Chris Hill: Hey, thanks for watching. I'm Chris Hill,
I'm joined by senior analyst Jason Moser.
Jason, thanks for being here.
Jason Moser: Thanks for having me.
Hill: We're going to be talking about augmented
reality; a fascinating industry. Jason's got
a couple of stocks if you're looking to put
them on your watchlist. And if you're looking
for even more stock ideas, you can go to
Fool.com/2020, Motley Fool’s CEO, Tom Gardner,
has got his top picks for the year,
check that out when you get a chance.
Jason, when we think about the augmented reality
industry, who are some of the bigger players?
Moser: Yeah, I think right now as this space
continues to gain traction, the big players
really, they're kind of the usual suspects,
and companies like Apple, Microsoft, Facebook
and Alphabet. They're the companies that have
made a lot of investments in the AR space,
immersive technology, virtual reality, things
like that. They've made a lot of investments
upfront and so they have a lot of the software
and even some of the hardware that is really
helping drive this market forward today.
Hill: Obviously, it is a tough environment
for stocks across all industries, but when
you think long-term is augmented reality,
immersive technology? Are they, sort of,
better setup for the next five to ten years than
maybe some of the other industries out there?
Moser: Yeah, absolutely I think so. I think
that it’s a novel technology right now that
is starting, like I said, is gaining a lot
of traction, they're finding new applications
for it all the time, which I think is what's
really exciting. So, certainly the enthusiasm
for immersive technology is gaining traction.
We're seeing companies now use it in more ways,
from things like, we're doing here with
virtual meetings to even retail experiences.
Companies like Ulta and Wayfarer, even the
Home Depot are using it in ways to help buyers
make better decisions on the spot, which is
really neat. I've used it personally, and
it seems like it works pretty well.
I think, also exciting in the space, it's
less consumer-facing, but we're seeing a lot
of really interesting use cases for augmented
reality on the industrial side. I mean, while
that is less consumer-facing, it is really
exciting, because you see how all of these
companies that make things, that are producing
all of these things that we use in our everyday
lives, you can see how these companies are
using this type of technology ultimately to
make better decisions to whittle down their
production time, save costs and ultimately
bring more products to market for consumers.
And so, all things put together, you know,
you've got Digi-Capital up there today who's
estimating that mobile augmented reality is
going to be a major driver of what they expect
to be a better than $100 billion market for
virtual reality and augmented reality by the
year 2021. That's obviously just next year,
so plenty of enthusiasm in the space, clearly
a very big market opportunity, and we're still
in the very early innings for it.
Hill: Before we get to the stocks, are there
any metrics that investors should be looking
at when they're doing research?
Moser: Yeah. I mean, there are a lot of companies
out there today pursuing this technology,
a lot of software companies. And I think a
metric with a lot of those companies that
they continue to track is something called
Annualized Recurring Revenue, or ARR, as they
refer to it in their calls and their releases.
And that just gives you a good idea of not
only how they’re retaining their customers,
but signing new customers. It can give you
an idea as to the pipeline of the
business and how they're doing.
Another one that I track, though, that I think
is really more industry-specific, and it's
a little bit maybe more -- it's a little bit
more of a unique metric, I guess, but I go
through earnings calls and earnings releases
and presentations to track the language and
see how often they're using this language,
how often they're using the words augmented
reality or virtual reality or immersive technology?
And there's clearly been a trend here,
over the last five years, where five years ago
you really would not have heard these words
mentioned at all, now more and more companies
you're hearing these words used more often
in their calls and their releases. So, that's
just another way to kind of keep track of
the actual, sort of, the boots-on-the-ground
research there. How companies are viewing
this stuff and how they're incorporating it
into their businesses?
Hill: It's a lot easier to do something like
that now that you just use the Control-F feature
to just scan the document looking for that
rather than having to read through every page.
Moser: A very good tip, I use
that one all the time. [laughs]
Hill: Before we get to Jason’s stocks, again,
go to Fool.com/2020, you can get Tom Gardner's
top stocks for the year.
Jason, for anyone who's looking to maybe add
a stock or two from the augmented reality
universe to their watchlist, what do you got?
Moser: Yeah, I mean, there are a lot of stocks
out there for sure. And so, I wanted to take
a look at this from the hardware side and
from the software side, beyond the usual suspects
that I mentioned at the top of the broadcast here.
On the hardware side, there's a company
called Lumentum, it’s ticker LITE. And they
are responsible for -- this is a mouthful here --
Vertical Cavity Surface Emitting Lasers,
or VCSEL technology. And ultimately this technology
[is] responsible for all of the 3D sensing
capability that is being incorporated into
all of these devices today. Now, right now
we're seeing a lot of that technology in our phones.
The neat thing about
Lumentum is, No. 1,
it's the market leader in that space; in the VCSEL
technology space. But it’s also basically
hardware agnostic, you're going to find their
technology in Apple products, in Android products
and everywhere in-between. And so, as we become
a more device-driven society, as we rely on
things beyond just our phones, we're finding
this technology being introduced into devices
all over the world.
And certainly, this recent market selloff,
this recent bear market that we're in, has
brought Lumentum back a little bit for investors.
It had been performing very, very nicely over
the past year. So, I do feel like Lumentum,
there is an opportunity there to get in with
a market leader at a better price today.
And then on the software side, there's another
one that's a bit under the radar for a lot
of folks, a company called ANSYS, ticker there
is ANSS. And this is a simulation software company.
It's a very large and growing market
there in simulation software. And I think
ultimately with simulation software, you have
to look at what it's for. This is software
that's helping companies make better decisions
and save on costs and time when you're building
something; whether it's a plane or a building
or some other kind of trinket. You know, a
lot of the production and fabrication, there's
a lot of trial-and-error involved in that,
that can waste a lot of cost, a lot of time.
And ANSYS is focused on providing the simulation
software that basically lets its customers
build things and iterate, without having to
waste all the money and time
involved with actually fabricating.
And so, certainly, we've seen ANSYS benefit
from this trend more towards companies incorporating
simulation software into their models. They've
also joined forces with another software company
that is in the industrial AR space, PTC,
and that ticker is PTC. They're an interesting
company with a nice
diversified revenue stream there.
But I think, when it comes to ANSYS, another
thing I really like about this business is
their presence in the academic world. They
supply about 2,400 academic institutions in
more than 79 countries with about 600,000
licenses, so students out there, engineers,
they're using this ANSYS product as they're
being educated, as they're going through school.
Which means, when they step out into the workforce,
the workforce has a lot of interest in making
sure that these engineers can jump right in
and get it to work. So, they're using ANSYS
software products as well.
So, it really just has a tremendous presence
globally from academia all the way into the
industrial world here. And I think there are
plenty of great days ahead for ANSYS as well.
Hill: Alright. Few interesting names there.
Jason Moser, thanks for being here.
Moser: Thank you.
Hill: I'm Chris Hill. Thanks for watching.
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