As an investor, when you are playing a momentum game, you sometimes just have to jump in when you see a stock moving
Recently I was tempted to hop into technology minnow Audio Pixels (AKP) after it emerged from its (investment) shell and people quickly began to take notice of Fred Bart’s revolutionary speaker technology.
Our portfolio manager says of his investment in Audio Pixels: “It’s pure speculation when something has momentum. You could tell it was going to go up and I jumped in as soon as I could. I’m still holding on for the ride.”
In July 2010, that price was $3.50 and the market cap was about $80 million. At present, Audio Pixels stock is $19.80 and its valuation well over $500m.
It’s a spectacular story.
But if you are really playing the momentum game, you buy big stakes in a portfolio of start-ups. Just ask Bart — he’s an operator with more backstory than the entire executive contingent in Australia’s top 200 companies.
Bart is the chairman of Israel-based Audio Pixels — he has also been a rag trader and a poker champion at Crown casino — who with wife Cheryl controls a portfolio of start-ups that include ASX-listed Electro Optic Systems (EOS), a company that tracks space debris, and an unlisted biotech doing research on an immunotherapy vaccine.
For those who don’t know, Audio Pixels has ploughed millions into developing a technology it hopes will be the world’s first digital speaker.
“We’ve had serious interest from everyone around the globe,” Bart tells The Australian: “It’s a game-changing technology.”
He’s not wrong — if it works.
Most consumer electronics with loudspeakers last three years or less. That lifespan could theoretically be in need of this technology, which creates the kind of blue sky that would make even NASA envious.
The item that really put a rocket under Audio Pixels shares and sent them doubling in price was the news “its test structures have surpassed one trillion cycles, with Zero Failures (the company’s emphasis)”.
“A trillion is a big number,” says our portfolio manager. “In order to get testing equipment that can test a trillion times you have to be on to something.”
Bart says the technology has the capability to produce “directional sound”, which apparently means you don’t need headphones. It would also reduce the power needs of a mobile phone, 30 per cent of which is used by the speaker. Audio Pixels believes it has developed a method of developing sound — using micro-electromechanical structures, or MEMS — from the chips themselves, eliminating the need for the bulky loudspeaker mechanism.
Bart says the company is on track to provide a sample product before late September. There are any number of reasons that could derail the project, but right now the company has hope on its side.
This is a common theme. None of Bart’s portfolio companies is making money, but they have a commodity investors often value even more — hope.
I know this is hard to believe, but as a keen gambler, Bart understands it well.
In the investment world, often the most profitable time in terms of share price appreciation, which reflects that hope or expectation, is before something concrete needing to be done.
In mineral exploration, for example, there is that hope once you find a little bit of gold because then you start imagining it’s going to be Lasseter’s Reef — an alleged discovery, announced by Harold Bell Lasseter in 1929 and 1930, of an astonishingly rich gold deposit in a remote location in Central Australia. Lasseter’s notes are conflicting and its exact whereabouts is a mystery — if it exists.
When it comes to actually doing something and developing a project, then more often than not the reality can be very different.
Richard Hemming is an independent analyst who edits undertheradarreport.com, which provides investment opportunities in small caps.
r.hemming@undertheradar report.com.au
AKP Price at posting:
$29.88 Sentiment: Hold Disclosure: Held
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