The Revolution of Our Reality

Most of us believe that we have a good sense of our surroundings. However, this belief is changing. Augmented reality (AR), one of the hottest technologies, is penetrating our lives in more ways than you would think. We were familiar with our surroundings, but not anymore.

Nintendo's (NTDOY) “Pokemon Go”, the latest AR app for smart phones, has created a new dimension, superimposed over our existing world. It is the latest product of the Pokemon family, a franchise containing card collections, games, TV shows, and toys where players train and fight side by side with their cute magical animals (called “Pokemon”). But with the latest addition of Pokemon Go, the Pokemon have broken through the virtual world and into our reality.

When I walk across the park, I often see passerbys stop and pull out their smartphone, which is the key interface which links us to the world of Pokemon. Smartphones' built-in GPS directs the location and the camera displays the real world with a pokemon superimposed over it. Millions of people across the globe are engaged in this revolutionary game every day.

Photo source: AndroidAuthority

The Profit of “Pokemon Go”

“Pokemon Go” is actually not the first AR game to be released. “Ingress”, an AR game released by Google (GOOGL) last year has 1,000,000 active users per month. Other AR games have had similar success in the market. However, users have been craving something unique and have been flocking from traditional smartphone games to augmented reality games.

A large user base means greater potential profit. Although the app “Pokemon Go” itself is free, players are actively buying virtual items to strengthen their Pokemon to further progress in this game. This “freemium” model has long been a profitable strategy for many game companies. For example, Supercell makes numerous popular free games such as Clash of Cans, yet the company is valued at $3 billion!

More importantly, we should need to recognized that “Pokemon Go” is not just a video game, it is heralding the world of augmented reality.

Photo source: kadvacorp.com

The Future of “Augmented Reality”

Although it is still in an early stage, augmented reality is one of the hottest areas of technology growth. One of the best ways to increase wealth is to invest in hot trends, and AR fits this description. One of its sub-products, virtual reality (VR), has already shown immense growth,

Photo source: Wikipedia

One of the technology industry’s leaders, Facebook (FB), purchased VR player Oculus (OCLS) for $2 billion in 2014. Entertainment giant, Six Flags (SIX), has made huge profits on building new facilities that provide their customers with a VR experience. Many of the big names, such as Google (GOOGL) and Microsoft (MSFT) and  have already engaged in this reality changing war. The war is still growing, as do the profits. A 2015 May report from investment bank Piper Jaffray states that, “While a market size of $5.8B may seem small, this number is content only and excludes hardware, which we estimate to be $62B (500M headsets at a $125 ASP) in 2025.” ( p1, Next Mega Tech Theme is Virtual Reality by by Gene Munster, Travis Jakel, Doug Clinton, Erinn Murphy)

The Leaders

Unfortunately, AR is still not hot enough due to some technology limitations. But we can still identify the leaders in this market which are worth keeping an eye on.

#1. Nintendo clearly comes in at number one, having skyrocketed from $15 per share to $35 per share since releasing “Pokemon Go”. The stocks performance over the last few weeks has been absolutely astonishing.

Charts source: Google

#2. Microsoft is our number two pick and can't be forgotten amidst the Nintendo craze. Microsoft is a behemoth in the technology industry, and has recently released their Microsoft HoloLens.

HoloLens photo source: Microsoft

Although a little bit shaking on price, it still a good choice in the AR trend.

#3. Oculus is our number 3 pick. Though the company has not performed well in the short term, Oculus also had a pop on stock price because of positive anticipation of the AR market after July 6^th (When Pokemon Go was released).

All charts source: Google

As Augmented reality becomes increasingly popular and affordable, these three companies will likely continue to be the industry leaders and are worth considering for your portfolio.