Working Two Sides of the Fence
11/10/2006 12:00 am EST
Gregory Spears and his team analyze companies with investment potential arising from commercial, as well as defense opportunities. Here, they recommend a business whose cutting-edge technology is making significant inroads into both of these expanding sectors.
"Microvision (MVIS NASDAQ GM) creates transparent imaging with advanced display and imaging engines called Integrated Photonic Modules (IPM) that project bright, high-resolution, high-contrast, full-color images using specialized low-power, low-cost chips. The IPMs can be embedded into a wide variety of products in the defense, automotive, communications, gaming, scanning, and medical industries. The company has a portfolio of 119 approved patents and 79 pending patents and is ISO 9001 certified, which allows it to bid for high-reliability defense and industrial products.
"Microvision new IPM technology is based on MEMS, Micro-Electro-Mechanical System, a revolutionary hybrid of mechanical and semiconductor elements. MEMS technology enables the development of smart products (like a smart valve, a smart hinge, a smart shutter, a smart mirror, a computer chip that can "see" and react, etc.) by combining the computational ability of microelectronics with the perception and control capabilities of micro sensors and micro actuators.
" We prefer to invest in companies like MVIS that have dual income streams from both the defense/security industry and mainstream commercial demand. In mid-September MVIS announced a $5.9 million contract with the U.S. Army for full-color, daylight readable, transparent helmet-mounted displays (HMDs), which enable the vehicle commander, driver, and gunner to see the same information at the same time. General Dynamics is the prime contractor for a variety of advanced electronic warfare programs, and this is a feather in the cap for tiny MVIS.
"Recently, MVIS also announced a partnership with a Tier 1 automotive manufacturer to develop transparent displays that can be projected on a car windshield. The company is also working with Europe's largest organization for applied R&D to develop miniature portable PowerPoint projectors and even smaller built-in components that turn cell phones into still (and motion) picture capture and projection devices. MVIS' latest device is an upgraded bar code scanner that works with a BlackBerry handheld or other smartphones to collect inventory and other data in the field and compile it on a spreadsheet application.
"MVIS was part of the Internet and tech bubble, and traded as high as $68. Given its technology and emerging partnerships, at $2 and change, we think the stock could increase 3-4 times in value over the next 12-24 months. MVIS has $22 million in cash and about $7 million in debt. Only 20% of the float is owned by institutions, so there is plenty of room for institutional accumulation to support a long-term upmove."