Editor's Note: Last Thursday I held a teleconference to
talk about one thing: how to generate 100% returns with stocks.
During the conference I spoke with my colleague, Chris Preston,
about one stock in particular that delivered a 110% gain
subscribers in just four months.
We've decided to share this stock with readers today since
a recently announced tech IPO is likely to draw even more
attention to the company. Here is an edited excerpt from my
discussion with Chris last Thursday…
Tyler, we've talked about what happens after growth catalysts
become more visible to the market. How you often see a sudden
rush of investors into the stock, analyst upgrades, higher price
targets, institutional buying, increased media coverage … all
things that help fuel a higher share price.
So let's talk about a specific example. You recommended a
in September, 2013. And five weeks ago you recommended
subscribers lock in a 110% gain. That stock doubled in just four
months. I'm not familiar with Ambarella, so first off, explain
what Ambarella does. How did this success story unfold, and do
you still like AMBA?
First I should mention that even though we locked in a nice gain,
I recommended that subscribers hold on to the other half of their
shares for the long term. We still want exposure here. It just
made sense to grab that quick gain while it was there.
Ambarella makes semiconductors for high-definition video.
They're best known for supplying chips for GoPro wearable
cameras. But they also derive significant sales from security and
automotive cameras, too. The company has been a huge success
since it was founded in 2004. And revenues have been growing
revenue by around 25% over past two years, but (they are)
I know you always
highlight specific catalysts
, or reasons to own a stock, to your subscribers. What did you
highlight for AMBA? What catalysts were you looking for when you
First, keep in mind AMBA was a relatively small company when I
recommended it; its market cap was around $400 million. So it was
right in that sweet spot where I like to invest. That was the
Second, I saw revenue growth accelerating from 20% to 25% to
30%, and I expected that to continue based on estimates of sales
from GoPro, auto and security cameras.
Then third, and I don't usually do this, there was a good
chance for a really quick pop in shares from an earnings
announcement. The stock had sold off going into earnings, but not
for good reasons. So we jumped on it.
And finally, the stock was cheap, especially on a forward P/E
basis, since it traded at 17-times forward earnings, but was
growing EPS by 50%. All of these things came together to suggest
a wide disconnect between the share price and the growth the
company was enjoying … and was likely to continue to enjoy.
And what is happening with the company now?
One thing is that AMBA is developing a wearable camera for Google
) for its "Helpout" application. This will be a high-def wearable
camera that connects people over the Internet for training and
consultation … applications are things like cooking, computer
software training, health care … basically anything where the
visual connection is really helpful. And it's a more
sophisticated option to Skype or FaceTime.
But probably the biggest near-term buzz is going to surround
GoPro's initial public offering. The company just filed under the
JOBS Act with the SEC, so its financials are still confidential.
But once those become public, we're going to know a lot more
about GoPro's financial status, how AMBA fits into that mix and
what the future potential for AMBA to grow along with GoPro
It sounds like this tech IPO for GoPro is going to be something
to watch. I assume you'll be updating your subscribers as that
stock comes to market? And let them know how AMBA will be
Absolutely, even though I recommended selling half of the
position in AMBA. There is still a lot of upside here. And we
still have skin in the game, so I'm following the stock
If you'd like to learn more about Tyler's catalyst
investing strategy and the six stocks he discussed in the
teleconference, including Ambarella, as well as the pending
GoPro public offering,
learn more here