Three Ways to Profit Now from the Augmented Reality Boom

By Lou Basenese, on Tuesday, September 15, 2020

The market for augmented reality (“AR”) is exploding.

By 2025, it’s expected to be worth over $198 billion.

And as I shared last week, that makes now the ideal time to start positioning our portfolios to profit.

The question is, what’s the best way to invest?

Most analysts have it all wrong. They’re saying, “Apple and Microsoft should be at the top of your list of AR stocks.”

Seriously? Forget about generating tiny amounts of revenues from AR — at the moment, they don’t generate any AR revenues.

Even when they do, it won’t be enough to matter for years. And by then, it’ll be too late for us to maximize our profits.

So forget about mega-caps like Apple and Microsoft.

Today I’ll show you three ways to invest in AR that are smarter…

And potentially, far more profitable.

Go for the Guts

Every major consumer electronic device includes vital technology components — components that enable it to perform its tasks.

In the AR market, many of those components are supplied by Himax Technologies (HIMX).

For years, the company generated the majority of its revenues from integrated circuits for digital screens.

But now its business is shifting. Increasingly, it focuses on providing depth-sensing camera components and wafer-level, liquid-crystal-on-silicon optics to leading AR device makers.

These components perform vital functions like improving visibility of AR displays, enabling smaller processing chips, and gauging distance so digital objects can be placed in the users’ line of sight.

Reports confirm that Google and Microsoft are already customers. But as the AR trend kicks into high gear, look for other device manufacturers to quickly be added to that list.

It’s worth noting that Google is also an investor in Himax, making it a natural acquirer down the line.

And with a $677 million market cap, the company’s valuation could realistically soar to several billion dollars before a deal is announced.

Sense and Display

Two other AR-related investments to consider are $5.5 billion market cap Lumentum Holdings (LITE) and $241 million market cap MicroVision (MVIS).

Like Himax, both make component technologies that promise to be vital to all leading AR devices.

Lumentum focuses on 3D sensing lasers. These function like radar, enabling a device to quickly assess its environment. In AR’s case, this involves “sensing” space to determine the proper overlay of digital information for wearers of AR devices.

The beauty of Lumentum as an AR play is that its technology is already being deployed. It’s already being used in leading-edge tech trends such as driverless cars, smartphone mapping applications, and industrial automation and controls.

In other words, there’s little to no technology risk here.

Furthermore, Lumentum has already been mentioned in connection with Apple’s upcoming AR glasses.

As for MicroVision, it’s a leading maker of lasers, as well. But instead of being used for sensing, the company’s technology is used for displaying and projecting images and data onto glass.

If you’ve ever driven a car with a heads-up display that projects speed and navigation information onto the windshield, you’ve experienced Microvision’s technology in action.

The same approach is being used, albeit on a much smaller scale, to project images onto AR glasses.

In this case, though, we shouldn’t have to wait for the AR revenues to start ramping up. Management is looking to maximize value ASAP.

More specifically, they’ve hired an advisor to “explore strategic alternatives.” This could include the sale of its AR tech, a strategic investment, and/or an outright sale of the company.

Either way, shares are poised to react significantly to the upside once the result of this process is announced.

That means a small investment could pay off big. And quickly.

Bottom Line: Go Small to Go Big

At the end of the day, the path to maximize profits when investing in the AR mega-trend is clear:

Avoid investing in the sector’s boring, watered-down mega-caps.

Instead, focus on smaller AR stocks that are under-the-radar.

Not only do they offer “pure-play” exposure which increases our upside potential…

But they also make for natural takeover targets — which increases our profit potential even further.

Ahead of the tape,
Lou Basenese
Lou Basenese

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