Motley Fool recommends PHO Apologies if previously posted, but Motley Fool (like them or not) has us on their short list of “hidden gems”. More info available here:
https://www.fool.ca/hidden-gems-hub/2018-hidden-gems-launch-bracket/ https://www.fool.ca/hidden-gems-hub/behind-the-scenes-innovators/ Meet Photon Control……. Take a look around at your current surroundings and highlight a few of the more prevalent product brands that you see. To name a few that are in plain sight on this end: Dell, Apple, Under Amour and Logitech. Thing is, underlying the products that carry these brand names, an entire ecosystem of companies we’ve never heard of exists.
For instance, within my Dell computer there are Intel microchips. I know this because there’s a shiny “Intel Inside” logo staring up at me, a rare bit of branding in the relatively anonymous world of technology components. Digging further, while Intel products make up a small percentage of the components within this computer, there are a number of components that go into each one of its chips. And underlying those components exists yet another layer. And so on.
You want to talk about “hidden”? We need to go to that fourth layer to find where Photon Control exists.
Photon Control offers a collection of products to the capital equipment manufacturers who count the Intel’s of the world as their end customers. To perhaps better conceptualize (and steal a simile from the company’s CEO), think of Photon Control as a company that makes headlights for Audi, which is a maker of capital equipment (automobiles). Essentially, Photon Control’s products are used to manufacture the equipment that’s in turn used in the manufacture of semiconductors.
We’re of the mind that demand for semiconductors is going up. Something that’s likely to spur the entire underlying ecosystem, of which Photon Control has a bit, though growing part.
Beyond this pull-through demand dynamic however, there’s a business here that contains many attractive attributes. You see, once Photon’s offering becomes involved in a manufacturing process, that process tends to run for five- to seven-years, which means a stream of annuities more or less constitute the company’s top line. And the secular growth associated with semiconductors isn’t the only game in town when it comes to Photon’s opportunity. Some combination of expanding its reach with current customers, increasing the number of customers it serves and even entering new markets all together is a likely part of this company’s future.
Like any ecosystem, pitfalls exist but colour us intrigued by the risk/reward equation that Photon Control offers.