AAPL and PANL or, Looking Behind the Curtain (For Values)

Looking behind the curtain for investing choices About a year ago – on September 18, 2009 – I wrote about a company called Universal Display PANL, which is at the center of the blossoming OLED technology sector and its derivatives. OLED stands for organic light emitting diode and is a relatively inexpensive, high-efficiency method of producing light and images.

PANL's focus is more on the development of new technologies within the OLED space and patents as opposed to distributing the actual products to consumers themselves. I bring this up not to gloat about the tremendous year the stock has had, but to remind you about hidden gems that are usually just out of sight when it comes to investing.

After researching PANL last year, I simply thought their technology and patents allowed them a strong position in the fast-growing display and efficient lighting space. The shares are up roughly 80% over the past 52 weeks.

Most of the U.S. is gaga over smartphones these days (myself included). I therefore thought I'd focus on the iPhone and the new Samsung Galaxy Tab as examples for today's article.

I was recently listening to my 80-year-old grandmother (who is not a technology geek like myself) wax poetic about her new iPad. She just cannot put it down and she says it's changing the way she reads (she's up to three books per week). This got me thinking about how great innovations throughout the generations have not only changed the way we lived, but made many people a ton of money over the course of history.

When Apple AAPL first went public in 1980, the IPO created more instant millionaires than any that had come before it – about 300 more, to be more exact. Remember, this was way before the iPod, iPhone, iPad (and even the iMac) were even a vision.

But investors don't have to buy a stock ahead of their IPO to capitalize on a company's success. What shrewd investors must do, however, is a bit more homework about a company's product line.

After finding a product or technology you believe could either change the way we live or become an integral part of our daily lives, don't just look at the company distributing the product to the masses and paying all those advertising dollars. Rip off the cover and look inside (and around it) for some potential hidden values.

The day the iPhone first came out, some of the initial videos were showing not just how cool it was to use, but what components were inside! Of course, the iPhone is an extreme example because everyone wanted to know who was manufacturing the guts of the device.

Everything Apple had touched in recent years seemed to be turning to gold. As such, if millions of iPhone units were flying off the shelves, the Broadcom BRCM chips inside (as well as other components) were flying right along with them. Consequently, investors were looking for increased revenue out of BRCM and others.

So with the new Samsung Galaxy Tablet, for example, if you believe it could be a hot seller when it comes to the States on multiple, you could begin to research what companies provide the device's guts. ARM holdings PLC, which licenses its technology to produce the chips that are used in many smartphones, is one company that is “behind the screens.” ARM chips are manufactured by a multitude of companies (licensees) including Samsung, Texas Instruments, Qualcomm (snapdragon), and others.

You can also examine companies that provide support for a fast-growing sector such as smartphones, as they may also offer potential investment opportunities. Companies like Skyworks Solutions SWKS – which provides components for mobile infrastructure – may be one place to start.

When researching my potential equity choices, I try to look for both unrealized value in the stock price and a niche that only this company can fill, perhaps with minimal competition. Of course there is no guarantee of success and with new products come new innovations (and perhaps new components that could be sourced elsewhere). It's important to always stay on your toes!

Photo Credit: Shaire Productions

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