The Best Google Glass Stocks (Part 1)
Profiting from the Wearable Revolution
My neighbor invited me to a small get-together this past weekend, and I was happy to oblige.
I enjoyed the beer and pizza, but I'm not so sure about the company...
Now, don't get me wrong – everyone there was incredibly friendly. However, everyone's face was also buried in a phone.
The image above says it all. We have become separated from each other in a physical sense, while simultaneously being more connected than ever.
And with the advent of wearables devices such as the Google (NASDAQ: GOOG) Glass and Apple's (NASDAQ: AAPL) iWatch, we are becoming increasingly integrated with technology.
This process of integration raises legitimate concerns involving privacy and social interaction. The prospect of losing ourselves in a virtual world is quite unnerving to many of us.
But when it comes to wearable devices, I am actually quite optimistic in regards to the social benefits this technology will have. In fact, I believe wearable devices will eventually make all those face-in-phone gatherings a thing of the past.
Back to Reality
The simple fact is that smartphones are physically distracting. In order to operate these devices, users need to dedicate their eyes and hands. The process of taking out a smartphone and typing in text removes us from whatever social situation we are currently in.
But wearables allow us to remain part of social situations with minimal interruptions.
If a display is hovering in front of your eye, a quick glance is all that's needed to read a notification. And if gestures and voice commands control your device, there is no need to lose yourself in input and navigation.
These are the two most important factors that will drive the wearable industry: input and output. In other words, interface and display.
And while Google and Apple will surely see benefits from the blooming wearable device industry, it is the companies providing viable options for interface and display that are set to experience the highest rates of growth.
Later this week, I will inform Energy and Capital readers about investment opportunities surrounding interface input.
But for today, I am going to focus on the hottest play in display.
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Google recently announced it has invested in Himax Display Inc. (HDI), a subsidiary of Himax Technologies (NASDAQ: HIMX). Google will hold a 6.3 percent stake in HDI with an option to more than double that share to 14.8 percent, at the same price, within one year of closing.
Himax is a semiconductor company that manufactures advanced display drivers, most notably liquid crystal on silicon (LCOS) chips.
These LCOS chips are used in a variety of applications, the most important being head mounted display (HMD) and head-up display (HUD).
Considering this recent deal, it is almost certain Google Glass is using a Himax display. It is also clear that Google is invested in Himax as a critical partner for Glass and is confident in the future success of the product.
When news of this deal reached the market, Himax shot up almost 35 percent, with volume jumping from less than 5 million to almost 40 million. Take a look:
And that's not even the whole story – Himax shares are up 375 percent over the past year.
Himax reportedly intends to increase its LCOS capacity from 300,000 units per month to an eventual 2 million units per month.
With Google's stake in HDI, the commercial release of Google Glass, and Himax ramping up production, a huge jump in revenue for the company is just about certain.
Furthermore, Himax's involvement with a tech giant such as Google both legitimizes and brings a ton of attention to the small cap company. Don't be surprised if Himax begins contracting with more competitors in the wearable market.
But despite the promising growth opportunity here, I wouldn't recommend buying on news. Himax is currently trading at $7.57, and a buying opportunity would be much closer to a previous support level of about $5.20.
As the demand for HMDs increases, investors may also want to look into Kopin Corp. (NASDAQ: KOPN) and eMagin Corp. (AMEX: EMAN), two more semiconductor companies manufacturing microdisplays.
And while investors wait for a correction in Himax shares, there is a current buying opportunity on the interface and input side of the wearable device industry. I'll be sharing that opportunity with readers in Part 2.
Turning progress to profits,
Energy and Capital's tech expert, Jason Stutman has worked as an educator in mathematics, technology, and science... Before joining the Energy and Capital team, Jason served on multiple technology development committees, writing and earning grants in educational and behavioral technologies. Jason offers readers keen insights on prominent tech trends while exposing otherwise unnoticed opportunities.
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