Prof

Paul Mampilly’s

The Company Leading the

$19 Trillion Revolution
 The Company Leading the
$19 Trillion Revolution
By Paul Mampilly, Editor of Profits Unlimited

M
OORE’S law holds that computing power doubles every two years. And that’s what we’ve had for
over 50 years now: Computers becoming smaller, more powerful and cheaper.
Computers have come a long way in those 50-plus years. In 1959, IBM introduced its 7090
mainframe computer. The 7090 was impressive for its time. You could even use it from a remote terminal.
The downside? It still filled a room, cost between $4 and $5 million in today’s dollars and was incredibly
slow.
By the 1960s, we were beginning to experiment with transistors. However, the big change came when we
moved to computer chips.
By packing circuits together, a chip multiplied the power of old computers. And you could pack them
tightly — so tightly that computers that once filled a room, now fit on a desk.
Moore’s Law and computer chips made people incredibly rich. Just imagine buying into Intel, Apple or
Microsoft when the computer-chip revolution became available in the stock market.

If you bought Microsoft at its IPO price and put $1,000 into it, you’d have $838,833 today. The keys to
making all this money are getting in early on a new trend and buying companies that are going to benefit
the most.
Right now, an incredible new trend is unfolding. People who are working on it call it the Internet of
Things. (You may have seen it referred to as Internet 2.0 or the Second Industrial Revolution.) The Internet
of Things is the intertwined network of objects embedded with sensors, analytics software and electronics.
In this report, I’m sharing the company that’s going to get us in on the Internet of Things revolution.

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 Unlocking the
Internet of Things
The key to the Internet of Things is something called MEMS, or microelectronic mechanical systems.
MEMS are smart sensors. MEMS are the critical element for the Internet of Things to work. Also known as
“smart sensors,” MEMS are micro-versions of computer chips. They are tiny. Many of them can fit on the tip
of your finger.
For example, these smart sensors are going into pipes to measure how much water is flowing through them.
They’re in roads, so we know how much and what kind of traffic is going on a highway. They can collect
information in a smartphone because they are designed to capture data with incredible precision.
MEMS can handle huge amounts of data in a fraction of a second. MEMS can be adapted for particular
environments ... heat, cold, water or air. They calibrate themselves for unusual situations so that the data they
collect is relevant.
Industry research shows that MEMS growth is going to explode over the next few years. Market Reports
Hub estimates MEMS are going to be a $57.77 billion market by 2022, and that the growth rate will soar to
18.1% per year.
That’s an incredible rate of growth. And it’s the kind of growth you want to get in early.
Because smart sensors will be everywhere, we want to buy into a company that’s focused on putting their
smart sensors in machines and devices. Intel became a stock market winner not because it had the best
technology, but because it went into billions of personal computers. So we want our smart sensors to go into
something that’s going to sell by the billions and millions.
We also want to make sure that the smart sensors are unique, so that they can’t be replaced easily. In other
words, you don’t want to own a commodity-sensor company. You want a company that has differentiated
technology, one that is absolutely critical to have in machines and devices.
And what machine is it absolutely necessary to have sensors in? Pretty simple: your car.

22 Billion and
Growing…
In 2020, analysts estimate that there will be over 110 million cars sold. And these cars are now equipped
with smart sensors — in the engines to communicate things like engine temperature, levels of oil, water and
air pressure, on the outside of cars to tell the driver if a car is in his blind spot; or to automatically brake the
car if something juts out in front of it.
Currently, every car has about 60 to 100 smart sensors on board. However, cars are becoming smarter —
which means they have more smart sensors generating more data about everything.
As a result, the number of sensors is projected to reach as many as 200 smart sensors per car. When you
do the math, you realize that the automotive industry by itself is going to need 22 billion sensors. Twenty-
two billion is big. Mega big.
Mega big is good when you’re buying into a trend early. That’s because you get to benefit from those big
profits.
Another area where more and more smart sensors will be imbedded is in your home. For example, Nest is

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a smart thermostat that learns your heating and cooling preferences and adjusts automatically to account for
them. It also learns your daily routine so that it can turn on and turn off your heating and cooling systems
so that you’re not wasting energy when you’re not home.
Clearly, as cars and home appliances show, smart sensors are going to be everywhere. And we want to
profit on that.
If you want to find the perfect smart-sensor company, one whose stock is going to soar higher because its
products are going to be used in huge amounts, look for a company whose smart sensors are used in cars,
in lights and electric outlets, in homes and in city infrastructure, and in factories and workplaces. In other
words, you want it to look like this:

As I mentioned earlier, we also want a smart-sensor company that has differentiated unique technology
— technology that’s critical for what customers use it for. In other words, we want to see a company that’s
innovating constantly and creating new products that its customers want to use.
This combination — smart sensors that are going to be used in high volume, and differentiated, unique
technology — is why you want to buy STMicroElectronics (NYSE: STM).
The image you see above ... that’s where STMicroelectronics sensors are being used today. Notice that
these are all high-volume markets ... cars, houses, etc. I’ll tell you about some of the new, innovative
products STM has introduced just this year ... and that are going to make its sales surge in the future. First,
let’s get some details about STM.

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 The Start of a
Fresh Uptrend
STMicroelectronics is a global smart-sensor company with headquarters in Geneva, Switzerland. STM has
43,200 employees around the world. Of these employees, nearly 20% are in research and development —
which is crucial. We need our smart-sensor company to have differentiated, unique products. And the only
way to do that is to invest in research and development. As you can see by the number of people STM has in
R&D, this is a huge priority for the company.
In 2015, STM generated $6.9 billion in revenue. Of this revenue, 40% came from sales to the
automotive industry. The remainder was spread evenly between spending on smart homes, smart cities and
industrial machines. This is exactly the kind of high-volume exposure we’re looking for.
Now, you need to understand that STM’s smart sensors are a cyclical business. By cyclical, I mean that
its products go through periods when there’s more demand, and periods when there is less demand. Cyclical
businesses go through long ups. Catch the stock of cyclical business at the beginning of the up cycle, and
you can make five or even 10 times your money.
STM’s smart sensors are at the beginning of the Internet of Things cycle (innovation, acceptance,
saturation). It’s introducing new products that are going to make its sales surge.
For example, STM recently announced the new LSM303AGR smart sensor that enhances dead-
reckoning accuracy in automotive navigation. STM also just introduced its newest generation of
microcontrollers for smart cars ...the SPC58 Microcontroller line. These microcontrollers help cars optimize
performance, lower power consumption and increase reliability and security.
In May of 2016, STM announced silicon-carbide technology that lets automobile owners travel longer
distances and recharge cars more quickly.
And this is just a sample of what STM has up its sleeve.
STM is a well-capitalized company. It currently has $1.7 billion in the bank. It pays a current dividend of
$0.24 per share, with a current yield of 3.02%. Remember that STM is at the bottom of the cycle, so you
can expect the dividend to go up as its sales and profits rise.

A 900% Windfall
I can tell you from 20 years of being an investor in cyclical companies that this is the exact setup for
getting in at the bottom of a cycle and setting yourself up to make five or 10 times your money.
Just remember that at its peak in 2011, STM stock traded at over $11 a share. If STM surpasses this, you
could make over 100% from its current price.
However, I believe that’s too conservative. The Internet of Things cycle is going to be a massive cycle that
is going to challenge the all-time share price seen in STM in 2000. That price peak was associated with the
last massive cycle that came from all the spending infrastructure for the Internet.
Meanwhile, the Internet of Things trend is estimated to be worth $30 trillion.
So, this cycle is even bigger than the one that we experienced in 2000. Back then, STM peaked at $54.
From its recent share price of about $5.40, you’ll have made 900%.
Personally, I believe STM will surpass its 2000 share price peak of $54.

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 STMicroelectronics (NYSE:STM) is the stock to buy to get in on the mega massive Internet of Things
trend. It pays a dividend of $0.24 per share annually (3.02% at the current price), which will go higher as
STM’s sales rise.
At the very least, I expect STM to go up 100% over the next 12 to 36 months.
However, I believe that is the bare minimum. The Internet of Things is a massive trend … like the
original Internet trend that happened in 2000. If that’s right, then I believe that STM is going to challenge
its all-time share price of $54 — which would be gains of about 900%.
Regards,

Paul Mampilly
Editor, Profits Unlimited
P.S. The stock listed in this report will not be included as part of the Profits Unlimited portfolio. I will
not be providing follow-ups or additional guidance on this equity. It is a suggestion only, not a specific
recommendation. The report provides a foundation for further independent research.

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