The Investor Diary Entry #34: April 30, 2023
Finally, I was able to complete my Aurora Innovation stock analysis which was delayed by my very slow reading of its 10-K report.
Once I finalized my stock research, I was able to decide on Aurora Innovation stock value. The company falls within my target as a small cap company within a new industry. Aurora Innovation Inc. is developing an autonomous driving system that will be deployed first on trucks and within a small region.
The expansion will first be geographic and then will move into passenger vehicles. Aurora is collaborating with big names, the likes of Toyota, Volvo, Uber and others. The latest collaboration that was announced few days ago is with Continental AG for providing hardware for the Aurora Driver.
Tricky Decision
I see a lot of potential for Aurora, but it is a small company playing with the big guys. The field of Autonomous Driving is filled with giants from both the Automotive and Tech industries.
The beautiful thing is that Aurora Innovation was able to partner with big players. It even acquired Uber’s self-driving unit, Advanced Technologies Group (ATG).
What I also like about Aurora Innovation is that it is the only company that I found that its sole purpose is to develop an autonomous driving system. Other companies are either within the automotive or technology industries who established units to develop such a system.
The Tricky part is that with all those big guys either as competitors or collaborators, will Aurora be able to continue on its own or will it be an easy acquisition target. The latter option is the most probable scenario.
Safety And Legislation
After the competition comes the safety and legislation threats. Many investors and analysts think that it is too early to predict the potential for self-driving.
In my point of view, between legislation and safety, safety is the greatest threat. Let’s say that after many successful tests on a multitude of scenarios governments allowed self-driving technology to be installed, if any safety issues appeared later on it will drive the whole self-driving industry to the drawing board. That is if government did not revise their decision.
Since there are a lot of companies that are developing autonomous driving systems, an accident does not need to happen within Aurora’s technology. If any issue happened with any other company, it will affect the whole industry and the way customers and investors look at the industry.
Now coming to the legislation issue. How long will it take governments to be convinced that self-driving systems are safe. Are today’s governments with today’s mentality able to pass such future leaping laws.
If we look at today’s technology level, we are still at the beginning of the AI transformation with many technological and ethical questions are still unanswered.
If we look at Chat GPT for example, where physical harm is not in question, we can still see that there are many accuracy issues involved. If that can be tolerated from a search engine, it for sure cannot be accepted in the transportation sector where lives are at stake.
Aurora Verdict
Yes, there are many challenges ahead whether on an industry level or at a company level. The US still under the question of having a recession or not. Aurora is not making any money is still requires funding.
With two forces happening; the slowing economy and banking saga, if Aurora was not able to secure funding until it is able to launch successfully and make profits, then this whole adventure is over. It is not an adventure really. Investors money will be wiped out.
Reports say that Aurora has funds that will last between one year and eighteen months. Other reports estimate that the company will not be make profits within the next three years.
The future is for sure towards autonomous driving. Many companies are racing to develop this technology. Talks are already happening with governments within the US and Europe, and things are looking good. Until now, there are no issues with all the tests that have been happening either with Aurora or with the other companies that are developing their own systems.
Aurora is a small cap company with a very attractive share price, but is it a good price?
Is Aurora Innovation A Stock To Buy?
I created three assumptions for a 7-year outlook of the company with the help of the software that I am using. The low assumptions gave me a share price of $0.19, the medium assumptions gave $0.45, and the high cashflow assumptions gave $1.48 per share.
Aurora Innovation stock price today is at $1.43. Their balance sheet is healthy, but there is nothing to analyze on their income and cashflow statements. As a new company for sure stocks will be diluted heavily.
Conclusion
Recently I have decided on a monthly amount that I would invest either in a new company or an existing company in my portfolio based on price targets.
I have decided that at the beginning of next month, May 2023, I will invest part of the monthly investment quota in Aurora which is also a fifth of the amount I dedicate to invest in one single company.
The risks are great, but so is the potential in my point of view.
The Investor
Sunday 30 April 2023
About The Author
I started to look into individual stocks in January 2022. I created this diary initially for myself to track my investing progress, and second as a place that I can share my ideas publicly hoping that others will share their ideas and learn from each other, and lastly as an online business where some links that I share are affiliate links, and if anybody bought anything by clicking those links I will get a commission based on that successful sale, which of course will not affect the price that you are buying the product or service at.
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I am fairly new to invtoinvesting and have initially opted to invest in exchange traded funds (EFTs) rather than individual stocks and shares, but I do want to start putting money into smaller companies.
Although Aurora seems to have a very innovative idea with automation of driving, I am concerned that their cash flow might be stretching it, without major investment from some of the larger players in the field. How safe would you rate Aurora for a beginner investor? Or are the risks too high for a beginner? Thank you.
Hello,
Smaller companies are for sure attractive and they provide a high potential, but they are also extremely risky. The reason that you mentioned is one that is shared by most small companies.
Personally, I just invest an extremely small amount of money per company. The most important factor before choosing companies is to decide on the criteria that one would choose to find an opportunity.
Every person has an individual appetite and tolerance levels to risk. Although all investors seek a unified goal of increasing wealth, each one chooses the path that best suits his/her style.
The way I look at investment is that every decision is risky. Anything can happen at any time, either with me or against me, but for sure I cannot give an opinion about one individual stock or company for many obvious reasons.
What I think is important for everyone to have is a strategy. One needs to design an investing strategy before jumping into investment.
I will give you an example of how one person cannot give any advice on investment to another. My own persona philosophy is that one should not give any advice to anyone about anything in life, but that is another discussion. Now the example.
I think it was either Warren Buffet or Charlie Munger that said if one doesn’t know how to calculate the value of a company then that person should not invest in individual stocks and should invest only in ETFs or Indices. I didn’t listen to that. I insisted on investing in individual companies and insisted that I keep learning different ways of understanding value.
Now, did I follow the things that I learned? No, I did for a short while, then I turned my attention to new industries where most of the companies in that industry are extremely small cap companies where no value could be derived since there is no sufficient data to extract such a value.
I really enjoyed your comment and enjoyed answering it. Replying to comments is a really interesting learning experience. As it gives me the chance to test my own logic.
I agree with the last comment you made “The risks are great but so is the potential”. Autonomous technology will most likely be a part of our future but it’s just not ready yet. I feel that one accident is too many and there have been many during testing. First responder vehicles and motorcycles have been the main targets for accidents. With so many other pressing issues going on in todays world I feel like this technology will not be advances as quickly as others have. If Aurora only has enough to stay afloat for 1 year to 18 months i feel like that would be too much of a risk for me. That’s just me though. As I am a bit older, I am more of a safe investor. Good luck with you investment plan into Aurora. I am rooting for you.
I hear you Dennis, and I cannot argue at all with your logic. I agree with you staying afloat for 12 to 18 months is not enough for this industry to see any widespread commercial application.
The way I am investing in such companies is that I am using their extremely low prices to invest extremely small amounts.
Thanks a lot Dennis.
Hi. I am pretty ignorant with stock trading. I recently lost a lot of money on a startup company. It was actually a electric vehicle company. And it turned out the CEO is a corrupt scammer. Luckily I only lost about 2000. But I know many guys have lost way way more. I think for something like this it’s best to risk only what you can afford to lose.
Ya, I hear you. This venture capital.. Investing in startups is a whole different game altogether. Currently in Stocks I only invest and don’t trade. In trading until now I use forex and Gold.
In investment, I only invest in public companies.
I think this is why they called it venture capital.. The company is still starting. There is nothing known about it.
This does not mean that investing in new public companies is not risky. Of course, it is. Actually, there is a whole school of investors who shy away from such companies.
When we talk about value investment. The whole concept relies on a history of the company to decide on its value. When there is no history, value cannot be established.
I am very sorry to hear that this venture didn’t work out.