Saturday, November 28, 2009

Memristive Technologies Could Soon Make You a Bundle

As you know, I've written regularly about memristors. This fabled "fourth circuit variable" was hypothesized in 1971. Until now, though, three circuit variables have long been the basis for all electronic circuits. They are resistance, capacitance and inductance.

Last year, HP made news by demonstrating a practical application of memristance. At the time, I was astonished that the development had occurred so soon after HP's announcement that it had discovered a way to build memristors. It turns out, though, that Hewlett-Packard's press relations may be better than its patent claims. This, in turn, could be great news for investors.

HP may have been only the first group to recognize what it had on its hands. Researchers from such varied institutions as the University of Parma in Italy to UC San Diego have also built prototype memristors from polymers and metallic oxides. They too are exploring applications for this exciting new technology and could end up holding important memristor intellectual property.

Multistate Computing and Neural Networks

Nearly all existing commercially available transistor-based technology is capable of assuming only two states per element, either 1 or 0. So by necessity, all calculation is done in binary.

Memristors, because they can assume different states corresponding to different levels of resistance, are multistate elements. This facilitates a much higher data density. Memristor storage density will be at least 10 times that achievable using current transistor-based technology.

Imagine the storage capacity of a large hard drive on the head of a pin. Moreover, memristor memory is nonvolatile. It retains its state even when no power is applied to the circuit. This has tremendous advantages over current memory technologies that lose their data when the power is switched off.

All these unique properties put off the eventual physical limitations imposed upon Moore's law using current transistor technologies. Unlike current transistor technology, memristance becomes more pronounced and efficient the smaller the element is. In transistors, small size and high density lead to greater power loss and heat production. The opposite is true with memristors. Nanotech-level scaling actually amplifies the memristive properties of the individual elements.

Biological Computing

It's not only computer scientists who are excited by these developments. Biologists are beginning to realize the potential memristors have to mimic organic or biological computing.

Because many of the properties of memristors are so similar to brain cells they may be used to imitate brain functions. If, as scientists believe, they can be used to mimic synaptic function, they could bring true artificial intelligence much closer.

Recently, researchers have been able to model the learning ability of the amoeba with a simple memristive circuit. According to HP, these circuits can "remember and associate series of events in a manner similar to the way a human brain recognizes patterns." In other words, the circuits learn.

While HP has grabbed the headlines, such devices are currently being developed for use as nonvolatile resistive memory by various companies. Some, like HP, are probably too big to be breakthrough technology top stocks for 2010. Samsung is one of the giants working on the technology. On the other hand, Micron Technology and Unity Semiconductor apparently have some patent rights, at least, to memristor technologies. If they're significant, these companies could be small enough to experience transformational profits that rival Intel's historic growth.

It is only a matter of time before this new technology begins to break through. We will be monitoring this area for developments and will keep you informed.

Sunday, November 22, 2009

Toyota Motor's Green Outlook Fails to Shake Bearish Investors

Toyota Motor Corp. (TM: sentiment, chart, options) is "facing a 4 million vehicle gap between what it can build and what it estimates it can sell this business year," according to a recent article in Forbes. The revelation arrived as part of the Japanese automaker's $4.4 billion loss for the fiscal year ended March 31 - the company's first loss in its 71-year history. But, as the author notes, TM's outgoing president, Katsuaki Watanabe, believes the company can mitigate its expected $5.5 billion loss for the current fiscal year via the expansion of fuel-efficient hybrids - if only he can convince the U.S. auto market to jump onboard.

Watanabe hopes that by placing Toyota at the lead of the new environmentally friendly movement he can avoid leaving his successor, Akio Toyoda, grandson of Toyota founder Kiichiro Toyoda, with excess baggage. Furthermore, according to Forbes, Watanabe's estimates don't include possible government incentives which could help alleviate losses, and potentially "allow the new boss [Toyoda] to revise earnings estimates up rather than down."

Finally, Toyoda will also be in a much better position than his U.S. Big Three competitors, as Toyota is sitting on some $56 billion in cash and ready-to-sell securities.

Contrarian Takeaway:

If going green is the new black, it would seem that options players are not buying the hype. TM's Schaeffer's put/call open interest ratio (SOIR) of 1.91 indicates that puts nearly double calls among near-term options. This ratio also ranks at an annual high, meaning that options traders have not been more bearish toward TM during the past year.

This negativity is underscored by data from the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE). The current ISE/CBOE put/call volume ratio of 4.07 reveals that puts bought to open on these exchanges have more than quadrupled calls purchased during the prior two weeks. Furthermore, ISE and CBOE options traders have maintained a higher preference for purchased puts only 17% of the time in the past 52 weeks. Clearly, confidence in Watanabe's fuel-efficiency plans is not running high among speculative investors.

Neither are Wall Street brokerage firms on board with the company's positive outlook. Specifically, three of the four analysts following TM rate the shares a "hold" or worse. Meanwhile, this data oddly conflicts with the consensus 12-month price target of $81.19 per share, as reported by Thomson Reuters.

Technically speaking, the bears have been right during the short term, as TM has given back more than 8.6% during the past three trading sessions. The equity has also breached key round-number support at the 80 level, and today broke below former support at its rising 10-day and 20-day moving averages.

There is the risk that this weak price action could embolden bearish investors into adding to their winning positions. Furthermore, price-target cuts from Wall Street analysts could also provide additional downside pressure for the shares. So, while a "red Toyota" may "see green," it seems that the best stock for 2010 will likely see more red before the weak hands are finally shaken out.

Research In Motion Limited (RIMM)

As the manufacturer of the infamous "CrackBerry," Research In Motion Limited (RIMM) once enjoyed near-total dominance over the smartphone market. That is, until Apple's iPhone threatened to break RIMM's hold on the sector. The BlackBerry is still arguably the top dog, but the sniper hits from Apple and the global economic recession have taken quite a toll on RIMM shares. In fact, RIMM plummeted more than 51% in 2008.

The security has made quite a comeback this year, soaring more than 81% so far in 2009. But RIMM is facing technical issues very similar to upstart smartphone maker AAPL. The best stock was recently rejected by resistance at the 78 level, site of its post-plunge peak set on Sept. 26, 2008. Furthermore, the equity is staring up at potential round-number resistance at the 80 level, as well as its declining 50-week moving average. The combined weight of these technical hurdles has forced RIMM to retreat nearly 8% during the prior three trading sessions.

Meanwhile, sentiment is far from flattering for bullish investors. RIMM's SOIR currently resides at an extremely complacent 0.84, in the 54th percentile of its annual range. Elsewhere, call buyers are swamping the ISE and the CBOE, as the duo's 10-day call/put ratio of 1.78 reveals that nearly two calls have been bought to open for every put on these exchanges. This ratio also ranks above 73% of all those taken in the prior 52 weeks, underscoring rising bullish expectations despite weak short-term price action in RIMM shares.

There is also evidence that the stock's recent spurt higher might have been related to short-covering activity. During the most recent reporting period, the number of RIMM shares sold short plunged by more than 19%. That said, there is very little fuel left in the tank, as less than 4% of RIMM's float remains sold short. In fact, we could see these bearish investors return to the security, emboldened by the stock's failure to overcome technical resistance.

Downgrades could also be a concern for the equity. RIMM has garnered 18 "strong buys" and six "buys," versus 10 "holds" and just one "sell." Any downgrades from this bullish bunch could send the security sharply lower.

Palm Inc. (PALM)

Once the king of the handheld device market, Palm Inc. (PALM) has had to fight an uphill battle against both RIMM and AAPL to regain a foothold in the smartphone market. But, as the saying goes, "if you can't beat 'em, join 'em." Palm is slated to release its own entry into the touch-screen market later this year, along with a slick new mobile operating system. The move has prompted questions of legal action from Apple, as the new Palm Pre, with webOS, performs remarkably similar to Apple's iPhone. Still, the Pre revelation has inspired PALM investors, and the shares are making a comeback.

Technically speaking, PALM has rocketed more than 255% higher in 2009, enjoying near flawless support from its rising 10-week moving average. Furthermore, the equity has not closed a session below its 10-day and 20-day moving averages since March 9. The best stock for 2010 met with a spot of technical resistance near the 12 level on May 7, but the pullback was halted by support at PALM's rising 10-day moving average. Additional support lies just below the shares at the 10.50 level - an area that recently provided short-term resistance. A rebound from this solid support should help propel PALM steadily higher.

Options traders have capitalized on PALM's strong price action, sending the stock's SOIR to a reading of 0.85, in the 40th percentile of its annual range. What's more, the ISE/CBOE 10-day call/put ratio has swelled to a hefty 5.71, as calls bought to open more than quintupled puts purchased during the prior two weeks. From a contrarian perspective, this wealth of bullish sentiment is par for the course for this outperforming equity.

Not everyone is quite so optimistic toward PALM, however. Short interest still accounts for a whopping 34% of the stock's total float, despite an 8.8% decline in the number of PALM shares sold short during the most recent reporting period. As the shares continue to defy gravity, more of these bears could be forced into buying back their positions, thus prolonging the stock's rally.

Finally, Wall Street analysts have yet to jump on the PALM bandwagon. According to Zacks, 13 of the 17 brokerage firms following the shares rate them a "hold" or worse. Any upgrades from this bearish bunch could provide additional buying support for the security.