I’ve saved the best for last.
Aside from the junior mining and biotechnology space, there’s one more batch of stocks I follow intently…
The disruptive technology sector.
Tech is the single largest segment of the market today – An industry whose growth potential trumps all others, including financials, healthcare, and industrials, combined.
Throughout my two-decade career as an investment analyst, I’ve invested in numerous growth trends in the tech space.
In the mid-1990s, personal computer (PC) sales surged. Manufacturers like Dell, Compaq, and Hewlett-Packard saw exceptional growth while the PC made its way into every household in America.
A few years later, surfing the internet became easier. High-speed connections became available… changing the landscape of how almost every company in the world did business.
We saw companies on the forefront of this trend – including Cisco (networking), EMC (data storage), and Microsoft (software) – surge thousands of percent from their IPO price.
The next big growth trend in tech was mobile phones. Early on, these handheld devices were big and bulky. Phone service was terrible and battery life was short. That changed in the early 2000s as phones became smaller and more affordable. Service improved dramatically due to an increase in cell phone towers. New technologies improved battery life.
Soon, almost every person living in a developed nation owned a handheld phone. The early beneficiary of this trend was Motorola. Samsung and Apple are the dominant mobile phone suppliers today.
I’m sure most of you reading this are familiar with these massive growth trends. If you bought any of these stocks early on, you’ve likely made a fortune.
Today, popular tech stocks known as “FAANG” (Facebook, Amazon, Apple, Netflix, Google) lead the headlines on almost every market close.
But the opportunities in tech go far beyond what’s trending on financial media outlets… And individual investors are having a hard time keeping up.
Differentiating between what’s actually going to impact the economy (rewarding investors along the way) and the fads, so to speak, that still have years before reaching the frontier – is more difficult than ever.
So push the convoluted news aside… The way I see it, these are the only trends you need pay attention to (for now):
The Internet of Things (IoT)
You probably don’t realize it yet, but we’re at a special moment in history…
More and more objects are now connected to one another via the internet. They’re sharing millions of data points at super-fast speeds. And the implications are already having a major effect on things like healthcare, social security, and even the world economy.
Most people in the world are already connected to the Internet. Even people living in remote areas of Brazil and India are using cheap computers and a simple WiFi connection to build businesses.
But I’m not just talking about connecting people… I’m talking about the connectivity of billions of devices and machines…
Just about every device you use – including your car, appliances, television, alarm system, fitness bands, eyeglasses and thermostat – are now connected to the Internet… or soon will be. That means you can control everything through your mobile phone, tablet, or PC.
Machines are also rapidly becoming connected. This includes airplanes, locomotives, and factories. They can now tell us when certain parts need maintenance… How they can operate more efficiently during good and bad times… And ultimately, how to create a safer environment and increase productivity for all of us.
This remarkable trend is called the Internet of Things (IoT).
It’s one of the biggest trends in the world today. And it’s disrupting nearly every industry across our multi-trillion-dollar global economy…. creating a new generation of millionaires and billionaires.
Most devices in my house are already connected. This includes my mobile phone… tablet… television… and fitness band. Your new car is likely connected – you can warm up your seat or start your car by using a simple app on your iPhone.
This is because everything from cars, appliances, televisions and thermostats are being connected to the internet. I want you to have exposure to this trend, because it’s only going to get bigger..
And yet… these connected devices amount to a tiny fraction of a market Goldman Sachs predicts “will be 10x bigger than the Internet.”
We’re still at the beginning stages of this explosive trend… there’s still plenty of time to make money.
According to tech consulting firm Link Labs, only a tiny fraction of things that could be connected are currently connected.
Networking giant Cisco (CSCO) predicts over 50 billion devices will be connected to the internet by 2020.
Companies like Cisco, Samsung, and LG will be beneficiaries of IoT. However, these companies are not pure plays. They operate in dozens of sectors outside of IoT.
Many of their products like routers, switches, and televisions are simply appliances in slow-growing industries.
To make the most money on this trend, I’ve encouraged readers to buy “nuts and bolts” companies. These are the pure plays of the IoT… and will likely see earnings and revenue surge for years to come as devices worldwide connected.
“Big Data” is a byproduct of the IoT revolution.
Connected devices are producing massive amounts of information. Big Data is the process of using advanced web tools to analyze and interpret this information.
The goal is to use past data to predict human behavior and interactions… making “predicting the future” one of the biggest trends in technology.
These tools are extremely valuable information to EVERY company in the world. Imagine being able to know the exact time and date someone will enter your store… what this person plans to buy… or how much this person is willing to spend.
Big Data is being used to increase efficiency and productivity across every sector.
Consulting giant McKinsey Global says it’s “the next frontier for innovation, competition, and productivity.”
Big Data is also saving lives… We can now predict where outbreaks of viruses (flu or Ebola) will most likely appear.
And this is only the beginning!
The amount of data on the internet has now surpassed one zettabyte.
For the non-tech geeks… That’s the equivalent of stacking a bunch of books from Earth all the way to Pluto – 20 times.
By 2025, consulting giant IDC estimates the “datasphere” will grow to 163 zettabytes (a trillion gigabytes). And individuals will have nearly 5,000 interactions with IoT devices daily. That’s one interaction every 18 seconds.
I could go on, but you get the point: Big Data will have a significant impact on our lives going forward.
And the companies that continue to ignore, or fail adapt to, these extremely valuable Big Data advantages, automatically pose a huge red flag for investors.
I’ve created a Big Data Watch List for my Curzio Research Advisory subscribers – a list of companies that are making this incredibly high-margin market a much bigger part of their overall business. They’re potentially some of the best ways to cash in on this megatrend.
And the last tech trend that should be on every investor’s radar…
Robotics/Artificial Intelligence (AI)
Robotics is one of the biggest trends inside of the multi-trillion IoT megatrend.
More importantly… most robots (all sorts of tech gadgets) are using artificial intelligence (AI) to become smarter and smarter.
With AI, machines can work and react just like humans. They perform at faster speeds, analyze data in milliseconds, and continue to learn (and become more “humanlike”) with every interaction.
Robots are being used in the military… for space exploration… underwater exploration… duct cleaning… harvest crops… fix oil spills… and to actually fight crime…
The robotics revolution isn’t coming. It’s already here…
- Nestle is investing in robots to sell coffee makers across the country…
- Tokyo-Mitsubishi Bank is using robots (capable of having a conversation with humans) as bank tellers and receptionists…
- Northrop Grumman builds military drones with a wingspan of 131-feet (wider than a Boeing 737) and ones with a wingspan of just 6.5 inches…
- Boston Dynamics built the “BigDog” robot, capable of running and climbing through some of the roughest terrains on earth…
- Rethink Robotics built the “Baxter” robot. It can package, load, unload, handle materials, and keep track of all this data using its own software platform..
Some of the world’s richest investors are pouring billions of dollars into robotics.
According to IDC, global spending on robotics and drones is expected to top $218 billion by 2021. That’s a CAGR (compound annual growth rate) of over 25%!
Most of this cash is coming from industry-leading companies. They include Alphabet (the parent company of Google), Microsoft, IBM, General Motors, Intuitive Surgical, Lockheed Martin, Northrop Grumman, Boeing, General Electric, SAP, Siemens, Nestle, FedEx, and Amazon.
Google is considered one of the biggest players in the robotics field. It formed its own robotics division (under their Google X division). In 2013, it bought up eight key players in the industry within a six-month period. It also brought in over 300 robotics engineers.
I’ve created a Watch List of large and small companies for Curzio Research Advisory readers that I expect to be big beneficiaries of the robotics trend – companies that may become official recommendations.
Despite the billions of dollars pouring into this industry, the robotics trend is also still in its infancy.
And many fortunes will be made over the next few years by investing in the right robotics stocks.
Cryptocurrencies & Blockchain
I’ve received hundreds if not thousands of emails on this topic.
“How high can Bitcoin go?… Is this gold’s replacement?… Should I buy Bitcoin or another cryptocurrency?”
Bitcoin was the first worldwide, decentralized cryptocurrency (digital payment system). It’s been around less than a decade – leaving your average investor, gold-bugs, and even government regulators with the same question…
“What’s really moving Bitcoin?”
One thing is clear: People are confused.
Investors, along with your average U.S. citizen, are having trouble finding a granular understanding of it all. It’s taken me years to fully grasp the potential of this technology, too.
On top of these crypto complexities, it’s an industry that’s rapidly evolving as regulators around the world are joining the digital efforts or, in some cases, making them illegal.
But without getting too much into it…
Here’s what I do know:
Digital currencies and blockchain technology aren’t just a passing trend. They’re a revolution.
What is a cryptocurrency?
Cryptocurrencies like Bitcoin, Litecoin, Ripple, and Ethereum, are digital coins created by a computer code. For this reason, some call them “algorithmic currencies.”
And rather than being issued by a government (e.g., the U.S. dollar), cryptocurrencies are issued by a computer network.
This is significant.
The computer network derives a code (transaction) that is far more transparent and secure than what central banks can provide.
People are beginning to put their faith in the integrity of the computer network itself, rather than in government-backed central banks.
And it’s this network, the “digital ledger” used for cryptocurrency transactions, that will change the way we look at capitalism forever…
It’s called a blockchain.
For traditional currency transactions, a double-entry ledger tracks individual credits and debits, assets and liabilities. This concept was created over 600 years ago.
A blockchain works differently.
It strings together a sequence of transactions that link together by use of a “hashcode.”
This means when you change one entry in the ledger, it throws off all future entries.
This makes things like cyber fraud and hacking easily detectable – MUCH easier than the current norm of double-entry bookkeeping.
Digital transactions also happen at twice the speed of traditional transactions. You can sell shares of stock, purchase bonds, or even the title to your car on a decentralized blockchain at greater security, with cheaper transaction fees.
With a blockchain, there are no more five-step international payments with redundancies… no more relying on auditors to investigate failed wiring transactions… and no more credit card fraud.
These are factors that have been sought out in the financial markets for a long, long time. And it’s going to change the way we look at capitalism forever….
Some call it the “New Internet”… The Economist calls it “The Trust Machine”… and other experts call it a colossal market disruption – the kind we haven’t seen since the launch of Amazon and Google.
If I had to bet, blockchain technology will have an impact on just about every single industry going forward.
Curzio Research Advisory subscribers can access our special report on cryptocurrencies and blockchain… including why you need to invest in this technology… the industries this technology will impact the most… and a list of stocks that have the most exposure to this incredible trend.
Technology Trends to Avoid
Every January, the Consumer Electronics Show (CES) showcases the latest and greatest tech trends. It’s the largest consumer expo in the world.
The CES is the host of nearly 4,000 technology companies. The space covers 2.2 million square feet – it takes me about half the day just to walk through the entire event.
Investors have the opportunity to witness these trends on the launch pad, firsthand. Some of these trends are going to grow exponentially, giving you a chance to make an absolute fortune if you pick the right ways to play them.
The trick is to know which trends to avoid.
There’s one vital question we all must ask ourselves before we invest in tech trends:
Does this technology actually serve a consumer need?
If consumer adaptability is far out of reach, and if earnings are already dropping, as investors, we should be looking elsewhere.
Below, I’ll dive into three tech trends every investor should avoid today: Autonomous cars, wearables, and cybersecurity.
Automakers and tech companies are racing to develop self-driving cars…
At this year’s CES, all the major car manufacturers showcased their new cars, including some that could drive themselves.
A self-driving car sounds awesome, but does it really address a consumer need?
A 2017 survey by Gartner showed that consumers aren’t ready to give up control of their cars to computers just yet…
More than half (55%) of 1,500 U.S. and German consumers surveyed said that they would not ride in a fully autonomous vehicle. They wanted the ability to retake control of the car in case of a technology failure or security breach.
Even some of the world’s top auto part suppliers and makers aren’t buying into the “autonomous” hype…
Don Walker of Magna International Inc., CEO of the top auto parts supplier in North America by sales, recently stated that purely autonomous cars are “a long way off for lots of reasons.” He said the industry will experience various setbacks, including “legislation, class-action lawsuits, and all the complexities and the costs associated with it.”
Partial or semi-autonomous technologies are already a reality in higher-end cars. Some cars, for example, can now stay in the same lane and adjust their speed relative to roadway conditions and limits – autonomously.
But the “mind off”, “eyes off” stuff won’t be a disruptive trend within the next five years…
And if the world’s largest auto suppliers and makers are downplaying expectations, why shouldn’t we?
If you want to make real money in technology, you have to look at the monster trends… Not those that may make up 5%-10% of the global market ten years out.
For a monster trend, you need mass consumer adoption. As it enters the mainstream or consumer levels, then you’re talking about seven billion potential customers.
Uber reached mass adoption because it filled the consumer need for a better taxi experience…
Airbnb is another example of a disruptive trend that hit mass adoption…
But what do driverless cars achieve for the consumer?
Obviously, it would be great for those who live in high-traffic areas or who don’t like to drive. Reports also suggest that driverless cars will reduce accidents by 90% and insurance costs by 40%.
But on a percentage basis, Google’s autonomous cars have crashed more times than those driven by humans. And many people, myself included, simply love to drive.
New laws also have to be created for this trend to reach widespread adoption. Imagine driving from Florida to California, for example, and having to detour around states driverless cars are not allowed to operate in.
In 2017, Google announced it was scaling back its ambitions for creating driverless cars.
Apple also said it’s scaling back on its autonomous car efforts.
Apple and Google have more than $200 billion in combined cash on their balance sheets, which means they can afford to spend a lot of money on promising technologies that may or may not pan out.
So if the big guys are scaling back their plans, it tells me I don’t want to spend a lot of time right now on this sector.
When I go the Consumer Electronics Show, I’m definitely going to look at these cars. I saw a car drive around Las Vegas by itself last year. It’s exciting. But it’ll be years before your neighbor has one.
So when you’re looking for the next big trend, especially in tech, make sure it will make your life better. Because if it won’t be adopted on the consumer level – at least within a few years – it’ll almost certainly never be a monster trend.
Not a week goes by that we don’t hear about another major company getting hacked…
In July of 2017, Equifax, one of the three major consumer credit reporting agencies, was hacked, affecting 143 million customers.
Every single Yahoo! Finance account was hacked in 2013 – 3 billion in all.
Target was hacked in that same year, affecting 40 million customers.
You’d think cybersecurity stocks would be going through the roof.
But the opposite is true…
That’s because only major companies can afford the hundred thousand dollar price tag of security packages from Palo Alto or Symantec or FireEye.
If you’re a bank or defense company, you may spend a few million dollars, maybe tens of millions, on cybersecurity.
Companies like FireEye and Symantec are trying to create low-cost subscription services for individuals and small businesses, but most customers are still buying large packages. If these packages aren’t regularly upgraded, you’ll have lumpy quarters.
But because cybersecurity hasn’t reached the consumer level, earnings for these companies – no matter how great – are choppy. And the stocks keep trending down… Even though hacking is an enormous problem.
I’m steering clear of this sector for now.
Wearables and Smartwatches
Another overhyped trend is the smartwatch.
Take a look at the wearables forecasts from 2012, 2013, or 2014. You’ll see that the analysts have rarely been more wrong.
Very much like any mobile phone today, you can text and talk on most smartwatches, as they effectively run like a computer. Most come with mobile apps, portable media players, GPS receivers, accelerometers, thermometers, altimeters, schedulers… you get the point. Wearables were predicted to revolutionize the personal mobile device.
In 2014, when Apple announced it would make its first watch, the trend really accelerated.
BGR, a reputable tech consulting firm, predicted Apple would sell 40 million watches in 2015 – 40 million.
Morgan Stanley came out with a report right after that, saying BGR’s estimates were conservative.
Guess how many smartwatches Apple sold? 12 million.
That number is a bit higher now – in 2017, Apple had sold close to 20 million smartwatches.
So what happened?
I’m sure a smartwatch makes life easier for some people. But do they address a real consumer need?
For most smartwatches and wearables, you still need to carry your phone and, for some of them, be connected to the internet. You also have to charge most smartwatches once a day.
Apple made a big splash in the summer of 2017 with the Apple Watch 3. This iteration has its own cellular connection inside, so it can finally work independently of your mobile phone.
But this doesn’t mean you can do away with an iPhone. We’re still a long way from that. This update only means that you can receive calls, texts, and some app notifications when you leave your phone at home. Otherwise, it’s essentially dependent on your mobile device.
Plus, you have hundreds – literally hundreds – of companies producing these things.
Companies like Garmin, Samsung, Fitbit, Motorola, and Fossil ALL were presenting their new smartwatches at the Consumer Electronics Show. They’re everywhere. This makes it impossible for Apple (and its competitors) to charge three to four times more for their product.
Sure, Apple gets away with charging a bit more, because it’s Apple – and its smartwatch is compatible with the whole Apple ecosystem.
Everyone thought the Apple Watch would be the company’s next big product – comparable to the iPhone. But this product is very different from the iPhone.
The iPhone provided customers with an amazing, simple-to-use product that people used every single day. The iPhone is the definition of revolutionary.
Wearables can be useful, and are certainly cool. I saw one wearable at the CES that even measures brain activity.
But wearables are already a commoditized product. That means most people will look for a smartwatch or health tracker with a decent brand name and the lowest price, since most now have a GPS and health monitoring programs. Under Armour is now in this market, and it has a social network of over 100 million people you can virtually compete against.
From an investment standpoint, there’s little competitive advantage for any one company.
Wearables is an industry I’ve avoided the past few years. And I’ll continue to avoid it for the foreseeable future.