Citi Research analysts Jim Suva, Joe Yoo, Asiya Merchant and Zhen Yang highlight the Consumer Electronics Show (CES) events that took place from the 6th to 9th of January 2014.
We attended the Consumer Electronics Show (CES) in Las Vegas this week Jan 6-9th including numerous new product launches, demonstrations, & management meetings. Attendance was at all-time record highs & surpassed 150,000. Having attended this event for well over a decade (no joke & my grey hair show experience not age) we noticed a lack of focus on new cell phones, PC / notebook / tablet launches & 3D TVs and more of a focus on the newer key themes detailed below & accordingly look to connect investors with the best way to invest.
CES 2014: Key focus items
1) Everyone wants to be smart!
A common theme in most products that include smart beds (adjust to stop snoring), smart BBQ grills (tells you how to cook & when food is ready), smart toothbrushes (ensures adequate brushing), smart ear buds (monitor & track your heart rate & location), smart light bulbs (remotely adjust on & off), smart scales (weight food & tracking consumption, calories, alerts) smart glasses (provide directions & information), smart automobiles (cars that diagnose themselves & send alerts before a breakdown, self-stopping safety features, wifi inside cars, displays that show different visuals based on passenger position such as drive sees a map while passenger can watch a movie), smart thermostats (remotely adjust your home heating & cooling), a flood of smart watches (count steps, calories, heart rate, location tracking, email & other activity), smart TVs (definitely not new but well needed improvements for user interface).
2) Internet of Things
All the above things have a desire to be connected to the internet and see this theme gaining traction in 2014. Associated with this is the exponential amount of data that is being collected and that opportunity for big data analytics.
3) TVs – bigger, better & flexible
We saw TVs that were 120 & 110 inches (estimated retail price $100,000-$150,000), others with 8K resolution (content in 4K is minimal at this time & 8K content is even less) with much needed improvements to user interfaces for their smart technology, and several curved and/or flexible TVs. The curved TVs were of investor interest with many asking why curved is better (answer is better viewing angle regardless of where on sits) as well as flexible TVs and displays to prevent breakage or mold to more commercial displays or better viewing experiences.
CES 2014: How to make money
While many investors are looking for the one OEM that will have the killer product, we take a non-consensus view of looking at the teardowns of the products and find a very compelling investing theme in the connector industry. It is NOT about the wires or connectors on the outside but more so all the connectors that are needed inside to connect the battery to printed circuit board, to the display, to the cameras, to the antenna, to the buttons, to the headset and data ports, etc. We believe this fits squarely with our thesis to own the connector stock Amphenol Corporation (NYSE:APH) and TE Connectivity Ltd (NYSE:TEL). Our other top stock picks are Hewlett-Packard Company (NYSE:HPQ) on its turnaround & low valuation at less than 8x PE and Xerox Corporation (NYSE:XRX) on its services improvements with Obama Care to help.