Update on SONO and Amazing FAAAMGS Keep on Carrying On!
Hey Subscriber,
So yes the news we have been waiting for on the Google/Sonos patent infringement case came in late Friday--and boy did the jury "find for the plaintiff!"
While the final International Patent Court decision is due in December, with Google a worldwide company (and of course in our FB/AMZN/APPL/ADBE/MSFT/SHOP Game Over Digital Platform Dominators) Sonos is now poised with its 2149 patents to be the G.O.D. in digital speaker technology.
The U.S. International Trade Commission judge ruled Friday that Google infringed on Sonos' patents. The suit began in January 2020, with Sonos claiming Google infringed on five of its smart speaker patents by putting its technology in Google products. Sonos wanted a sales ban on several Google products such as Nest home speakers, Pixel smartphones, and Chromecasts.
“We don’t believe they are recognizing the value that is there. In trying to work it out in terms of talks, we felt this was the step we had to take in order to make sure we are properly getting the value we deserve,” Sonos CEO Patrick Spence told Yahoo Finance Live early on in the fight against Google.
The final decision isn't expected from the International Trade Commission until mid-December--but--it is extremely rare for the IT Trade Commission to NOT rule very similar to US International Trade Court--and many times they rule even harsher!
Key Point: The US trade court win sets the table for Sonos to secure $tens of millions in lucrative licensing deals from tech companies that may be infringing on its patents. Monetizing Sonos's amazing set of utility and design patents was a big reason for our $40 price target and our belief that in the end, Sonos will be acquired by Apple (like the BEATS acquisition).
Brent Thrill (the consumer electronics analyst at Jeffries we follow on SONO) said "We note that Sonos boasts a portfolio of over 2,149 utility and design patents, granting them one of the most valuable patent portfolios in consumer tech. We believe Google is likely one of many companies infringing on Sonos' patents, and suspect their win against Google will set a precedent for other infringers.
Key point: AGREE!
"Today, less than 5% of Sonos' revenue comes from licensing, but believe it can become a larger portion over time as infringers cut deals with Sonos. Licensing revenue should provide further tailwinds to margins as it becomes a larger mix of overall revenue."
Agree.
Thill upgraded Sonos shares to Buy with a $50 price target in the wake of the Google decision.
Also, try this--go to BestBuy and ask how long the wait is for Sonos wireless speakers/how many they have in stock. At my local BB in Scottsdale--it took me 6 weeks to get the new mobile speaker the ROAM--and they are still on backorder.
We have gone through a few mobile speakers over the years (I even have one for the golf cart that also speaks the distance to the hole!) and I can tell you the BIG SOUND out of the little Roam portable speaker is amazingly deep, rich and bright.
"Following validation from the ITC of the strength of SONO's patent portfolio, we increasingly view their patent portfolio as a competitive advantage, granting SONO an edge against competitors in the audio market. We believe their IP will allow them to continue to out-innovate others in the industry, driving rev and market share higher over time," Thill added.
Agree.
Action to Take: IF you don't yet have SONO in your Ultra Growth portfolio (and yes I know a lot of you have a very low cost on SONO from our Jan 2020 entry and after 2020 crash etc--maybe you take your original $$ out and let rest ride--or sell some $36 put options for some premium!) it's a buy under $40 and a GIFT if traders who bought on the $42.25 this morning barf up the shares down to $38!
XOP Energy Hedge
As mentioned many times since energy shares led the entire stock market sectors in 1H 2021, there was and is profit-taking and sector positioning going on post 1H end in June.
No time to panic--the dividends you have earned far exceed the correction.
BUT--if the XOP breaks 200-day MA on decent volume, we will hedge with XOP October Put Options. Each option represents 100 shares of XOP as you know--so you choose how much your positions you want to hedge (if any).
Here is the XOP Chart: A break under $76 would call for hedging with an October $65 put option.
Delta Variant Issues
With China locking down entire 5-10M size cities, China's GDP (and oil importation as the world's largest oil importer) will take a hit over the next 45-60 days. And you know when even libertarian Fox News reports that the U.S. led the world with over 38,400 cases yesterday (Sunday 8.15) and the surge is "going very steeply upward" that the delta variant is now more than just a pandemic for the unvaccinated.
While the hyperpartisan culture wars turn into violence (anti-masker protest fights for crying outloud) the data WE FOLLOW--the University of Washington's Institute for Health Metrics-- shows that at current rates the U.S. should peak with new cases mid-September to late AND deaths 20-30 days later.
Key Point: IF you take the U.K. and Netherlands as a case study (they both have about same vaccine rates as the US ex-the Deep South) there is a chance that new infections will plunge and rapidly fall off mid to late September (as they did in the UK/Netherlands after their infection spikes in July for reasons epidemiologists can't entirely explain).
So yea--the 700,000 unmasked largely unvaccinated motorcycle fans riding to Sturgis, South Dakota will of course be a super spreader event. And when they return with the delta variant (vaccinated or unvaccinated--the delta variant is 1000X more infectious than the previous alpha variant) we will see another infection wave like the LAST Sturgis event.
BUT with a little luck, the U.S. surge will plunge in mid-to-late September because, as the experts I follow are humble enough to tell me, "Covid is driven by a much wider and more mysterious range of factors than most public health and epidemiologists are willing to acknowledge."
Your lips to God's ears, ladies and gents.
Action to Take: The best data out there says this "fourth wave" of new covid infections/deaths in the U.S. ARE GOING TO spike for the next 3-4 weeks (but with much lower death rates because of so many <30 and < 20-year-olds getting infected (with the return to school just starting).
It's tragic. We should expect oil prices to drop 5-10% from here but natural gas prices remain firm. Energy trader "muscle memory" from the March-June 2020 energy meltdown tells me many will sell first and think later.
The Good News? From an Ultra Income perspective, if the energy patch melts down again, we make get a second chance to lock up 12-14% yields IF we are patient and follow the technicals.
The horrific news is we will get those investment opportunities because 30% of Americans believe it is a violation of their inalienable right to do whatever the ^(*(*^^(*^(* they feel like doing during a public health pandemic--that they don't owe their fellow citizens anything--that insuring they are NOT infecting innocent others (because so often the delta infected are not symptomatic and don't know they are infected) is not their problem.
Please my fellow investors--don't be that person. I just got a note from a wife of a LONG time subscriber (early ChangeWave subscriber who got rich and retired early from buying our 2005 Apple recommendations among others) that Fred T. had died of his Covid infection. According to her, "Fred was one of those guys who never gets sick, never has a cold, and was a health freak and long-distance runner."
Fred is dead folks--and trust me after meeting Fred many times at MoneyShows in Florida, if a person like FRED who could tackle and truck can die of Covid-19 infection (delta variant) ANYONE can, ok?
I will hoist a Martini to Fred J. tonight--proud to have known him and my heart aches for his Janet his widow. As she told via text today "Toby tell your subscribers--JUST GET THE DAMN VACCINATION!"
Mission accomplished Janet.