Daily Archives: January 18, 2018

Technology

These Five Startups Shine Brightest at Vegas Tech Show

Why go to Vegas?

I don’t gamble.

And I’m not into seeing past-their-prime performers like Celine Dion or the Righteous Brothers command the stage.

For me, there’s only one reason…

To get a peek at some of the amazing technology on display at the Consumer Electronics Show (CES).

The massive exhibition attracted 1,200 exhibitors and 185,000 visitors. Adam and I went there last week as guests of Indiegogo and its co-founder Slava Rubin and CEO David Mandelbrot.

The company had one of the bigger booths among the 800 companies at the Eureka Park venue in the Sands Expo halls. Eureka Park, by the way, is reserved for startups only.

Over a sumptuous dinner one evening, Slava told us that an increasing number of visitors to the Indiegogo site are interested in buying equity stakes in companies. Until recently, Indiegogo offered only perks and rewards.

It’s always a positive to welcome aboard a company of Indiegogo’s stature and success. Indiegogo is a true crowdfunding pioneer. Over the past 10 years, it has raised $1.3 billion for 800,000 entrepreneurs.

So why is the company reaching out to us?

Because Indiegogo sees a similar opportunity in equity crowdfunding. The fact that it’s partnered with MicroVentures, a highly regarded equity funding portal and one of our favorites, will make it even easier for us to work with it to find high-quality startup deals.

Tooling around Eureka Park, I saw a number of impressive products. I suspect some of them will end up raising via Indiegogo/MicroVentures.

Below are the five that stood out the most to me. Keep in mind that while I found their technology fascinating, whether they evolve into successful businesses is another matter. As such, don’t construe what follows as investment recommendations.

Aris MD: The things you learn at CES! The co-founder of Aris, Chandra Devam, told me my kidney and lungs are different from yours in shape, location and pathology (or just plain wear and tear). Surgeons aren’t really sure where to cut. They have a general idea, but that’s it. Aris’s virtual reality /augmented reality technology takes a diagnostic image – an MRI, for example – and lets the surgeon practice in immersive reality before the surgery.

Aris MD’s Goggles

Source: Aris MD

I put on these goggles at its booth. And, with a little help, I extracted a person’s brain. What came into view was a 3-D image floating right in front of me. There was no tumor, but if there was, I would have been able to see its true shape, size and depth. Amazing.

Robomart: Imagine tapping a button on your phone and in five minutes, a vehicle packed with fresh food items stops in front of your house. No driver or human to be seen. No cash register to bother with. No money exchanged. You simply take what you want and you’re automatically debited. This will be the model competing with Uber Eats and Amazon’s Whole Foods hookup – not just an order, but a range of selections from the entire food store coming to you.

A Robomart delivery vehicle

Source: Business Insider

Hologruf: It’s 3-D, portable and easy to install. Hologruf’s hologram system projects signs and displays that float in midair.

Imagine you’re in an auto dealership and the car drives right up to your seat as a hologram. Hologruf wants to make that a reality. Seeing its holograms up close, I can attest to their outstanding quality.

BLOCKS: You’re familiar with building your own pizza or hamburger… but how about your watch?

It makes perfect sense. Smart watches can now do so many things, BLOCKS founder Omer El Fakir told me it makes no sense to manufacture a one-size-fits-all watch anymore. With BLOCKS, you start off with a core that has smartphone notifications, fitness tracking, Alexa personal assistant and other features…

And go from there.

You can add functions by buying individual modules. For some, that may mean a fingerprint sensor module. For others, an air quality monitor module. Or perhaps all you want is an extra battery module.

My favorite module? Probably the flash memory, which keeps your data safe and close by.

The core costs $259. The modules cost between $30 and $40 each. Would you buy one? I’m tempted.

Olli: Branded as the world’s first 3-D-printed car and first self-driving car to incorporate the artificial intelligence capabilities of IBM Watson, Olli is the brainchild of Local Motors. I took a tour while taking on the persona of a near-blind person. As I entered the vehicle, it told me where I could find a free seat, alerted me to my stop and gave me directions to my destination when I left the vehicle.

An Olli 3-D-printed car

Source: Local Motors

Olli has gone through several iterations and is still under development. The company has scheduled several deliveries for mid year, when the Olli team will be monitoring how it performs in different environments and use cases.

It wasn’t easy picking my top five. There were many others I also liked. Hopefully, down the road a bit, I’ll be seeing a couple of these companies on crowdfunding sites.
Technology is just part of the equation of what makes a startup successful in the long run. But developing exciting technologies that also address real needs gives these companies a leg up out of the gate.

It doesn’t get any easier. But having talked to dozens of founders at the show, I think they know that already.

Good investing,

Andy Gordon
Co-Founder, Early Investing

Source: Early Investing 

Growth Stocks

3 Stocks Taking Off From Trump’s Tax Cuts

The cut in the U.S. corporate tax rate from 35% to 21% is supposed to do everything from juicing the U.S. economy to levels not seen in decades to enriching both shareholders and consumers alike. But the reality is likely to be quite different.

The first thing it will bring is a muddied fourth quarter earnings season for investors. A one-time tax on accumulated offshore earnings and revaluations of deferred taxes, based on the new rate, means a lot of potential charges and writeoffs for multinational companies. For firms that report only GAAP earnings, the headline impact on earnings could be quite large.

Investors should look through these one-off charges and focus on what the long-term effects will be on the companies they are invested in.

While many on Wall Street make proclamations about the benefits of the corporate tax cut for banks, I believe the sector still faces too many headwinds (like continuing low interest rates) for me to be interested in investing into banks. Instead, I’d rather focus on three other sectors – with still relatively low valuations – that should benefit from the changes in the tax law regarding U.S. corporations.

Airlines to Fly High

One of the biggest beneficiaries of the tax cut is the U.S. airline industry. Since most of their income is taxed domestically, the lowering of the tax rate to 21% from mostly in the mid-30s%, is a big deal.

Take Delta Air Lines (NYSE: DAL), for example. Just last week it said that the tax cut will boost its earnings by about $800 million a year. That translates to about $1 per share in increased earnings for 2018. Delta management raised their earnings per share guidance for 2018 to a range of $6.35 to $6.70, up 20% to 30% from the year earlier level.

Delta, like many U.S. airlines, pays no cash taxes. However, Delta expects it will become a cash taxpayer in 2019 and 2020, so the lower rate will be a boon.

The tax cut is a bit of icing on the cake for Delta, which is doing very well currently. In the latest quarter, it reported an 8.3% revenue rise to $10.2 billion, which beat market expectations. Passenger unit revenue (PRASM) increased 4.2% in the quarter as Delta regained some of its pricing power following a nasty airfare war.

That’s the danger for the airline industry and the tax cut. Will the airlines just use the windfall to launch into another round of airfare wars? The industry has squandered windfalls in the past, such as from plunging oil prices.

Oil Company Tax Gusher

Speaking of oil, the oil industry should be another beneficiary of the changes in tax law. According to Bloomberg, it pays the second-highest effective tax rate of any sector – 37%. So a drop to 21% is an obvious boost.

Other tax perks for the industry were left in place. For instance, the century-old tax treatment of allowing oil companies to expense intangible drilling costs was retained. As was another century-old treatment that affects small independent companies and royalty owners – the percentage depletion deduction.

A new provision allowing businesses to expense the full cost of new investments in certain plant and equipment for the next five years will give a boost to many in this capital-intensive industry. Giants like Chevron have an $18.3 billion capital and exploration budget in 2018 and ExxonMobil has an even bigger $22 billion budget.

And it’s not just the big oil firms to benefit. The oil refining segment should really get a major boost. The largest company in the segment, by market capitalization, Phillips 66 (NYSE: PSX), will receive a 16% boost to 2018 earnings according to an estimate from Piper Jaffray’s Simmons & Company energy investment bank unit.

Phillips 66 is a leading player in each of the segments it operates in: refining, chemicals and midstream.  The company will invest $2-$3 billion in capital investments this year. Yet, it still increases payouts to shareholders on a regular basis.

Retail Rebound

The third sector to look for benefits from the tax cut is retail. The tax cuts should give them a respite from being Amazoned out of existence, thanks to a soon-to-be increased cash flow. This holds true for the vast majority of retailers whose operations are domestically based. Wall Street analysts believe the average retailer will get a 15% earnings boost from the changes in the tax law.

One of my favorites in the sector is Ulta Beauty (Nasdaq: ULTA), which operates 1,058 stores and generated $4.8 billion in revenues in 2016. It should get a double boost – not only from the tax cut itself, but from consumers with a little extra in their pocket spending on simple luxuries like makeup, lip gloss, etc. Perhaps that’s why the stock is already up over 6% year-to-date.

Hopefully, the tax cuts will reinvigorate this once ultra-high growth company. Especially since parts of the company are still growing fast… e-commerce sales in its latest quarter did soar by nearly 63%. Management has forecast sales growth for 2018 in the 10% to 11% range.

Bottom line for you – the number one item to remember regarding the tax cut is that, like all three companies I spoke about in the article, it will boost domestically-focused companies much more than it does multinational companies. Of course, multinationals have other things going for them, such as a weak U.S. dollar.

Here are other important points to keep in mind regarding the tax cut: Even for companies within a sector that will generally receive a boost from the tax cut, some companies will benefit more than its competitors. So before investing, make sure to do your due diligence to see whether a company will really get a big bump from the change in corporate taxes.

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Source: Investors Alley