All The Shiny Toys at CES Hide the Real Money to be Made

Tuesday marked the beginning of the largest annual event in customer-facing tech: The Consumer Electronics Show (commonly known as “CES”), held each year in early January in Las Vegas.

175,000 people from 160 countries will be pouring into the Las Vegas Convention Center to see the latest TVs, speakers, robot vacuums, and car concepts from hundreds of companies.

But there’s a reality between the eye-candy that the media wants to show you and the underlying reality where real money can be made in the markets. Finding those stock price-moving pieces of data is what CES is all about.

It’s truly a spectacle of new tech with fanciful features, outlandish promises, and more often than not, ludicrous price tags.

The show only just started, and we’ve already seen:

  • A razor from Bic that measures how thick your facial hair is and how dull its blade is, and sends that information via Bluetooth;
  • a prototype electric car from Sony, the electronics giant that’s never dabbled in transportation before;
  • a rowing machine with a built-in 17.3-inch screen that turns your workout into games; and
  • a flying taxi concept from Hyundai and Uber.

While a few of these fanciful items may make their way onto consumers’ wish lists, only one of them moved the stock price of a company – and we’ll cash in when it continues up. More on that below.

But don’t expect the flood of useless headlines coming out of CES to end there. We still have the rest of the week left, and I’m sure there are several big announcements still to come. The headlines will be full of gadgets coming out of CES for days.

As traders, it’s tempting to see this as a prime opportunity to make some money. It’s a trap that’s very easy to fall into – a company announcing a new and exciting product must be a good trade, or so we’d like to think.

Coverage from Wall Street and the Media pushes this idea too.

As I mentioned above, the reality gap is that what’s new and exciting is not always profitable for you…

Quite the contrary.

Instead, there’s another way to profit from CES and events like it…

You Won’t Make Any Money Trading on Gadget News

For starters, let’s look at the tiny startup called FitLinxx. At 2015’s CES, this company revealed AmpStrip: a fitness tracker much like Fitbit or Apple Watch, but slimmed down to the size and shape of a Band-Aid. The idea was to put it on your chest before an exercise, and you’d get all your fitness and health data directly from the device without the fitness tracker even being visible.

The AmpStrip was a huge success at the show and won multiple awards.

Nine months later, it was cancelled, having never come to market.

At next year’s CES, automotive giant General Motors Co. (GM) revealed its fancy new Chevrolet Bolt electric car. Its first modern foray into electric vehicles, the Bolt was heavily awaited, and won awards such as the 2017 Motor Trend Car of the Year, the 2017 North American Car of the Year, and an Automobile Magazine 2017 All Star. Time Magazine also listed the Bolt as one of the Best 25 Inventions of 2016.

The Bolt even became a commercial success, and updated models are still in production.

But trading all this excitement would have been a bad idea:

Over the course of that January, GM’s shares fell by about 13%.

Fast forward two years later to the 2018 CES for another example of how exciting gadgets don’t guarantee profits…

At CES in January 2018, LG Display Co. Ltd. (LPL) revealed a 65-inch, 4K OLED TV that was fully bendable. Instead of coming with a stand and frame like most TVs, LG’s new device came with just a long, rectangular box.

When turned off, the TV would stay in the box, rolled up. When turned on, it unrolled itself and rose out of the box, like a snake responding to a snake charmer.

It was a sight to see, and it’s no surprise that tech journalists took it to heart immediately.

But over the first two weeks of that January, LG’s stock was up just 0.15%.

Trading the hype, in other words, is no certain path to profits.

But that doesn’t mean CES isn’t a profit opportunity.

It’s just that instead of trading the most exciting gadget news, look for this instead…

The Key to Profits is “Boring” News

Amid all the new gadgets and tech being announced at CES every year, there are some announcements that do move stocks up.

It’s just that these announcements are “boring” – at least when compared to the spectacle surrounding them at the floor of the Las Vegas Conference Center.

Take 2016’s CES, for example. On January 6th that year, Netflix Inc.’s (NFLX) CEO announced that the company was expanding its video streaming service to 130 countries.

In an instant, the stock shot up 3%.

Not because of a new gadget that may never see the light of day, or a new technology that may be too expensive to ever be used.

No, because a business was simply expanding its operations, doing what it knows how to do in more places. That may not be as exciting as a razorblade that can measure the size of your beard, but it’s a tangible promise of higher revenue.

Or take NVIDIA Corp. (NVDA). At the 2018 CES, the company announced a partnership with Chinese tech giant Baidu Inc. (BIDU), where Baidu would use Nvidia’s new AI chip to create self-driving cars and other AI-controlled machines.

That January, Nvidia stock went up 23%:

The announcement may not have been flashy or fun, but it was very profitable.

So this year, be on the lookout for “corporate” news at CES: partnerships, mergers, acquisitions, or new initiatives that will make a company more money.

Sony Corp (SNE) has long been a leader in personal electronics. The Walkman is a cultural icon. Sony TVs have long been regarded as top quality. More recently, Sony has been a leader in eGaming platforms, with its PlayStation brand capturing a top spot in global sales.

So when Sony announced an electric car on the first day of CES this week, it was a shock to even the well-informed members of the consumer electronics industry. The concept car was hailed as “Tesla meets PlayStation”. And the stock has popped:

I like SNE stock here not only because it’s venture into electric cars represents a whole new revenue stream and focus for the company, but because it has such a series on strong foundational businesses already in place that money has been flowing into the stock and driving prices up since April of last year. If you’re looking for a long-term play with plenty of upside, built on a firm ongoing business, add SNE to the list.

Great trading and God bless you,

D.R. Barton, Jr.

P.S.: While I’m on the subject of big tech announcements creating huge profits, I want to make sure you didn’t miss this one…

On December 31, a brand-new California government mandate required solar energy technology on every new home built in 2020 – leaving every contractor, developer, and homebuilder in the Golden State scrambling to secure this $150 device that boosts the productivity of virtually any solar panel in the world.

This three-pound device has turned the world’s most abundant energy source into a “24/7 fuel,” and its distribution to just one state will spark a $32.5 billion opportunity for one tiny company. Click here to get the full story.

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