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"Stocks Just Keep Getting Cheaper"

In our daily briefings here, we typically focus on one topic or one stock.

Every so often, however, a number of developments break at once on stories or stocks that we're following.

So Radical Technology Profits Editor Michael Robinson and I took a quick run through some of our best ideas this week.

And today I'm giving you a rundown on that strategy session.

"Geez, Bill," Michael remarked when we finished with our conference call, "when I look at all the opportunities that are piling up here because of the sell-off in the market – coupled with the constant advance of technology – I almost feel as if there's a big stack of cash sitting on the kitchen table … just waiting for someone to grab it. I'm already pretty jazzed about what I think tech will do in the year's second half. And this doggone sell-off just keeps making the stocks cheaper."

So let's take a look at some of the best ideas we talked about.

And we'll start with a venture-capital play we gave you all only a week ago.

Like a Wealthy Investor

Back on April 29, Michael told you about a new fund that gives Main Street investors access to "late-stage" (pre-IPO) startup companies.

And we promised to keep you posted on new developments.

The fund in question is the SharesPost 100 Fund (PRIVX) – which I still think is one of the coolest profit opportunities we've brought your way in the two-plus years we've been publishing Private Briefing.

As we explained in that column – "Note to Self: At 9:30 This Morning, Become a Venture Capitalist" – in a search for maximum tech-sector profits, almost nothing can eclipse the windfall profits you can reap from investments in Silicon Valley startups.

Unfortunately, those investments are almost always reserved for the "investment elite" — the so-called "accredited investors" who already have hundreds of thousands of dollars in liquid net worth, and the connections that helped them build it.

But we uncovered a way to get around that restrictive and exclusionary rule. It's the SharesPost fund, which allows you to invest in late-state startups for as little as $2,500.

That's about what you have to pony up to invest in some of the more popular mutual funds.

This is a brand-new type of investment, run by a legendary VC player, a veteran investor named Sven Weber. And because it's just been launched, we're giving you access to a true "ground-floor" profit play.

"As a 30-year veteran of Silicon Valley – including time as a senior advisor to a high-tech venture capital (VC) firm – I've had a lot of experience with startup companies and the financing that accompanies it," Michael said of the PRIVX fund. "I know – just as you said, Bill – that even with the higher associated risks, the payoff can be gargantuan … many, many times what you could ever hope for from even the best publicly traded tech stocks. And I know that when you invest in startups via the specialized funds that VCs run for just this purpose, you have the best possible chance of grabbing the biggest winners – thanks to the expert insights that the well-connected folks who run these funds obviously have."

In our initial report, we told you that Weber had already made his first "late-stage" investment.

Today we're reporting back to tell you that he's made another.

The SharesPost 100 Fund has now invested in Hightail Inc., "a great play on the growth field of cloud computing, where clients pay to have data and applications hosted at remote data centers and delivered over the Web."

You can learn more about the fund by clicking here.

Making Sense of Sensors

Sensor makers – including so-called "MEMS" (Micro-Electro-Mechanical Systems) – have taken a beating with the rest of the tech sector.

And while many investors are hitting the exits, Michael is urging folks to view this as a time to buy.

"Bill, there's just no getting around the fact that MEMS are becoming a pervasive – and I mean pervasive – component of the global tech landscape," he said. "Heck, they are everywhere. You'll find them in smartphones, tablets, laptops, printers, cars and trucks, aircraft, and cameras … and lots of other things, too. These will be huge in medicine – and will find their way into a whole host of life-saving medical devices."

And the best part of all this is that we're still in the early stages of this particular global tech revolution.

According to a new report from IC Insights, MEMS will play a huge role in the optoelectronics sensors and discrete devices market.

"Last year, that segment had total worldwide sales of $58.6 billion," Michael said. "IC Insights is predicting 8% higher sales this year to $63.5 billion. But it actually gets better next year. The researcher sees a 16% increase in sales in 2015, giving us a two-year gain of nearly one-third."

And that's in addition to MEMS growth in other areas.

We continue to particularly like InvenSense Inc. (NYSE: INVN), recommended at $14.61 a share in the June 2013 report "Double Your Money on This 'Mobile Wave' Stock." After grabbing a peak gain of 67% for us, the stock has sold off. We still have a gain of about 26%, and Michael says that – for long-term players – this is one of the top sensor plays you'll find.

"I've often said during our conversations, Bill, that if your readers wanted to just buy one sensor stock and put it away … this would be a great candidate," he said.

If you're a big football fan – as I am (I've followed the Pittsburgh Steelers since the "Immaculate Reception" days … who do you folks like?) – you know of one high-profile area where sensors are being used – in the study of concussions. Researchers are putting sensors inside helmets to study the forces at work during hard-hitting games, figuring that their findings can lead to better helmet designs … and fewer injuries.

Chip Shots

One of our very best calls here at Private Briefing has been our early-year 2013 prediction that the semiconductor sector was poised for a big rebound.

We were right, and the multiple recommendations that flowed out of that prediction made you folks lots of money. In fact, we reiterated the call at last year's midpoint, and then came back with a prediction that the semi sector would be even stronger here in 2014.

The microchip sector continues to show a lot of strength, the latest reports show.

The Semiconductor Industry Association (SIA), the trade group representing U.S. chipmakers, just announced that worldwide sales reached $78.47 billion during the first quarter – the highest total ever for the first three months of the year.

In March alone, worldwide chip sales reached $26.16 billion for the month of March 2014, an increase of 11.4% on a year-over-year basis. The market in the Americas region is even stronger, with sales jumping 16.1%.

"The global semiconductor market has demonstrated consistent momentum in recent months, and sales are well ahead of last year's pace through the first quarter of 2014," said SIA CEO Brian Toohey. "Perhaps most impressively, sales in March increased across all regions and every semiconductor product category compared to last year, demonstrating the market's broad and diverse strength."

Equipment sales have also been strong, indicating that chipmakers expect this strength to continue.

SEMI, the trade group representing the producers of chip-manufacturing gear, says equipment-makers signed $1.28 billion in orders in March, for a book-to-bill ratio of 1.06. That represents a year-over-year increase of 16.1%.

Three semi stocks that we continue to like a lot are:

  • Advanced Micro Devices (NYSE: AMD), which Michael re-recommended in a May 1 report, saying the stock could double from here.
  • Avago Ltd (Nasdaq: AVGO), which is up 26% since we told you about it back on Dec. 17.
  • Ambarella Inc. (Nasdaq: AMBA), recommendedon Aug. 8 at $16.60. The stock rose as high as $36.49 for a peak gain of 120%. The stock is still up 69%, and we believe it can recoup all its gains – and then some.
  • And Intel Corp. (Nasdaq: INTC), which we detailed in a report back in July.

Putting a "Byte" on the Web

Just this week, Michael told me that Avago has hit his radar screen again.

"If you look at the data, and at the outlook for the Web, it's a mixed bag," he said. "By that I mean it's both exciting and daunting. There are lots and lots of opportunities here. Analysts estimate that by 2016, we'll have three networked devices per person. The equivalent of 1.2 million minutes of video will cross the Web every second. So we'll be able to do lots of cool things as consumers, and make lots of intriguing investments as investors. But we have to make sure that the Internet can keep functioning."

And the latest research says that, five years from now, Internet traffic will be triple what it is currently.

In short, five years from now, our overstressed network will be carrying 109 exabytes of traffic a month. My Dad is a physicist by education and an engineer by training, so I know a bit about big numbers. And 109 exabytes is a numbing figure. It's expressed as 10 to the 18th power – or 1,000,000,000,000,000,000. To give you a bit of context, Earth is 93 million miles from the sun – and written out that's just 93,000,000.

Says Michael: "If we're going to save the Internet, we need to find a technology that can speed everything up in a way that allows all that bandwidth-eating video to run stress-free."

Avago has some of the solutions.

For instance, its products include a series of chips that convert data flowing along a cable into multiple streams running in parallel. That greatly increases data-center "bandwidth" without taking up valuable real estate inside server racks.

Avago also makes a family of chips known as ASICs (application specific integrated circuits). Those chips are optimized to handle more than 200 data streams simultaneously.

So it's no surprise the company is gaining market share. In 2012, Avago had roughly 18% of the data center ASIC market. Avago projects that by 2015 its share of this sector will nearly double to 33%.

It's also at the forefront of another Web-based trend: The move toward optical networking components.

According to one technical-analysis report that I perused earlier this week, Avago could be readying itself for a new run. As the analyst wrote, Avago's stock "pulled back in April but is once again testing the high at $65.83. If the price moves beyond that high it could run again, especially given the strength of the trend. First target is $72.50, although the price could go higher over the longer-term."

The predicted technical "breakout" could already be happening. Avago shares actually set a new 52-week high of $68.93 yesterday. So keep an eye on them.

Then there's Intel, the one-time PC giant that's making a stand in the "wearables" sector now and aims to be a player in the "Internet of Everything" as that evolves.

Rehabilitating a Giant

Just yesterday, stock-market researcher Trefis.com reported that Intel has a very good shot at grabbing more market share in the mobile market.

Back in 2011, Intel planted its flag in the mobile market with the acquisition of the Infineon Wireless Solutions Business. This gave the company a top-slice ranking a near-top ranking in the market for cellular baseband processors, even as Qualcomm Inc. (Nasdaq: QCOM) and Samsung attained their dominance through the Apple iPhone and Android operating systems.

Although it's taken both cash and time, Intel is gaining traction: While it currently has less than 1% of the smartphone market, it does hold 4% to 5% of the global tablet market, Trefis says.

Intel is now making a big internal move to get out of the diminishing feature phone and 2G/3G business, and muscle its way into the integrated long-term-evolution (LTE, or "Lite" in sector parlance) solutions market.

4G/LTE is the future of wireless mobile devices. As we told you in a report back in 2012, LTE is the wireless standard experiencing the strongest global growth as carriers shift to it. The market is expected to double by 2016.

That means the Intel transition strategy is a good long-term move that will cost the company some major revenue this year, but will start to pay off in 2015.

In February, Intel introduced a series of new products/updates at the Mobile World Congress. Its first LTE solution, the 7160, is now available in the Samsung Galaxy Note 3 Neo and the Asus Fonepad 7, in addition to the previously announced Samsung Galaxy Tab 3, Trefis says.

Another product, the 7260, will start shipping this quarter. Then the floodgates open.

"The company showcased its next-gen Atom SoC products – the Atom Z34 family of SoCs (Merrifield), the Atom Z35 line (Moorefield), as well as Cherry Trail and SoFIA," the researcher said. "Merrifield will start shipping in smartphones in the current quarter. Moorefield will hit production in the second half of 2014, and Cherry Trail and SoFIA towards the end of the year. [Intel] recently announced multi-year, multi-device agreements with Lenovo, Asus, Dell and Foxconn to expand availability of out-of-base smartphones and tablets."

After shipping only 10 million "tablet" chips last year, it is on track to hit a goal of 40 million shipments this year. It is heavily subsidizing producers' costs to get design wins – a move that will crimp its profit margins but will boost revenue and production. Intel is paying tablet makers to defray the higher cost of using its Bay Trail chips instead of ARM-based processors, and is also helping its customers cover the engineering costs of designing an Intel tablet.

On Tuesday JPMorgan analyst Christopher Danely argued that Intel should follow the lead of Texas Instruments Inc. (Nasdaq: TXN), and shut down its mobile business.

That shift allowed the Dallas-based TI to build on its strengths in analog chips – in essence, allowing a healthy core business to "shine through."

But Bernstein Research analyst Stacy Rasgon has countered by arguing that the two companies – Intel and TI – are very different. And he makes a good case.

Because Intel's core business is still the shrinking PC market, Rasgon stressed that the Santa Clara-based giant faces a tougher dilemma. It also faces a crowded, competitive field in mobile, where ARM-based chips are dominant.

"Very simply put, [Intel's] market is moving away from them," Rasgon argued in his note to clients. Intel could either adjust to the new market situation, "or risk increasing irrelevance and, potentially, eventual death."

Because it has a huge lead in manufacturing – a very expensive proposition in the chip sector — it can make smaller and smaller, and increasingly powerful, chipsets. And Intel is wagering that this competency will let it catch up in mobile.

Other analysts believe that could happen, and Rasgon says Intel is essentially correct in pursuing that strategy.

"The alternative is they pull back," Rasgon told MarketWatch.com, which could be risky. For if their rivals "close the gap" in manufacturing technology, "the one advantage that Intel has, they're toast."

Besides, Michael says, by getting a beachhead in mobile, Intel also gains time to build a business on the emerging "Internet of Everything."

"And that's going to be a great potential business," Michael said. "I've seen analyst predictions of the size of that market ranging as high as a $15 trillion to $20 trillion market. The demand for chips will be huge – and Intel will be sitting in a great position. Wearables, too, hasn't been talked about enough. Intel has established a strategy that is targeting dominance in that emerging field. It's going to be exciting to watch. And we believe the company will pull it off."

A final check: Michael gave us great updates on a number of existing recommendations.

But you really need to see what he's working on next.

It's a stunner.

If you want to take a peek, check it out here.

Have a great weekend, folks.

[Editor's Note: Unless otherwise directed, we recommend investors employ a 25% "trailing stop" on all holdings.]

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