Light Up Your Portfolio
Steve is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Trust. It's an all important word. Every relationship in our lives depends on it. This includes our relationships with our investments.
We've seen what happens when we trust those we shouldn't. Look at Lehman Brothers, Enron, Bernie Madoff, or my ex-girlfriend for examples. Trust is just one of the reasons that it's always important to do your own due diligence when investing. When reading information from one website, it's probably a good idea to check the facts with other sources to make sure that everything is true.
In a recent post about Universal Display (NASDAQ: PANL) by Liam Mulcahy of Seeking Alpha, I found what I believe to be a lot of misleading information. In this case, misleading is used in the most generous way. Here are some of his claims:
Point 1: Samsung isn't using green PHOLEDs.
Counterpoint: Samsung was using green PHOLEDs in the third quarter of 2011 in commercial products. There were no problems. Samsung was also using Universal Display's green host material. It was recently noted that Samsung was having problems using green PHOLEDs with host materials provided by someone other than Universal Display.
It is my opinion that Samsung would go back to using Universal Display's host materials instead of halting the use of green PHOLEDs. If using UDC's host material was worth it in Q3 2011, it's probably worth it now as well. Samsung is the leader in OLEDs. I don't believe that they want to take a step backward and remove green PHOLEDs from their products.
What is happening right now with Samsung's use of green PHOLEDs? No one can say for sure. We will likely find out during the next conference call if UDC is still receiving commercial revenue from Samsung for green emitters.
Point 2: LG's 55 inch TV won't profit UDC.
Counterpoint: At a recent conference with Goldman Sachs, a representative from UDC said that there are multiple ways to create OLED displays. LG will be using a white OLED light with color filters. UDC's patents cover this.
Point 3: "An October 13, presentation by DisplaySearch the forecast for OLED displays in 2011 was $4.5 billion. By January 5th, that forecast had been reduced to just $3.4 billion."
Counterpoint: None. This is a completely valid claim. So far, he's batting 0.333.
Point 4: Samsung won't be paying a license fee this quarter, and that will unexpectedly hurt earnings by $3.2 million.
Counterpoint: It's true that Samsung won't be paying a license fee this quarter, but long term investers should not care about this. Additionally, Samsung doesn't hold all of the cards here. AUO expects to start selling small OLED displays in the first half of the year. It wouldn't be a surprise to hear that they are purchasing more materials for developmental and commercial use. Another revenue source that may not be factored in is any potential puchases of green host material if it is in fact being used by anyone at the moment.
Point 5: There will be an "accelerating decline in patent protection starting just 2 years from now."
Counterpoint: The phosphorescent patents have several years more than this, and those are much more important. On top of that, UDC is adding new patents to their portfolio as often as possible including patents on encapsulation and flexible displays. Samsung just signed a contract with UDC that expires on December 17, 2017. I doubt that they would do this if they believed that they could get around UDC's patents in 2 years. They know there was no way around the patents, so they bit the bullet and signed on the dotted line.
Point 6: The patents are being challenged.
Counterpoint: No important patent has been taken away, which means that so far, all world governments that have seen challenges have sided with UDC on all significant matters over Liam Mulcahy, a man who "works for a Long/Short Equity Hedge Fund," and just happens to be short PANL himself.
Liam also states that Panasonic and Sony probably won't use UDC's technology. I find this hard to believe, given that Panasonic just announced plans for an OLED TV (http://www.digitalversus.com/tv-television/panasonic-produce-oled-tvs-n22394.html), and Sony's next president wants to invest heavily in OLED (http://www.oled-display.net/sonys-new-president-kazuo-hirai-planning-major-investments-in-crystal-led-and-oled/).
UDC has over 1,000 patents issued and pending with multiple countries around the world, and they have contracts with multiple companies with goals of producing displays and/or solid state lighting with these companies. Being short PANL, Liam seems to think that these patents and ventures will not be successful. Given the validity of his research, do you trust his stance on PANL?
Fool Blogger Steve Wilson is long PANL.
