It’s often said when presented with a gold rush the best investment is the picks, axes and pans that stand to be sold, rather than being the one standing in long line along the cold stream.

Right now there is a bit of a land rush into the world of driverless cars with everyone from that that actually manufactures cars such old line BMW and new kid Tesla (TSLA) to the “disruptors” such as Google (GOOGL) and Apple (AAPL) all looking to insert themselves into the next generation of vehicles.

There is one company is poised benefit no matter who or how this inevitable evolution in transportation plays out.

MobileEye (MOBL) is my top pick to profit from the trend towards assisted driving that is gripping the automobile industry. Note, I did not call it “driverless’ car. It will be a long time before manufacturers, insurers, and passengers hand complete control and responsibility to machines.

Mobileye designs and develops software and related technologies for camera-based advanced driver assistance systems. It creates propriety software such as EyeQ chips that perform detailed interpretations of the visual field to anticipate possible collisions with everything from other vehicles, to pedestrians and pigeons. It also is able read traffic signs and traffic lights.

Agnostic and Ubiquitous

Mobileye’s software is already embedded and being used by all of the major players from the original equipment manufacturers, to tier 1 system integrators, and third party retail resellers. Insurance companies are even starting to offer discounted rates for vehicles equipped with the safety feature software.

Here is a short list of recent deals and alliances ripped from the recent headlines:

General Motors (GM) gets help from Mobileye to speed up development of self-driving Chevrolet Volt plug-in hybrid cars.

Tesla Motors (TSLA) is developing its own autonomous features, also with Mobileye technology’s help.

Baidu (BIDU) which is allied with Uber — is working with Mobileye and in March said that a car that drives itself but lets a human driver take control when needed would be out later this year.

Ford Motor (F) has partnered with Mobileye to invest $1.8 billion over the next five years to autonomous driving and other smart-car features for the China market, as the tech sector looks to shake up the global auto industry.

The upshot is Mobileye is not only already embedded in the existing “driver assist” technology being installed but is laying the groundwork to be the defacto software going forward.

And this brings us to the crucial point; Mobileye’s technology is not simply a commodity. It has a first mover advantage in which it building an ecosystem which is creating a competitive moat.

Last August Citron Research, widely followed short selling firm most recently responsible for the dismantling of Valeant (VRX), issued a bearish report on MBLY causing shares to tumble some 15% in a two day period.

Citron’s bear thesis was based on statements such as “while Mobileye is a “pioneer” in automotive safety, the company doesn’t have any patents to protect itself from the competition or any long-term commitments from car companies that could give it an advantage.”

I hope the above referenced articles have dispelled that notion.

Citron went on to say, “major automotive suppliers Continental and Delphi Automotive are already building their own ADAS businesses. While Mobileye entered the market early, these big players have a much better chance in profiting from ADAS. Citron mentioned that Mobileye only spent $56 million in R&D over the past 18 months, far short of its competitors.’

What Citron fails to recognize is the reason Mobileye’s R&D spending has slowed is because its earlier investments are starting to pay off. This is paying off in two ways:

• Mobileye now has 13 years of data-collection from its driver-assistance ADAS chips and software, millions of miles of traveling data giving the company essentially a monopoly on the information needed for autonomous navigation.
• Reduced spending is accelerating the company towards profitability.

The above was evidenced when in Mobileye’s delivered its second quarter earnings report on August 6. The company reported revenue $52.8 million, an increase of 57%, and a profit of $15.3 million, or $0.06 per share which helped shares recover and trade back above the $50 level.

But by this fall with the broad market sell-off and particularly hard hit were stocks with high multiples such as Mobileye, which at $50 a share sported a p/e of 270x next year’s earnings. By mid-February the stock had lost over 55% and a hit a low of $24.50 per share.

But now it looks like a rounding bottom is in place and stock is poised for to move back higher.

The stabilizing stock price and positive technical picture comes with a promising fundamentals. Last week on February 24^th the company delivered fourth quarter profits that once again beat estimates and included 62% increase in revenue. But the real highlight was the sharp improvement in gross margins. The company is clearly moving towards profitability.

The Trade:

Semi-autonomous and autonomous cars are likely the future of the automotive industry, and applications are growing. It’ll bring big changes in the automotive space and Mobileye is well positioned to benefit no matter how it plays out.

I want to use a long term LEAP option to participate in this journey.

-Buy January 2017 $35 Calls @ $5.50 a contract

I think shares of Mobileye could be above $50 within the next 10 months. If that plays out these calls would be worth over $15 for a 300% gain.

Driver, take me to the bank.