“Opportunity is missed by most people because it is dressed in overalls and looks like work.”
Those astute words of Thomas Edison still hold true today, and that mistake is a potentially expensive one that can cost investors millions.
To this day, investors skip on opportunities because they choose to ignore a boring stock, or get caught up in herd mentality. They trade on raw emotion instead of basing investment decisions on rational thought and research.
Missed Opportunity No. 1
For example, back in 2011, investors began to aggressively sell semiconductor stocks, because analysts warned that the U.S. semiconductor industry was likely to face slower growth.
Information and analysis provider, IHS predicted that semiconductor revenue would rise an anemic 2.9% in 2011 to $313.3 billion. As a result, even the Van Eck Vectors Semiconductor ETF (SMH) slipped from a high of $31.93 to $25.22.
Investors scattered from stocks like Himax Technologies (HIMX), even though it was showing signs of improvement in its bottom line.
So, in the May 2011 issue, The Cheap Investor recommended HIMX at $2.36 a share and waited. By February 2012, the Street woke up to the opportunity in Himax, as the company beat revenue expectations with $169.2 million – a 20% increase quarter after quarter.
By 2013, Google had taken a 6.3% stake in the company, and slightly more than a year later, the stock ran to $14.77 for a potential gain of 526%.
A fantastic potential profit was missed by those so caught up in a wave of herd mentality that they avoided a whole industry. They missed the opportunity we uncovered.
Missed Opportunity No. 2
Unbelievably, many investors missed a second opportunity that sat right under their noses.
In 2017, Himax’s price began dropping. It was largely ignored, falling eventually to a low of $4.78.
However, as we pointed out in February 2017, investors were ignoring a $162 billion augmented reality (AR) boom. At the time, Apple CEO Tim Cook had just noted that augmented reality could be significant.
“I regard it as a big idea like the smartphone,” he said. “The smartphone is for everyone. We don’t have to think the iPhone is about a certain demographic, or country, or vertical market: it’s for everyone. I think AR is that big, it’s huge.”
There was speculation the new iPhone, which was being released in 2017, could jumpstart the augmented reality boom even more. In fact the International Data Corporation (IDC) forecasts “worldwide revenues for the augmented reality and virtual reality (AR/VR) market to reach $13.9 billion in 2017, an increase of 130.5% over the $6.1 billion spent in 2016. AR/VR spending is expected to accelerate over the next several years…totaling $143.3 billion in 2020.”
But most investors continued to ignore Himax, even though its Liquid Crystal on Silicon (LCOS) chips provide the technology that many augmented reality developers need. Eventually, though, the Street woke up to the opportunity. Himax traded as high as $9.59 just a few weeks later.
Even Morgan Stanley seemed to have missed the potential early on, downgrading Himax before upgrading it two weeks later.
Opportunities just like Himax pop up every day on Wall Street. In fact, we highlight similar opportunities in each issue of The Cheap Investor.
There’s nothing more painful than a missed opportunity. Don’t follow the herd. Instead, do the homework to find those opportunities that most investors miss.