JERRY JORDAN
PORTFOLIO MANAGER
JORDAN OPPORTUNITY FUND

COMPANY: AU Optronics
TICKER: AUO (NYSE)
PRICE: $17.30 (as of 4 p.m. yesterday)
52-WEEK RANGE: $10.60-$17.10
MARKET CAPITALIZATION: $9.64 billion

Jerry Jordan is a portfolio manager at the Jordan Opportunity Fund (JORDX) in Boston. AU Optronics is a Taiwanese manufacturer of liquid crystal display (LCD) panels for use in computer products and consumer electronics worldwide. Mr. Jordan spoke to David Dalley of The New York Sun and explained why a global revolution in consumer electronics and the emergence of key Asian markets such as China could see AUO stock soar by more than 65% over the next 12 months.

What does AU Optronics do?

They are the third-largest global manufacturer of LCD flat panels. They sell to everyone – Sony, Sharp, Motorola – anyone who uses a flat panel.You see them in cell phones, laptops, TVs, everywhere.

Why is it a strong buy right now?

There are several reasons. I believe that technology spending has shifted from the ’90s where it was all about corporate demand, to be more consumer focused now. We’re in the midst of a consumer electronics buying revolution, and that’s occurring globally.

What you’ve got are buyers all over the world, particularly in China and India, who for all intents and purposes didn’t exist eight years ago.And it’s not like it’s 100 million people. It might be 300 to 500 million. That’s a huge boost to the demand base.

Everybody is buying these consumer electronics, and importantly most consumers are making enough money to own them. A big part of that is the upgrade cycle from traditional CRT TVs to flat panel TVs, and it’s a global cycle, driven by the obvious factors. They’re slick, cool-looking devices, for one. Also, the introduction of new standards for TVs in the U.S. means that starting June this year all TVs must be digital. Added to that then you’ve got high-definition TV rolling out in the U.S. fairly aggressively, which will also drive demand. Ninety percent of those who upgrade will buy flat.

What are the numbers like?

There were between 20 million and 22 million LCD TVs sold worldwide in 2005. The estimate for 2006 is 40 million, and for 2007 it’s 70 million. If we assume that we’re not going into a global recession, and I don’t think we are, then most households will be able to buy one if they want going forward. Prices have dropped precipitously at the retail level.Most 32-inch HDTVs retail for less than $1,000, and that’s a price people are prepared to spend.

If I add up potential households globally,you get about 400 million to 600 million who will want to upgrade, and some will buy two or three over the next few years.So I think the numbers are woefully underestimated. In China in 2005 the sales estimate was 150,000 units. Guess what? They sold over a million. I wouldn’t be surprised if the 2006 global figure is between 70 million and 100 million.

Where do you see the price heading?

I think it’ll be as high as $30 in a little over a year.