Investing in a New Wave of “4IR” Technologies
Technology stocks have delivered stupendous returns in the first half of the year. Analysts are now making some bold tech stock predictions for 2017. But in just seven months, we’ll bid adieu to 2017. Opportunities like these rarely knock on the door twice in one year. I’ll be honest, making a fortune out of the best technology stocks in such a short time frame will be a tough feat. So don’t think like a short-sighted trader. I say, think like an investor—think long term. Think 2025!
Why 2025? Because that’s the critical year when the tipping point for the Fourth Industrial Revolution is predicted to occur. If this is news to you, then you’d better stay with me as I divulge more information on it.
You see, every year for the World Economic Forum, political and business leaders meet at Davos to discuss the future of their respective countries and businesses. But no one, I repeat, no one sees the ins and outs of these meetings as closely as Klaus Schwab—the man who’s been running the show for four decades now.
In case this is the first time you’re hearing his name, Klaus Schwab is the founder and chairman of the World Economic Forum (WEF) and has been overseeing WEF meetings since, what seems like, forever.
Schwab has coined the term “Fourth Industrial Revolution,” alternatively called “4IR,” to mark the dawn of the next generation of technological concoctions that are going to reshape our lives in the coming years. And, the year 2025 appears critical in his thesis.
According to last year’s surveys conducted with WEF participants, the year 2025 marks the time when these technologies are expected to hit the mainstream.
Before I get to them, take note that WEF participants come from many walks of life from nearly all parts of the world. So if the majority sees a technology becoming dominant, you can expect its ubiquity not just in the developed world, but to a great extent also in the developing world.
This is critical because any strong company with a global presence in these technologies will likely be minting a lot of money with the rise of 4IR.
That said, three of these technologies have particularly piqued my interest. Investors must keep an eye out for the best technology stocks serving in these three technology segments.
- Firstly, it is believed that the fourth industrial revolution will push vision-based user interfaces into the mainstream. To put it simply, these include key technological features like facial and gesture recognition and head and eye tracking in daily use devices.
I know that we’re already familiar with this idea through our smartphones and video gaming consoles. But look beyond them to devices like home monitoring systems, electrical appliances, and cars. If you’re also thinking Internet of Things (IoT), you’re on the right track. My first technology stock pick serves these technologies. You’ll soon find out how.
- Second is the phenomenon of cloud computing. The 4IR will increase our digital presence manifold. This presence will not be tied down to a single device or platform. It’s already evident that we connect to our digital data through various devices today, including smartphones, tablets, desktops, smart watches, smart TVs, and the like.
The fastest way to interconnect all these platforms is through the cloud. Cloud storage, in particular, is viewed as becoming available to virtually every internet user by 2025. The key is to look out for the best cloud computing companies in both consumer and enterprise segments. My second pick serves the world of cloud in a very peculiar way. Stay tuned for more on it.
- Finally, as the phrase itself hints, the fourth industrial revolution will drive the rise of the machines. Robots are expected to take over nearly all of our industries, including services. This is where artificial intelligence (AI) will play its biggest role. My final technology stock pick attends to this segment.
Best Technology Stocks 2017 for 4IR
Now that we have the prelude to three great technologies, we can make some sound tech stock predictions 2017 that can last us in the longer term. Without further ado, here are three of the best technology stocks to consider through the fourth industrial revolution.
1. STMicroelectronics (STM) Stock
What better place to look for the best technology stocks than the home ground of 4IR—that is, Switzerland?
For now, forget the companies that manufacture all the hi-tech gadgets and think about one company that lends these gadgets the brain to function. STMicroelectronics NV (ADR) (NYSE:STM) is a global manufacturer and vendor of semiconductors. Basically, it makes the tiny chips that go into tech gadgets and bring them to life. (A bit of trivia for you: The company is famously called ST.)
Anyhow, you may be wondering why, considering that there are a handful of other chipmakers out there, I picked this particular Swiss company.
ST caught my eye for having close ties with the biggest manufacturer of premium devices—yes, I’m talking about the mighty Apple Inc. (NASDAQ:AAPL). This chipmaker supplies component parts to Apple for its smart devices, including the “iPhone” and “Apple Watch.”
But wait, Apple is only the tip of the iceberg. Beyond Apple, ST has many other tech heavyweights as its repeat customers. Companies like Samsung and Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) are also on the list.
Although the company’s product portfolio is enormous, just to give you an idea, I’ll stick to only a handful of the aforementioned 4IR technologies. STMicroelectronics manufactures touch screens, near-field communication (NFC) chips, and motion sensors that go into smart handheld and wearable devices—smartphones, tablets, watches etc.
What’s more, its biggest bet, as of late, is on smart cars and the Internet of Things. The company has introduced a new lineup of chips to power gadgets that can help them interconnect in an IoT ecosystem.
Now, unlike many money-losing chipmakers, ST is not only profitable, it is safely leveraged with more than enough cash reserves to pay off all its debt. Better yet, it also pays a dividend.
As for STM stock, the price chart below is a testament to its performance. Initiatives in 4IR technologies have brought it back from the dead, with STM stock more than tripling in just under a year.
Chart courtesy of StockCharts.com
Now may be a good time to consider STM stock before you miss out on further gains.
2. Akamai Technologies (AKAM) Stock
Next up is my pick in the cloud space.
I understand that buying cloud computing stocks presents a great dilemma to traditional investors. Oddly enough, many of these are unprofitable, yet their stock prices are reaching for the stars. It doesn’t make sense, right? Well, it will if you look at the prospects of the cloud computing industry.
Now, all cloud computing stocks can’t be put together in one basket. In case you’re unaware, there are essentially three kinds of cloud computing companies out there: companies that offer software as a service (SaaS), those that offer platform as a service (PaaS), and those that offer infrastructure as a service (IaaS).
Without getting into the details of any of these, just know that according to IDC Research, Inc., the cloud computing industry is collectively forecast to grow to over $122.0 billion in revenue by end of 2017. (Source: “Worldwide Public Cloud Services Spending Forecast to Reach $122.5 Billion in 2017, According to IDC,” IDC Research, Inc., February 20, 2017.)
What you’ll find intriguing is that that my stock pick covers all three of these cloud segments. Akamai Technologies, Inc. (NASDAQ:AKAM) is a very unique company in that it doesn’t sell cloud software, platform, or infrastructure. Rather, it makes all of these fast and secure.
The company defines itself as a cloud delivery platform. In simple words, it serves as a middleman between digital cloud-based companies—like International Business Machines Corp. (NYSE:IBM), Microsoft Corporation (NASDAQ:MSFT), Airbnb—and their clients, who are average people like you and me.
Simply put, Akamai caches the cloud content of companies so users can access it quickly without having to wait for long page-loading times. Plus, it ensures that all the data in the cloud is dished out securely to users, being safe from malware and cyberattacks.
Akamai is making it possible by having one of the largest networks of secure servers, with roughly 200,000 such servers active in 130 countries around the world.
Akamai allows security-conscious digital and cloud-based companies to deliver their content to their clients on any device—be it mobile, tablet, or desktop—anytime and anywhere in the world, in a secure environment.
This is exactly why the list of Akamai’s customers is expanding, with even government institutions making it to the list—the U.S. Department of State, U.S. Army, U.S. Airforce, U.S. Securities and Exchange Commission, and U.S. Department of the Treasury, all use Akamai’s services today.
Sadly, Mr. Market has been brutally punishing the company for missing quarterly targets, which is why the stock has been trading lower. But like I said earlier, the prospects of a good investment only become obvious when you broaden your time horizon past a few months to years.
The industry outlook of the company is promising and so is its unique place in the cloud space. Take note that cloud security has become a paramount concern amid imminent cybersecurity threats, particularly after the recent ransomware attack.
It’s worth mentioning that the “Cloud Security Solutions” segment was Akamai’s best-performing segment in terms of revenue growth in the latest quarter. There’s a fair chance that it can turn out to be a promising cash cow for the company ahead of the cloud-based fourth industrial revolution.
Nonetheless, AKAM stock is worth a second look, especially now that it’s selling at a bargain price.
3. ABB Ltd (ABB) Stock
Barring the technology heavyweights, most tech companies have historically had short life spans. They were around for a few years, then they sunk into oblivion, by which I mean they either ran out of steam or got taken over.
My final pick today deserves a special credit for having survived economic storms for decades. In other words, it would be safe to assume that this trend can continue in the years to come.
ABB Ltd (ADR) (NYSE:ABB) is one company that has its origin dating back to the 19th century. Formally formed through a merger of two old Swiss companies, the resulting ABB group has been in business for three decades now and is one of the biggest industrial conglomerates in the world.
Now, you may ask why it’s included on a list of technology stocks. That’s because this company has shifted its focus to the tech industry with what ABB calls its “Next Level Strategy.”
And guess what? ABB’s management has pivoted its Next Level Strategy on 4IR with an exclusive mention of the revolution in its strategy. It’s no coincidence that like ST, ABB is also based out of Switzerland.
ABB’s focus industry is expected to see a massive boom in the coming years. The demand for industrial robots is on the rise as economies around the globe are shifting towards automation.
It’s true that Siemens has remained near the top of the leaderboard for a long time. But not anymore! That’s because ABB is taking its rival head-on with new acquisitions and partnerships left, right, and center.
ABB has recently acquired another big player in the robotics and automation industry—Bernecker and Rainer (B&R)—after which ABB now holds a complete portfolio of industrial automation products.
To top it off, ABB is also partnering with tech companies to add next-generation technologies to its product mix. Last year, ABB signed an agreement with Microsoft to create a new range of automated robots. Building on that strategy, the company has signed another agreement this year with IBM to launch a lineup of artificially intelligent robots.
All these initiatives in its Next Level Strategy have breathed a new life into ABB stock, which is starting to make quick strides northwards.
Chart courtesy of StockCharts.com
If you’re paying attention, now is the best time to consider ABB stock because it could likely turn out to be one of the best technology stocks in 2017.
Final Word on Best Technology Stocks 2017
In the technology kingdom, only a handful of best technology stocks are fighting for the throne. The rest are merely commoners counting their numbered days. So it’s imperative to sift out the best ones and get acquainted with them before they rise to the higher ranks and leave us behind in the race.
The best way to do that could be to look into the future—that is, make tech predictions 2025 based on the fourth industrial revolution and see which stocks promise to stick around.
I say, keep your ears pricked and eyes open for these three stocks. These could be the best technology stocks 2017 to deliver on that promise.