Chat GPT finds news of Collins Aerospace and Seeing Machines collaboration

This Chat GPT is bloody good stuff in my humble opinion, as it has found information about Collins Aerospace and its use of Seeing Machines eye-tracking technology that I didnā€™t realise even existed.

Just read this Q&A session with the AI-powered search engine:

Q. Does Collins Aerospace have a pilot support system that uses eye-tracking?

A. Collins Aerospace, a subsidiary of Raytheon Technologies Corporation, offers a range of avionics systems, including pilot support systems. One of their products, the “Pro Line Fusion” avionics system, includes a feature called “Head-up Display (HUD) with Eye-Sensing Technology.”

This technology uses eye-tracking to provide pilots with a more intuitive and efficient way of interacting with the aircraft’s avionics. By tracking the pilot’s eye movements, the system can automatically adjust the information displayed on the HUD to match the pilot’s focus, making it easier for the pilot to keep their attention on the task at hand.

The system also includes a feature called “SmartView Synthetic Vision System,” which uses 3D graphics to provide pilots with a more comprehensive view of their surroundings, helping them to make more informed decisions.

So, in summary, yes, Collins Aerospace offers a pilot support system that uses eye-tracking technology as part of its Pro Line Fusion avionics system.

Q. Which company supplies this eye-tracking to Collins Aerospace?

A. The eye-tracking technology used in the Collins Aerospace Pro Line Fusion avionics system is supplied by Seeing Machines, an Australian-based company that specializes in developing advanced computer vision technologies.

Seeing Machines’ eye-tracking technology is based on machine learning algorithms that analyze eye movements and can accurately track eye gaze points in real-time. This technology is used in a variety of industries, including aviation, mining, automotive, and transportation, to improve safety and performance.

Collins Aerospace has a partnership with Seeing Machines to integrate their eye-tracking technology into the Pro Line Fusion avionics system. Seeing Machines’ technology is a key feature of the Pro Line Fusion system, helping pilots to maintain situational awareness and improve their overall performance.

Share price impact

This is potentially huge news for Seeing Machines if confirmed by either company, as it could materially impact its share price.

The writer holds stock in Seeing Machines.

Chat GPT and Seeing Machines

While the world is going crazy for Chat GPT, I thought Iā€™d see if this AI-powered breakthrough technology could help answer who is the global leader in driver monitoring.Ā 

Its answer to my question was revealing: 

Q. Who is the global leader in driver monitoring?

A. It is difficult to identify a single global leader in driver monitoring, as there are many companies that offer products and services in this space, and the market is constantly evolving. However, some of the leading companies in the field of driver monitoring include Seeing Machines, Smart Eye, and Eyesight Technologies. These companies develop technology that uses cameras, sensors, and advanced algorithms to track a driver’s attention, fatigue, and other key factors, and provide alerts or other feedback to help improve safety on the road. Other major players in this field include Nauto, Omnitracs, and Guardian Optical Technologies, among others.

Iā€™d give the answer qualified approval, as it at least names Seeing Machines first – although it failed to categorically confirm it as the leader – unlike Mobileye CEO Amnon Shashua who, in a recent Autonocast interview (10m), stated: ā€œweā€™re working with the leading supplier in DMS; Seeing Machines.ā€

I canā€™t help thinking of Chat GPT as a smart geek who hasnā€™t yet spent years researching this area but has managed to pick up the basic players pretty quickly. Good for general research, certainly. Although it tends to be a bit behind the times: for example, it missed the fact that Eyesight Technologies changed its name to Cipia a while back.

A takeover of Seeing Machines

I couldnā€™t leave my questioning there and so asked it to give me the AI Moneyshot answer; who will acquire Seeing Machines?

Again it provided a fascinating response:

Q. Which is the company most likely to acquire Seeing Machines?

A. As an AI language model, I don’t have access to information about potential acquisitions or the future plans of companies, and it is difficult to predict which company might acquire Seeing Machines, if any. However, it’s worth noting that Seeing Machines has partnerships with a number of major players in the automotive and transportation industries, including Caterpillar, Boeing, and General Motors, and has also received investment from companies like Qualcomm and Samsung. This suggests that Seeing Machines is a company with valuable technology and expertise in the field of driver monitoring, and it could be an attractive acquisition target for companies looking to expand their capabilities in this area. That being said, any potential acquisition would depend on a range of factors, including the strategic goals and financial resources of the acquiring company, as well as the interests and priorities of Seeing Machines and its stakeholders.

However, despite a fair general answer (albeit a bit out-of-date), those who read my previous post, Take your seat for the ā€˜Battle of the Titansā€™ will have a better idea of the likely players in a future takeover battle. 

The writer is long Seeing Machines. If you’d like to know more about how to make money from stocks he is available for long boozy lunches ā€“ provided someone else picks up the tab. Alternatively, just read this blog.

Take your seat for the ā€˜Battle of the Titansā€™

Ladies and Gentlemen, please take your seats. The ‘Battle of the Titans’, the heavyweight takeover of the decade, is about to begin. The winner will be the champion of interior vehicle monitoring for the next decade, opening up billions in new revenue streams in vehicles while also preventing accidents. It should also be able to help robots care for us humans long after that. 

With the news that Mobileye has been granted non-exclusivity to market SEE technology in the Aftermarket sector, itā€™s clear that the company (majority owned by Intel) needs SEEā€™s driver monitoring technology to complement its Advanced Driver Assistance Systems (ADAS). It is now able to offer a one-stop active auto safety solution to its truck and bus customer base (who according to one source currently deploy over 2m vehicles). 

I’m even willing to bet that Mobileye wanted exclusivity, but Seeing Machines preferred to play the field, as it possesses the world’s most effective driver monitoring system (DMS).

Now that the dream of fully autonomous vehicles on all our roads has been seen to be just that, a reality that is decades away, DMS has come centre stage. As Colin Barnden, analyst at Semicast, astutely realised a while back: Mobileye needed DMS, the best DMS. And it now has access to it.

With Gen 3 Guardian likely to be available from Q1 of this calendar year, it opens up the possibility of a one-stop solution for Aftermarket being available in H2 of this financial year for millions of existing Mobileye customers as well as millions more truck and bus operators in Europe who arenā€™t.

As the scale of the market it will capture becomes crystal clear to players (and investors) Seeing Machinesā€™ share price should rise substantially. Explosive growth in its Aftermarket revenues will also be coupled with sizeable Auto contracts and the much-anticipated Aviation deal. Financial analysts (commonly referred to as City scribblers) will then finally start producing broker notes with spiraling upgrades, as Fund Managers pile in. Professional investors can exhibit Fear of Missing Out (FOMO) just like private investors.

Whatā€™s the timeline? Itā€™s starting now and will be increasingly apparent with every passing month. Notably, Iā€™m expecting a trading update on the 22nd of February with a US investor show on the 8th March. Not to mention some big contract news between now and June.

Battle of the Titans

It seems my ‘Battle of the Titans‘ prediction is slowly (oh, so slowly) coming to pass.

However, unlike a boxing contest, the battle to acquire Seeing Machines wonā€™t be a 2-person contest with Marquis of Queensbury rules. Itā€™s set to be a bare-knuckle bout involving strategy and multiple bidders, more akin to a contest in an episode of Alice in Borderland. As I see it, there are at least 4 main contenders:

  • Intel (majority holder in Mobileye). 
  • AMD (owner of Xilinx)
  • Qualcomm
  • Nvidia – the dark horse? 

However, lurking in the shadows are many more players who must covet the technology that Seeing Machines possesses. Some are subsidiaries of Chinese companies, such as Omnivision, but I doubt that Australia (one of the Five Eyes intelligence alliance) would allow a Chinese company to acquire such sensitive technology which could have military applications. Do the remainder have the financial muscle and nerve to outbid the above chip companies? That remains to be seen.

Once the contest really gets going, I expect one of the three ‘A’s; Apple, Alphabet and Amazon to show their hand. They have the nerve, nous and financial strength to not only outbid the above chip companies but take Seeing Machines technology to the consumer market in a huge way.

I believe that this year is finally going to be fun for holders of Seeing Machines shares. Let the contest commence.

The writer holds stock in Seeing Machines.

US$32m Stellantis win boosts intrinsic value of Seeing Machines

The latest auto contract awarded to Seeing Machines carries ā€œan initial lifetime value of US$32M (A$45M)ā€ and brings the official initial cumulative lifetime value of the auto contracts won to US$321m. Opinions may vary as to who the OEM is, but Iā€™m confident itā€™s Stellantis, marking an impressive follow-up on an earlier contract win in June with the European headquartered car manufacturer.

Of course, followers of this blog wonā€™t be surprised to learn that the actual lifetime value of all these contracts is likely to be multiples of the so-called ā€˜initial lifetime valueā€, as car manufacturers make Driver/Occupant Monitoring a standard feature and these initial contract values expand.

Bizarrely, Mr Market hasnā€™t yet properly priced in the value of SEEā€™s stated auto pipeline, never mind its likely long term value, which Iā€™d judge to be approximately US$1bn. Seeing Machines adopts a very conservative stance on the value of its auto contracts, which also hasnā€™t helped investors understand the intrinsic value here.

It may take a short while longer before the market cottons on, so investors must remain patient. Although, the Consumer Electronics Show (CES) in early January should bring announcements that will make SEEā€™s value in automotive clearer.

Catalysts

Fortunately, there are two catalysts that I expect will make Mr Market re-evaluate SEEā€™s value in the second half of this financial year.

  1. I expect the transformational aviation license deal that has long been anticipated will soon materialise, triggering upgrades from all brokers.
  2. I expect the Gen 3 Fleet product to be available in Q4 of this financial year, enabling huge Fleet contract wins. This will also trigger broker upgrades.

Iā€™d urge all holders of Seeing Machines to have faith in their research and the intrinsic value of Seeing Machines. Never forget that price does not equal value, for as Warren Buffett noted: ā€œPrice is what you pay.Ā Value is what you get.ā€ In my opinion, at its current share price Seeing Machines is laughably undervalued.

Of course, all investors should do their own research and be prepared to suffer the slings and arrows of outrageous fortune for a little while longer. Covid, Ukraine and market jitters have previously held its share price back and, while I do fear the effects of a global recession and a possible market crash, Seeing Machines progress as a business appears unstoppable. Ultimately, a takeover will unlock the true value here regardless of overall market conditions.

The writer holds stock in Seeing Machines.

Smart Eye fairytale reaches a climax

With the news that Smart Eye is desperately using a SEK 60m (Ā£4.8m) bridging loan to finance its business while it attempts a SEK 325m (Ā£25m) discounted rights issue, the greatest Scandinavian fairytale since Hans Christian Anderson wrote ā€˜The Emperor has no clothesā€™ appears to be coming to a dramatic climax.

It’s sad news for investors who thought that the Emperor really was the leading global provider of driver monitoring systems and who believed that the 103 design wins it has long boasted of, and still boasts of, will ever go into production.

Indeed, the press release announcing this news reads like a profit warning, as it seeks to blame Covid for its problems, stating:

ā€œThe consequence for Smart Eye has thus been that the implementation of the Companyā€™s software for DMS and Interior Sensing, as well as licensing revenues from existing design wins have been postponed. Hence, commercialization of design wins is expected to be realized later than originally estimated.ā€

Notwithstanding the massive dilution that investors will experience at the discounted rights issue, investors should really ask themselves how likely it is that Smart Eye will achieve its stated intention of a positive cash flow by the second half of 2024, given the parlous present state of its finances. 

How many public companies can you name who are forced to use a bridging loan to stay afloat?

Investors will have to wait until January 24th to find out the price of the rights issue. Given the likelihood of the price plummeting before then, they are likely to sell in droves. This is turn will likely increase the resulting dilution necessary to raise the required funds.

Of course, investors should do their own research as I freely admit that Iā€™m a long-term holder of shares in Seeing Machines — and had until a few years ago regarded Smart Eye as a serious rival.

Magna-ificent performance from Seeing Machines

Following recent announcements relating to Magna, reinforced by analysis from CEO Paul McGlone at an investor event in London, Iā€™m confident that Seeing Machinesā€™ technology lead across, auto, fleet and aviation will soon start to be reflected in its share price.

The recent news that auto Tier 1 Magna is paying US$17.5m for the exclusive rights to use Seeing Machines technology in its rearview mirrors until the end of 2025, while also agreeing to invest up to an additional US$47.5m, just confirms its global leadership position in Driver and Occupant Monitoring Systems (DOMS). 

Crucially, the cash injection removes any concerns that Seeing Machines needs to raise cash. It is now fully funded to profitability in 2024.

The Canadian Tier 1 Magna has gone exclusive with Seeing Machines in rearview mirrors because it aims to the vast majority of that market, 100% has been suggested by one expert, as no real rival to their DOMS offering currently exists. By partnering with Seeing Machines it has a product that is apparently superior to that of its competitors in terms of price, performance, and time to market. Thatā€™s presumably why it won the huge A$125m VW contract in December 2021. 

By 2026, itā€™s likely that Magna will have won as much as 50% of the overall auto DOMS market in partnership with Seeing Machines – since half of DOMS is forecast to be delivered via rearview mirrors. Thus it will have done to its main rival Gentex what Qualcomm has done to Intel in auto. The huge VW win with Magna should have confirmed this, future wins certainly will. 

Itā€™s no coincidence that both Magna and Qualcomm have chosen to partner exclusively with Seeing Machines. These moves should be seen as part of a strategic land grab that I expect to deliver Seeing Machines at least 75% of the auto DOMS market by volume by 2026.

That is because its competitors (Smart Eye, Cipia, and Jungo) arenā€™t winning anywhere near the number or volume of RFQs that Seeing Machines is. For example, Smart Eye appears to have effectively been replaced by Seeing Machines in forthcoming BMW models. The 10 BMW models featuring Smart Eye technology are from past wins, such as the X5 (2015) and M8 (2018). 

Of course, OEMs may do some dual sourcing. Speaking to Smart Eye last week its CEO Martin Krantz tentatively said that Smart Eye ā€œwill probably be in future BMWsā€. I wish him luck but I donā€™t think it is going to be a threat to Seeing Machines going forward. 

Indeed, investors need to beware of looking in the rearview mirror at market share unless they want to crash their prospects for significant financial gains. For those paying attention to the road ahead, itā€™s Seeing Machines that is in the fast lane to market dominance. 

Over the past year, Seeing Machines states that it has won 80% of the RFQs for which it has bid. Iā€™m confident it will maintain that win rate with the $A1-2 billion of contracts for which it is currently bidding.

Looking at design wins, Smart Eye currently boasts 94, while Seeing Machines has 120. However, even this figure fails to reflect the latterā€™s dominance. Not all of Smart Eyeā€™s 94 ā€˜winsā€™ made it into production, in contrast, every Seeing Machines design win has hit the road. 

Iā€™ve long admired the Smart Eye people – not least for their PR bravado – but it canā€™t blind me as to where I should invest my hard-earned dough. Iā€™d also be doing readers a disservice if I didnā€™t state what I honestly believe. 

Following the Seeing Machines investor presentation Friday, (when the video is posted I will provide a link) Iā€™m very confident that an inflection point has been reached.

Increased margins

From now on license revenues for vehicles hitting the roads will begin to ramp up for Seeing Machines. This is a very high-margin business as the main costs have already been borne in the development phase. It currently has a pipeline of A$395m in auto but this is expected to grow substantially over the next few years on the back of further wins.

Similarly, in aftermarket more large enterprise customers such as Shell are coming along. These margins for selling the product and the monitoring service are much higher than selling indirectly via distributors.

It should also be noted that Seeing Machines Gen 3 Guardian will be launched by the end of this financial year, opening up the prospect of huge scale-up in Fleet sales. The product has apparently been re-engineered to reduce costs yet will be better, with automotive-grade additions and much faster install times. In addition, there is huge money to be made from the service element of monitoring the drivers.

Thus, now there is clear visibility of increasing revenues and cashflows with SEE set to make huge profits over the next few years.

In addition, Iā€™m still confident that a lucrative license deal will soon be struck to deliver Seeā€™s pilot monitoring technology into the cockpits of aircraft. Being early is the same as being wrong but I hope by Christmas Iā€™m proven right.

Bids coming

As readers know, Iā€™ve long believed that SEE will face a near-term bid. To that view some have argued that such is its success that it really doesnā€™t need a takeover to prosper, unlike some of its rivals who hope to be saved by one. Iā€™d certainly agree with the assessment that Seeing Machines could perfectly well prosper as an independent.

However, even if Seeing Machines isnā€™t ā€˜up for saleā€™, it doesnā€™t mean that it cannot be bought. A wise man recently told me: ā€˜Great companies get bought NOT soldā€™. Well, I believe Seeing Machines is a great company.

Ask yourself, how badly must some company want what Seeing Machines has? Its technological lead, data, and market leadership would take years and many billions to replicate for even a company of the stature of Google, Apple, or Amazon. If you had the money (and they do) why wouldnā€™t you just buy it?

If Magna is prepared to pay millions for the exclusive use of SEE technology for a couple of years, why wouldnā€™t they want it permanently? Qualcomm, AMD, Intel, and Nvidia also have reasons to enter a bidding war when the starting gun is fired. Indeed, even Gentex does if it wants to win future DOMS rear-view mirror contracts and protect its market share from rivals such as Magna.

Thereā€™s even the argument that a consolidator might want Cerence and Seeing Machines to create something very special.

Value stock

As legendary value investor Irving Kahn taught, investing is an art rather than a science but I think were he alive today, heā€™d take an interest in Seeing Machines as it ticks many of the criteria he looked for in an investment.

The good news for investors is that they can now sit back and enjoy the ride. It has been substantially de-risked, which is why Cenkos upgraded to 25p last week. I expect the other analysts following the company to do likewise in short order as the contracts and license deals roll in. 

The writer holds stock in Seeing Machines.

Remain positive on Seeing Machines

This is just a short note to say that, despite the current shareprice being very much in the doldrums I remain positive on Seeing Machines as a business and investment.

It is the global leader in driver/occupant monitoring and, while I’m frustrated at the lack of news recently, I am confident more good news is coming. How can it not? Manufacturers of cars, buses and lorries are going to have to install driver monitoring in Europe from 2024. Given lead times, they have to make decisions now as to who to use. This process is also being replicated in the US, China and Japan.

Seeing Machines is already benefitting from this trend in partnership with many large players, such as Qualcomm and Magna.

In addition, I believe a behemoth will bid for Seeing Machines. Most likely a chip company but others are also in the frame if a bidding war breaks out.

Of course, you should make your investment decisions based on your own research. I have been wrong before and undoubtedly will be again. Only investing what you can afford to have tied up for a while is a good rule.

I look forward to meeting some of you at the investor event in London on Friday, 7th October.

The writer holds stock in Seeing Machines.

SEE share price to fly on aviation license deal?

An impressive full-year trading update this week made it crystal clear that Seeing Machines is set for significant growth in margins, revenues and a speedy path to profitability, as license revenues for autos on the road ramp up, with fleet/aftermarket set to grow very quickly.

Surprisingly, the trading announcement was brought forward by a couple of weeks. The reason is likely to be revealed soon as the company subsequently announced that there is to be a presentation for investors in London on September 13.

Aviation license deal

The news Iā€™m really hoping for before its investor meeting on the morning of the September 13 is that it has signed a license deal with a Tier 1 aviation supplier with an upfront payment that will bring forward profitability.

CEO Paul McGlone turned very bullish in a  recent promotional video interview with Proactive Investors in which he stated that in aviation he is committed to licensing out SEEā€™s technology to one or more partners: ā€œWe are going to be working through significant Tier 1 avionics partners to deliver our product to market. We have created the demand there so itā€™s a very strong proposition for the partners that we are talking to,ā€ he confirms.

It surely cannot be a coincidence that after downplaying the significance of aviation in a prior interview McGlone has now become much more bullish. Certainly, my sources are confident of success and so Iā€™m optimistic that an announcement on a licensing deal is ā€˜IMMINENTā€™. 

As to who it is, the obvious candidate is Collins Aerospace (part of Raytheon Technologies) with whom it is already working closely.

Note the wide range of areas within aviation that are being targeted: ā€œThe Agreement positions Seeing Machines to work closely with Collins to jointly market co-developed solutions across the Aviation industry to deliver its eye-tracking technology solutions to Commercial Air Transport, Business, Military, Rotary Wing, General Aviation and Flight Training customers to address improved safety and efficiencies for both pilot training and flight operations.ā€

Share price to re-rate

I think that such news, when confirmed, could be the catalyst for a huge re-rating in its share price, given the fact that:

  • It is likely to involve an upfront payment that could be significantly larger than the one it received (US$17.5m over 4 years) back in September 2015, when it signed a licensing deal with Caterpillar.
  • The ongoing license revenues, even if low double digits would likely run into tens of millions of Australian dollars each year. 
  • It will absolutely confirm that Seeā€™s pilot monitoring provides crucial safety benefits in yet another transport sector, thereby giving chip manufacturers another reason to acquire it in order to diversify their revenue streams. Itā€™s a model that can be replicated in other transport sectors; most notably marine. 

In addition, Berenberg in a note this month mentioned that SEE should be a beneficiary of a strong US dollar as a quarter of its earnings are in that currency. In the note it estimates that Seeing Machines is ā€œexpected to experience a c8-14% tailwind to sales in the current fiscal year, followed by a 1-4% benefit in FY23ā€. With US earnings accelerating along with the dollar strength, I’d hope this will be an underestimate.

More contract wins

As if this wasnā€™t reason enough to be bullish about a share price rise, weā€™ve yet to hear of significant wins in auto and aftermarket/fleet that my sources have confirmed have been decided in SEEā€™s favour. I can only assume there is some slight bureaucratic delay in signing off the contracts.

By the end of this financial year, I confidently expect an official A$1bn order book for SEE – which will eventually turn out to be nearer two or three times that.Ā 

To all sceptics, I say: pick up your mobile phone. Can you hear that noise? Thatā€™s not static, someone in Canberra is calling out: ā€˜Show me the money!ā€ 

The writer holds stock in Seeing Machines.

Will Seeing Machinesā€™ likely Nasdaq listing elicit a bid?

Rumours that Seeing Machines is planning a dual listing on Nasdaq gained further credibility with the attendance of CEO Paul McGlone at a recent shindig organised by house broker Stifel to promote that very idea to clients. The question is, might a dual listing be the catalyst for a bid?

Itā€™s long been known that a dual listing on Nasdaq has been under consideration at the Aim-listed tech company for a number of years. At a previous investor meeting held online on 24th November 2021 Paul McGlone stated (in answer to the question: ā€˜Are there any plans to move to a US market?ā€™): ā€œIt is in our plan, itā€™s only sensible that we talk about it. I do imagine that we will end up there but I want to see some additional momentum before we flick the switch on that particular transaction.ā€

With Seeing Machines coming to dominate interior monitoring with its class-leading DMS/OMS system, it appears that time is drawing close. Indeed, some argue that such a listing would be guaranteed to increase its US profile and enable it to secure more backing from US tech funds.

Stifel served as joint bookrunner on an $85 million dual-listing Nasdaq IPO for Renalytix AI back in July 2020. The price tripled shortly thereafter but has since come right back down. More successful was GW Pharmaā€™s dual listing back in 2013, before it was eventually acquired.

Mobileye IPO

A more appropriate comparison is the Nasdaq IPO of Mobileye, floated for US$5.3bn in 2014, bought by Intel in 2017 for $15.3bn and now in the running for a potential $50bn spin-off IPO, backed by Morgan Stanley.Ā 

Examining the prospectus for the original Mobileye IPO in 2014, indicates that Seeing Machines is set to be a superior business. Not only is it dominant in auto but also in fleet and aviation. Moreover, its robust technology has applications well beyond the transport sector.Ā 

Expected date of dual listing

While it appears that no firm decision has been made by Seeing Machines regarding a precise date for a dual listing, I believe that the much-mooted plan is moving inexorably forward.

My sources indicate that (barring a market meltdown) it is most likely to happen around Spring 2023, by which time Seeing Machines is expected to have achieved several milestones that will have more US tech funds eager to jump in. These milestones include:

  • An order pipeline of $A1bn in auto;
  • A fleet operation that has proven it can scale, boosted by the third generation of its Guardian product, which will be easily incorporated into telematics products for trucks and buses;
  • The launch of a dedicated aftermarket division to sell its Guardian product to niche manufacturers of buses and trucks, with monitoring services sold to their customers; and
  • A licensing deal in the aviation sector.

I also believe that there is an outside possibility that increased momentum in auto and fleet, with Seeing Machines pretty much set to win every contract it contests, could bring forward the date.

Will QC gatecrash the party?

The question is, will the host of chip companies who want SEEā€™s IP wait until its value has been boosted by a Nasdaq dual-listing IPO before swooping? Moreover, will Qualcommā€™s Christiano Amon risk another chip company, or one of the three Amigos (Amazon, Alphabet and Apple) eating his lunch? It doesnā€™t seem likely. The Arriver acquisition proved Qualcomm fights for want it wants.Ā 

Given the crucial importance of Seeing Machines vision technology to Qualcommā€™s Snapdragon Drive automotive stack it seems logical that he will act quickly, to forestall any rival acquiring this important strategic partner. 

Sector ripe for consolidation

The sector is certainly ripe for M&A deals. Even peripheral DMS players are starting to be bought. In fact, one took place late in 2021, with Lattice Semiconductor acquiring computer vision company Mirametrix. The latter has a rudimentary DMS and, according to unnamed sources, went for a ‘huge multiple’ in a private deal. You can see its offering here: https://ir.latticesemi.com/investor-overview/presentations

Note the slide detailing some of the consumer uses for its technology entitled ā€˜Consumer Challengesā€™ ā€” it may ring a (door)bell for some investors. The wide range of markets in which SEEā€™s technology can be used, aside from its transport applications, is one reason it is an attractive target.

Smart Eye would probably love to be taken over as would Cipia. However, SEE is the demonstrable market leader and will be the one that all the major players covet. 

As ever, if youā€™ve found any value in this article please consider making a donation to a charity of your choice.

The writer holds shares in Seeing Machines.

A tribute to Irving Kahn: a legendary value investor

The article below, Investment lessons from Irving Kahn was originally published for the UK Motley Fool website back in 2010. The reason I am replicating it here and not amending it is that Iā€™m proud to say that after it was first published I received a very kind email on his behalf from Andrew Kahn, his grandson, who worked with him at Kahn Brothers.

In it he wrote: ā€œMr Kahn read your article and was very pleased with its accurate assessment of the firm and your attention to the often-overlooked aspects of value investingā€.

Iā€™m sad to say that Mr Irving Kahn passed away in 2015 at the age of 109. However, his reputation remains as does the firm he founded and the books he helped write.

Let me quote again from the email I received: ā€œRegarding books to which Mr. Kahn has contributed, he was Ben Grahamā€™s teaching assistant during the period in which Mr. Graham wrote Security Analysis, and, to that extent, he contributed a considerable amount of research to that text. Another book that comes to mind is a small 50-page monograph titled Benjamin Graham: The Father of Financial Analysis that he wrote in the 1970s with Robert Milne for the Financial Analysts Research Foundation. At the time the Research Foundation was the publishing imprint of the CFA Institute, but it is now known as the ā€˜Research Foundation of the CFA Instituteā€™.

It is therefore my hope that by reading the article youā€™ll learn from the wisdom of Irving Kahn and therefore avoid catastrophic investment mistakes. Should you wish to delve deeper you can read the books he helped write.

Investment lessons from Irving Kahn

This centenarian has the secret of long profits

At 104 years old Irving Kahn can aptly be described as the grand old man of value investing. While he may not be able to tell us much about the secret of longevity, he has much to teach about profitable investing.

Unbelievably, after 80 years on Wall Street not only is he alive, he is still active. Currently, heā€™s Chairman of Kahn Brothers Group, a privately-owned investment advisory and broker-dealer firm that he founded in 1978. It has approximately US$550 million funds under management.

Background

He is a value investor right to his marrow. This should be hardly surprising as he learnt from the master, serving as the teaching assistant to Benjamin Graham at the Columbia University Business School.

He was an original founding member of the New York Society of Security Analysts in the 1930s. He was also a co-founder of the Financial Analystsā€™ Journal and a director of Grand Union Stores, Kings County Lighting, West Chemical, and Wilcox & Gibbs.

Investment philosophy

On the website of the Kahn Brothers it explains that the company employs:

  • As bottom-up stock selection approach
  • Invests in undervalued equity securities that are usually out-of-favour

To determine which security to invests in it uses:

  • Asset valuations
  • Operating performance metrics
  • Long-term fundamental business prospects.

Moreover, ā€œunlike many investment managers, we spend a considerable amount of effort evaluating the downside risk of every investment.ā€

Interview

In an interview Irving Kahn gave in 2005, he and his son Tom, Kahn Brothers president, outlined in more detail Kahn Brothersā€™ views on investing.

They regard value investing as an ā€˜artā€™ rather than a science, involving qualitative factors as much as quantitative. For that very reason, just as the best artists can occasionally produce poor work, even the best investors will make mistakes.

However, to reduce this risk and ensure a ā€˜margin of safetyā€™, they follow these rules:

  • Favour those ā€˜out of favourā€™. Invest in companies that are either little-known or out of favour. The former tend to be smaller companies.
  • Low or no debt. They like companies with little or no debt and avoid highly leveraged companies.
  • Management stake. They prefer management that owns a lot of stock as they have the same incentive as shareholders to maximise the value.
  • Red flags. Companies that have volatile cash flows, high leverage and poor management should be avoided.
  • Earnings potential. Go beyond the latest set of results to determine the earnings potential of a business.
  • Patience. They are long-term investors with a typical 3-7 year, or longer, time horizon. If there are very few value stocks to be found, they are comfortable holding cash.
  • Identify catalysts. The marketā€™s recognition of value is often dependent on a catalyst ā€”an event that corrects the margin of safety discount. The identification of potential catalysts is therefore an integral part of the research process. Without a catalyst, a prospective investment can remain underpriced indefinitely and thereby result in a mediocre return.
  • Research. Do your own homework and pay no attention to what you see in the papers.
  • Be a contrarian. Maintain a strictly contrarian approach on the basis that half the price of a common stock is usually fashion.