Watch This Milestone in Wearable Technology

GoPro hits the public markets on Thursday.

Jun 26, 2014 at 10:15AM

U.S stocks are falling on Wednesday morning, with the benchmark S&P 500 and the narrower Dow Jones Industrial Average (DJINDICES:^DJI) down 0.57% and 0.6%, respectively, at 10:15 a.m. EDT. Yesterday's final revision for first-quarter U.S. GDP was downbeat, today's initial jobless claims figure for last week of 312,000 is in line with the consensus forecast ... and so it goes. (Reminder: A long-term, value-oriented investor ought not to pay much attention to short-term volatility in economic indicators.) In company-specific news, digital camera maker GoPro joins the public markets this morning.

As smartphones and tablets approach maturity in developed markets, the next growth segment for mobile device manufacturers appears to be "wearable technology." Yesterday, for example, Google (NASDAQ:GOOG) (NASDAQ:GOOGL) announced at its I/O conference that consumers can now order the first Android-powered smartwatches from LG and Samsung. Google has already produced a wearable device with the Google Glass smart spectacles, although they have so far garnered only a niche following among technology hipsters and enthusiasts.

However, that's not the milestone I referred to in the headline. Instead, I'm looking at GoPro, shares of which begin trading on the Nasdaq this morning after pricing at $24 yesterday. With a valuation approaching $3 billion, it's one of the largest consumer electronics floats in years. GoPro increased revenue by 87% last year to nearly $1 billion. Essentially all of that revenue comes from the sale of versatile handheld (or head-mounted) cameras that enable users -- many of them sports enthusiasts 00 to capture footage like this:

Initial public offerings, particularly in the technology sector, are rarely great bargains. As I wrote in this column on Tuesday, investors should steer clear of most IPOs: A public offering is an exercise in salesmanship during which a company takes advantage of the spotlight to put its best foot forward. At their $24 IPO offering price, GoPro's shares don't look particularly cheap, at first glance: the price is 51 times the $0.47 per share GoPro earned last year.

Furthermore, consumer electronics companies are generally poor long-term investments. The industry is brutally competitive and it is very tough to establish any sort of defensible franchise: Technology itself is rarely a differentiator (not over any significant time period, in any case) and companies are reduced to competing on price.

Interestingly, then, GoPro has chosen to market itself partly as a media company, pointing to large followings on social media websites and a massive collection of user-generated content. As the offering document explains:

We believe consumer demand for compelling content, combined with our self-capture technology and the popularity of social media, create a significant media opportunity for GoPro. GoPro programming, a combination of GoPro originally produced content and "best of" UGC, has developed a growing audience. ... In addition, we actively curate and redistribute, with permission, UGC as GoPro-branded content through the GoPro Network, which includes the GoPro Channels on Facebook, Instagram, Twitter, Virgin America, Xbox Live and YouTube.

It's not clear that this initiative will ever make a significant contribution to revenue and profit, but it nonetheless seems shrewd from a branding perspective. GoPro is in a tough business, but it appears to have established a genuine brand, which could translate into a competitive advantage. So far, wearable devices appear to have mainly niche appeal -- one of GoPro's strengths is that it understand who its customers are and has been delivering a product they want.

Leaked: Apple's next smart device (warning, it may shock you)
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Alex Dumortier, CFA has no position in any stocks mentioned. The Motley Fool recommends Google (A shares) and Google (C shares). The Motley Fool owns shares of Google (A shares) and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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