One Stock to Consider Buying Today
It was on a work trip to Sydney last week that I saw it for the first time in the flesh. It was beautiful!! The quality, the colour, the contrast, the depth of vision, as a movie lover and sports fan my mind began to run wild. Amongst the crazy madness of George Street this television in a small shop front window had me mesmerized.
Perhaps I’m being a little dramatic, but just a couple of weeks earlier I had recommended a stock to clients of UGC, which I believed had all the ingredients necessary to really dominate the theater and in-home entertainment industry. Having just experienced a taste of what the future holds, today I hold even more conviction.
What I was looking at was the new Samsung OLED Television. All 55 inches and $9,000 of it. OLED stands for organic light-emitting diode. Very simply put, an OLED is made with organic compounds that light up when fed electricity. It’s the next generation in in-home TV screen technology and it was impressive. I thought this technology on its own would be enough to lead to a new revolution in in-home entertainment. Then I started considering the opportunities that were on offer for this company considering the already impressive experience with LCD’s and plasma screen TV’s. With the future being OLED screens when prices come down, this business offered the final ingredient necessary to transform the way we experience entertainment at home.
That company is Dolby Laboratories (DLB). You have probably heard of this company at some point in time while watching the latest movie at the cinema. This world dominating technology company provides technology for encoding and decoding sound for digital formats. It is the true leader in sound technology and is currently in almost every device that uses sound. It is seeing huge growth from smart phones and tablets. It is also making a huge push into “Cloud” based sound technologies. Dolby also just launched its “Atmos” technology to bring more realistic, immersive sound to movie theatres and home theatres. Put simply, this expands “wrap-around” sound up to the ceiling, so the noise of a plane flying overhead seems to come from overhead. But as exciting as these opportunities are, the real growth opportunity is in the patent it holds for 3-D screens that do not require glasses. Dolby plans to license this technology to manufacturers of LCD and OLED video screens.
Apart from the exciting growth opportunities that clearly lay ahead of the company, it is also an extremely capital efficient business. For every $1 in sales it keeps about 43 cents in cash. Plus, because its main investments are in human capital and intellectual property and the licencing of those patents, of the ~$950 million in revenues it generates today, it only needs to spend a modest $47 million in capital expenditure and $129 million in research and development. It is also becoming a very shareholder friendly company, buying back 6% of shares outstanding over the past two years. The company has no debt, trades on an Enterprise Value to EBITDA ratio of about 7x (Less than 7.5x indicates value) and a price to operating cash flow of ~10x when stripping out its large cash hoard. 12 to 18 months of declining PC shipments and concerns around the effect of this trend on its business has seen the share price move into value territory over the past 12 months, but recent price moves suggest investors are now starting to take notice of these growth opportunities and their significance.
The problem is, you can’t buy Dolby Laboratories on the Australian stock market. But don’t let that dishearten you. At United Global Capital we help ordinary Australian investors build Australian and international share portfolios, focusing on building wealth through investment in powerful global investment trends and the leading companies within them.
The fact is the world has so much more to offer investors than just two resource companies, 4 big banks and a Telco.
Contact United Global Capital today and speak with one of our financial strategists for a No Cost, No Obligation consultation on 03 8657 7640 or email [email protected] to learn how you can position yourself to profit safely.
Here’s to your long term health and wealth.
The information contained in this report is General in nature and has been prepared without taking into account your objectives, financial situation and needs.