Generally speaking, most of your investment research time should be dedicated to long-term investments that have a track record of profitability and stability. I have always been an advocate of setting aside a small portion of your portfolio for speculative investing, say 5%-10%, depending on your particular risk tolerance.
By speculating, I mean investing in well-researched, legitimate (not penny stocks) companies that produce a real product and are in the early stages of developing their business. I find that it makes investing more enjoyable to know that you could possibly be in on the ground floor for the “next big thing.” One such company that I believe has a legitimate shot for big returns is Universal Display Corporation (NASDAQ:PANL).
Who is Universal Display?
Universal Display Corporation (NASDAQ:PANL) researches and develops organic light emitting diodes (OLEDs), which have many benefits over traditional LED or LCD screens including less power consumption and the ability to be made on flexible screens.They supply and license their technology to companies such as Samsung, LG, and Konica Minolta, among others.
How Are They Doing, So Far?
Pretty well, actually. Universal Display Corporation (NASDAQ:PANL)’s OLED screens are currently in Samsung’s Galaxy line of smartphones, including their S4, which features a 4.99” full-HD OLED display. Just recently, Samsung and LG-Display released their 55-inch OLED televisions, which could be the next big TV technology once the devices become a little more affordable. Industry analysts say that based on past display technology trends, 2016 should be the real breakthrough year for OLED televisions, expecting sales of about 1 million units.
LG’s model recently went on sale for about $10,000, and the company is about to release the first curved OLED TV, which will sell for an even more expensive $13,500, and which LG claims will give viewers an IMAX-like viewing experience.
Don’t let the company’s history of operating losses deter you. The company’s revenues have been climbing rapidly as its technologies catch on, and from the revenue chart below, you can see when that started to happen (around 2009).
The company also has a very strong balance sheet for this stage in the game, featuring $244 million in cash and no debt (their entire market cap is about $1.3 billion).
Universal Display Corporation (NASDAQ:PANL) has been profitable (slightly) for the past two years, most recently earning 21 cents per share in fiscal year 2012. This is expected to rise to $0.50 per share this year, and to $1.28 and $2.00 in 2014 and 2015, respectively. So, the company’s shares trade for just 15 times 2015’s consensus earnings (estimates for ’15 range as high as $3.13 per share), and this is a year before the technology is expected to really become mainstream.