.

Car2Go Smart Cars

That's the key to making this sort of thing sell - it has to be seamlessly integrated into our lives.  Think about how car services like Uber and Car2Go have suddenly transformed the way we can get from point A to point B - we push a button on our smart phone and either a car either shows up (Uber) or we can unlock and start up the nearest Car2Go Smart Car (Car2Go) - you don't have to own a car or worry about parking it when you reach your destination, you just get from where you are to where you want to be and leave the hassle of parking, maintenance, fuel, and insurance to someone - or something - else.  That's seamless mobility, and it's part of the Internet of Things - even more so when Uber starts using Tesla's (TSLA) autonomous cars instead of human drivers in a few years.

Let's imagine another example that isn't really that far off.  You may know that RFID tags are already being used to tag pets and some high-end merchandise at some retailers.  What you may not know is that RFID tags may also soon show up on your grocery's shelves.  That would make checkout faster and smarter - imagine just pushing your cart through the checkout line, without actually having to remove the items and have them scanned - the RFID tags will automatically broadcast what you're purchasing to the register, and once you've paid the register will let you out of the store with your bounty (or Bounty).

But that's just the beginning.  When you get home, your SmartFridge will update the house manifest based your purchases - it'll always know what ingredients you have in stock.  When you run out of milk and throw the carton away, the RFID tag leaves the house - and the fridge then knows to add milk to your shopping list, which you'll undoubtedly access on your SmartPhone while at the grocery store.  This isn't really that far fetched - you can already buy internet-enabled refrigerators today; all that's missing is the RFID reader and a simple database/grocery list app that one of my 14-year-olds could probably write in python.

So how can we as investors make money off of this coming revolution in connectivity?  That's a great question.  Obviously we can't know for certain which companies will succeed and which will fail, but what we can do is look at the companies that are positioned to succeed - and that's likely to be not the companies making the actual gadgets, but the companies making the components that are required to make the gadgets - and they really fall into several categories:

MEMS chips manufacturers:

There are several manufacturers to look at in the MEMS arena - Invensense (INVN), Bosch (BOSCHLTD), Texas Instruments (TXN), and ST Microelectronics (STM) are probably the top players.  Of these, I like Invensense and ST Microelectronics - they have a good presence in items such as the iPhone and Apple Watch, and offer a diverse number of products that complete complete and ready to use - almost plug and play - for manufacturers such as Apple.  In addition they are affordable price right now - always a consideration if you're looking to optimize your price per share after commission.  Invensense in particular is a great choice; the price per share is pretty low right now, and their multi-sensor chips and software combos are very powerful and easy to adopt for hardware manufacturers.

SOC manufacturers:

The choices in this category are also pretty broad; I tend to keep my eye on the big players like Intel (INTC) and Samsung (because Samsung is listed on the Korean exchange it's difficult for us here in the States to purchase), but the companies I've invested in include Taiwan Semiconductor (TSM), and Invensense (INVN).  Arm Holdings (ARMH) is also a very tempting stock - they don't actually manufacture any hardware; rather, they design chip architectures, patent them, and then license those designs to other companies to use as the basis for their own designs, or to build outright - like Samsung, Qualcomm, and Apple.  In fact, Apple now designs all of it's own processors for every product it makes - except the actual Mac computers - using ARM architecture.  That means that Arm Holdings gets a slice of delicious royalty pie for every single iPhone, iPad, Apple TV, and Apple Watch that Apple sells.  The same goes, actually, for just about every SmartPhone out there - with a few exceptions they will all use ARM architecture somewhere.  It's important to note that Apple doesn't actually manufacture the chips they design; they usually farm that out to companies like Taiwan Semiconductor (who will be the exclusive manufacturer of the new A10 chip for the iPhone 7).

Communications chips manufacturers:

Again, many choices - Sierra Wireless (SWIR) is a popular choice amongst Internet of Things investors, as is Qualcomm (QCOM).  But you should also consider Nordic Semiconductor (NOD), whose low-power Bluetooth chips are among the finest, and Intel (INTC).  Of these, I like Sierra Wireless and Qualcomm, especially at today's prices.

One last thing for you to chew on - all of those Internet of Things gadgets will require power.  While many of them can easily be directed plugged into the grid, many of them need to be mobile, and you don't necessarily want to have to plug every gadget in your house into a charging station every day or two - it's bad enough we have to do that with our phones, Fitbits, and Apple Watches.  While wireless charging isn't new - the Apple Watch uses inductive charging; you just lay it on top of it's charging dongle and it powers up - the idea of long-range charging is starting to gather steam.  Pay close attention to Intel (INTC) and Qualcomm (QCOM) as potential leaders in this charge (heh, I see what I did there....) - and once a standard and/or leader emerges, jump on them with all your might.....

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Disclaimer - I am not a financial expert and I am not responsible for any losses - or gains - you may make if you make decisions based on the information posted here.  If you do make money, please feel free to let me know!

Disclosure - Wolfgang Rumpf owns shares in Apple (APPL), Invensense (INVN), ST Microelectronics (STM), Sierra Wireless (SWIR), NVIDIA (NVDA), Taiwan Semiconductor (TSM), and Qualcomm (QCOM), and plans on purchasing Intel (INTC), ARM Holdings (ARMH), and Tesla Motors (TSLA) stock within the next 12 months.  

Wolf's Stock Pick for February 8, 2016 - Nvidia (NVDA)

I used to think of myself as a Dividend Investor (see last week's post for some basics about dividend investing).  I still think that dividend investing is a good, safe way to make money - and I believe that once you have enough money in your investment accounts, you should convert every stock you own to a dividend paying stock so that you can retire and live on the dividend income alone!  We'll talk more about that particular retirement strategy in a later blog - meanwhile, today, I'm going to talk about a speculative stock (one that you buy hoping to make money when the stock increases in price) - NVIDIA (NVDA).  While NVIDIA does in fact pay a dividend (roughly 1.2% at today's price per share of about $26),  I don't think of it as a dividend stock per se - but I do think you should buy some, and here's why.

You've probably already know of NVIDIA as a  manufacturer of graphics cards for computers.  They build these cards using their own proprietary GPUs (graphical processing units).  They also manufacture a System On Chip (SOC) that powers the NVIDIA-branded Shield Android tablet (which is more than just an Android tablet - it's a gaming system in disguise):

Nvidia Shield.  From https://shield.nvidia.com/

The core product of NVIDIA is the GPU, or Graphics Processing Unit), and they sell it in several ways - graphics cards, SOCs, etc.  And a GPU can be used for more than just generating graphics - GPUs are actually more powerful than CPUs (the main chip driving most computers) for certain types of processing - specifically, batch operations on large data sets, such as linear algebra computations and statistics.  This is because a GPU has, rather than 2 or 4 cores, as many as hundreds of cores, all performing the same function in parallel.  GPUs are being used to create supercomputers that in turn can run neural networks (machine learning) programs, bioinformatics analysis, computer vision and image analysis, and even oil exploration algorithms.  GPUs were actually the fastest way to mine bitcoins until they were replaced with even more specialized field-programmable gated arrays (FPGAs).

Okay, you're saying, I get it.  GPUs are cool.  But why should I buy NVIDIA stock today?

Great question - I'm glad you're following along!  The answer is that GPUs, for the reasons mentioned above, are going to start showing up in places other than your home computer, gaming console, or university supercomputer, and it's primarily going to be in two of the applications I mentioned above:


Machine Learning

Machine learning is used to make "smart" computer software called a neural network - we're not talking AI, or artificial intelligence (not yet, anyway), but machine learning has already been used to help doctors diagnose illnesses, choose which medicines to treat an individual with based on their own genetic information, and predict things like the outcome of presidential elections or stock market behavior.  In more bizarre examples, neural networks have been used to simulate the brain of the nematode C. elegans, and to create an autonomous quadcopter drone  using a simulated bumble bee brain as the "pilot".  Closer to home, you probably interact with machine learning software every day - most likely on your smartphone.  That's right - Siri, Cortana, Google Now, and Amazon Echo are all powered by machine learning.  Today most of the actual processing happens on a remote server, which is why you can't use Siri or any of the others without being online - but that will change as we find more uses for these intelligent agents in our homes.  For example, Apple's (AAPL) latest incarnation of the Apple TV uses Siri to let you talk your way through the TV listings, searching for Sci Fi movies starring Rutger Hauer, for example.  You can buy things directly from Amazon by telling your Amazon Echo what you need.  You can even voice control your smart lights and your thermostat, if you have the right hardware.  And as more of our homes become internet-enabled with such Internet of Things (IoT) gadgets, it's very likely that you'll be able to control them all through Siri or Cortana.  And as we add functionality to the neural networks running everything, they'll need more and more processing power - and that means GPUs.

But that's not why I think you should buy NVIDIA - while there will be increased use of GPUs for machine learning, I don't think that alone is what's going to make NVIDIA pop.  Let's add one more component to the mix:


Computer Vision and Image Analysis

Computer vision is defined by Wikipedia as "... acquiring, processing, analyzing, and understanding images and, in general, high-dimensional data from the real world in order to produce numerical or symbolic information..." (https://en.wikipedia.org/wiki/Computer_vision).  In simpler terms, computer vision is the application of cameras to capture still (or moving) images and passing them to sophisticated algorithms that can process those images (or videos) to extract information.  In the lab where I work, we have used computer vision to capture the limb motion of infants, analyzing the motion patterns to detect anomalous neuromuscular syndromes.  Mac OS X uses image analysis to detect faces from your pictures in the Photos app.  Google's Deep Dream combines computer vision and neural networks to process images and generate new images that are eerily reminiscent of something that Salvador Dali or Edvard Munch - or possibly H.R. Giger - would come up with.


The computer isn't "thinking", of course (and what encompasses thinking is still not clear - consciousness might be an extension of modeling behavior, and some think that image processing actually is a long step towards enabling true non-biological thought), so it doesn't do anything other process the image following the algorithm it's fed by the programmers.  Google Dream is at the extreme end of  computer vision, employing a true neural network to process image.  Nevertheless, the ability to teach a computer to capture images and videos and extra information from them is powerful - and it's this second piece of the puzzle that makes me think NVIDIA is a must-have.

What do you get when you combine neural networks with computer vision?  It's (probably) not the killer robots or singularity event that science fiction has prepared us for.  While the singularity probability is coming, it's not why you should buy NVIDIA.

So why have I led you so far down this garden path?  Why am I recommending you buy NVIDIA?

The answer:  autonomous cars.

Sigh.  Again you laugh.  And yet, it's true.  Autonomous (self-driving) cars are coming.  Tesla (TSLA) Motors is probably the most obvious example, but most other major car manufacturers - as well as other companies that aren't specifically in the automotive industry - have leapt on the bandwagon, providing cars that help you parallel park, manage freeway driving and lane changing, brake for you proactively when they sense you getting too close to another vehicle - the examples are numerous.  In fact the automotive industry itself is due for a shakeup once we get fully autonomous vehicles - imagine a future where nobody has to own a car anymore, because Uber and similar services make it possible for them to get a car anywhere, anytime - and more importantly, just as much car as they need (a convertible for the weekend, or a coupe for the daily commute) at the push of a smartphone app button.  Think of the money you'll save by not having to own and maintain a vehicle that spends most of each day just sitting....but I digress.

Google's self-driving car.  From https://upload.wikimedia.org/wikipedia/commons/1/14/Google_self_driving_car_at_the_Googleplex.jpg

NVIDIA's GPU technology can manage both the neural network processing and the computer vision required to make autonomous vehicles a reality.  And while there certainly are other companies manufacturing GPUs - notably AMD (AMD), Intel (INTC), and, remarkably enough, Apple (AAPL) -  NVIDIA has one huge advantage: they're already established a beachhead in the automotive industry.  Manufacturers like Tesla (TSLA), Audi (NSU), GM (GM), Honda (HMC), and Hyundai (KRX) are, or will be, using NVIDIA GPUs to drive their in-dash entertainment systems.  And the NVIDIA Drive-PX2 series of chip, described as a dedicated autonomous vehicle AI platform, and ostensibly one of the most advanced GPU systems available - has already been selected by Volvo (who recently claimed that within just a few years there would be no more driving-related deaths in their automobiles.  A bold assertion, but given Volvo's safety record, I'm willing to bet that they really think they can make this happen - and it's all going to be the result of cars that don't have to wait for a driver to make decisions.

Most of the manufacturers working on autonomous vehicles are being very close-mouthed as to the actual hardware/software being used to drive their vehicles, but it's a safe bet that NVIDIA is involved.  In fact, it's so "obvious" that NVIDIA is going to be a huge player in this market space in the next decade (Elon Musk himself said that fully autonomous cars are only two years away) that many savvy investors have already started snapping up NVIDIA shares - if you look at the 5 year stock chart for NVIDIA you can see a nice general upwards trend.

That being said, it's not too late to get in on the action - there's plenty of upside in this industry, given that we don't even have the first fully autonomous car - yet.  And as always, you can't really predict the future, only guess as possibilities - but smart money seems to be betting that when it comes to self-driving cars, NVIDIA is going to be along for the ride.

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Disclaimer - I am not a financial expert and I am not responsible for any losses - or gains - you may make if you make decisions based on the information posted here.  If you do make money, please feel free to let me know!

Disclosure - Wolfgang Rumpf owns shares in Apple (APPL) and NVIDIA (NVDA) mentioned above, and plans to purchase shares in Tesla Motors (TSLA) within the next 12 months.