Tech Stocks Always Make Good Investments. But these 3 Truly Tap Into Where the Future of Technology is Headed.
This is my fifth and last installment in my series on the Key Demographic Trends that I believe will provide the next great investing profits. As you know, technology has been a game changer for the past few decades—innovations are lightning-fast and can disrupt an entire industry overnight. That makes investing in technology stocks very exciting, yet it can also be extremely volatile. But the profit potential is immense.
In this segment, I want to bring you up-to-date on a few of the latest tech trends that will provide some of the best investing opportunities over the next few years.
4 Important Tech Trends for the Future
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The first is Productivity Enhancement. McKinsey Global Institute estimates that 10%-50% of job tasks in the U.S. could be automated using existing artificial intelligence and robotic technology. In its study of some 800 occupations, about 60% of those surveyed reported that at least 30% of their daily activities could be replaced by software, with some jobs (such as driver, retail worker and fast-food employee) becoming entirely obsolete.
Next, Digital Applications—new and old—are at the forefront of the latest disruptive technologies, changing experiences—how corporations, customers and employees engage and carry out transactions within digital environments: payment, mobile apps, and communications. The App Economy Forecast from 2017-2022 estimates that there will be 6 billion devices by 2022; customers will spend $157 billion on them; and there will be 258 billion mobile app downloads.
Analytics is also a tremendously growing field. Research firm IDC forecasts that the digital universe will reach an astonishing 163 zettabytes, or 163 trillion gigabytes of data, by 2025. Consider that one zettabyte could store roughly 2 billion years’ worth of music, and it boggles the mind the amount of data we are creating. This data plays a critical role in our economy, as companies use it to explain and predict customer behavior.
Lastly, the Cloud has become a routine storage and working spot for most of us, yet we’ve barely touched its capabilities. In the future, we will see many more products and services encompassing:
- Digital Reality—augmented reality, virtual reality, mixed reality, IoT (Internet of Things)
- Blockchain (transaction processing) is to trust what the web was to communications. This sector is estimated to reach $9.7 billion by next year.
Gartner projects global public cloud revenue will grow 17% this year to $266.4 billion. Software-as-a-service (SaaS) is the largest segment, which Gartner estimates will account for $116 billion in spending this year. However, infrastructure-as-a-service (IaaS) is projected to be the fastest growing cloud segment of 2020, expanding 24% to $50 billion in revenue. From 2018 to 2022, global cloud revenue is forecasted to grow from $196.7 billion to 354.6 billion, according to estimates.
And within the framework of these technology trends are incredible investment opportunities in many sectors, including:
- Robotics
- Payment Processing
- Mobile Apps
- Cloud Software Providers
- Data Resellers
- Cybersecurity
I’ve cranked up my models to find a few technology stock ideas that I think will continue to outperform. Here are three worth considering.
3 Technology Stocks to Consider
In the Cloud: Adobe Inc. (ADBE). In a recent issue of my Wall Street’s Best Investments, contributors Richard Davis, CFA, David Hynes Jr., and Luke Morison of Canaccord Genuity Research had this to say about the stock: “We continue to believe that Adobe, working in partnership with Microsoft, will begin to win a greater share of marketing digital transformation bake-offs. Adobe remains one of our favorite stocks because the stock is valued at about 1x EV/FCF/G based on normalized earnings growth, the company is exceptionally well-positioned for digital content creation, the marketing effort is quite promising, and management has proven that the firm can integrate material acquisitions.”
From the Payments arena: StoneCo Ltd. (STNE), which was recommended by Brit Ryle and Jason Williams, contributors from The Wealth Advisory. Their take: “StoneCo is the Square of Brazil. It’s a payment processor that gets a piece of each transaction and it focuses on the mostly unserved market of small to medium-sized business. StoneCo kept the rally alive in December. Management reported stellar numbers in November and sent shares spiking up. We’re now well above my new limit (which is just $10 shy of my original target price). So, I’m boosting that to make sure we’ve all got a chance to get in. Now that shares are above 40, I see them cruising over 50 in short order. So, let’s boost the limit to 45 and see if we can capture some more gains. StoneCo Ltd. is now a ‘Buy’ anywhere under 45. The 12-month target is staying at 75.”
And lastly, from Cybersecurity: Palo Alto Networks (PANW). The stock was recommended by Hilary Kramer, editor of Game Changers, and was featured as a recent Spotlight Stock in our publication. Hilary commented, “The strength of the company’s technology has been recognized by IT consulting firm Gartner Inc. (IT), whose analysis of market trends has placed PANW as a leader in the Gartner Magic Quadrant in firewalls for eight consecutive years. The favorable industry trends, along with the company’s strong products, have allowed Palo Alto Networks to grow impressively. Sales have grown from $255 million in the August 2012 fiscal year, the first year PANW was a public company, to $2.9 billion in the August 2019 fiscal year.”
I think these three technology stocks have what it takes to enhance your portfolio. But, as always, make sure that they fit your investing parameters before diving in.
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