Tech Stock Analysis: Top Tech Trends of 2020; Part 2

Tech Stock Analysis: Top Tech Trends of 2020; Part 2Tech Trends for 2020, Continued

In the first part of my two-part series “Tech Stock Analysis: Top Tech Trends for 2020,” I started exploring some of the biggest tech stock trends in 2020.

In part one, I covered the artificial intelligence (AI) and cloud computing sectors, and I looked at specific tech stocks within those sectors.

Here I’m profiling the 5G, automation, and cybersecurity industries.

Three More Tech Industries That Could Dominate in 2020

Best 5G Stocks in 2020

The Internet of Things (IoT) has been a buzzword for years now, but it may finally come into its own in 2020 thanks to 5G technology. In fact, the IoT and 5G go hand in hand.

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The idea of the IoT is that any device or appliance will be able to connect to the Internet or to other devices and appliances. This includes everything from cell phones, to washing machines, to cars, to coffee makers, to lamps, to wearable devices.

But what has been holding the IoT back? Download and upload data speeds. That’s where 5G comes in. On a practical level, 5G is up to 1,000 times faster than 4G.

Because so many devices are connecting to the cloud these days, it’s becoming slower and less responsive. And the situation is only going to get worse.

With 3G networks, the response time is roughly 120 milliseconds, and with 4G networks, it’s between 15 and 60 milliseconds. That may not sound like a long time if you’re loading a web site or downloading a game, but it is if you’re a doctor performing surgery remotely or you’re someone who wants your autonomous car to respond to an emergency.

A 5G response time of just one millisecond is virtually unnoticeable, and would make the IoT a reality.

For cloud computing to work that quickly, data needs to be processed less than 93 miles from the user. With older technology, that’s not a realistic option.

It’s easy for 5G though. 5G technology can be placed on a home router, on the side of a building, on top of a lamp post, or at a mobile base station.

The tech companies that get there first will have first-mover advantage.

Qualcomm

Qualcomm, Inc. (NASDAQ:QCOM) is a well-known chip maker that is also leading in the 5G space. The company’s “Snapdragon X50” modem, which supports 5G technology, is designed to achieve download speeds of up to five gigabits per second (which is fast).

Qualcomm has partnerships with AT&T Inc. (NYSE:T), Alphabet Inc (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), Samsung Electronics Co Ltd (KRX:005930), and Verizon (NYSE:VZ). All of these companies launched their first 5G phones in 2019.

Qorvo

Qorvo Inc (NASDAQ:QRVO) is a semiconductor stock that is making 5G a reality. Keep in mind, 5G devices won’t work unless the cellular infrastructure is set up to support 5G.

The company has a robust radio frequency portfolio for both wireless infrastructure and mobile devices. Since the beginning of 2018, Qorvo has shipped over 100 million 5G wireless infrastructure components.

Skyworks Solutions

Skyworks Solutions Inc (NASDAQ:SWKS) supplies power amplifiers and radio frequency chips to the mobile, wearable, smartphone, wireless infrastructure, automotive, broadband, home automation, industrial, aerospace, and military sectors.

One of the company’s biggest customers is Apple Inc. (NASDAQ:AAPL); Skyworks’ 5G technology is used in the latest “iPhones.”

Other major customers include Huawei Technologies Co., Ltd. and Samsung. Skyworks’ chips are also used in consumer devices like Facebook, Inc.’s (NASDAQ:FB) virtual reality headsets and Vizio Inc.’s sound bars.

With 5G now launched on four continents, Skyworks expects its momentum to continue as 5G becomes a universal connector for the rising number of wireless devices.

Best Automation Stocks in 2020

When most people think of automation, they think of robots, drones, vacuums, and other technologies that replace human labor. But there are lots of companies developing smaller automation technologies.

Despite the great strides made in the automation sector, there are actually no pure-play robotics companies. That said, there are several companies with subsidiaries dedicated to automation. Here are a few of them.

Rockwell Automation

Rockwell Automation (NYSE:ROK) provides industrial automation and digital transformation solutions. The company operates in two segments: “Architecture & Software” and “Control Products & Solutions.”

The Architecture & Software segment provides programmable automation controllers; design, visualization, and simulation software; and human machine interface products.

The Control Products & Solutions segment provides electro-mechanical and electronic motor starters; motor control and circuit protection devices; and electrical control accessories.

Whereas some automation tech companies are in the early stages of growth, Rockwell has been around since 1903. That has given it more than enough time to solidify its international reputation. Which in turn, has led to a long track record of financial success.

Lockheed Martin

Lockheed Martin Corporation (NYSE:LMT) is an aerospace and security company whose autonomous technology includes drones used by the military.

The company’s “Martin RQ-170” is an unmanned aerial vehicle used by the U.S. Air Force and the Central Intelligence Agency. The “Stalker XE” is a small, silent, unmanned aerial system that can fly for more than eight hours and has different launch options.

Lockheed has also been developing and building small autonomous underwater vehicles for over 35 years.

Eaton

Eaton Corporation PLC (NYSE:ETN) is a power management company that makes products that help its customers manage electrical, hydraulic, and mechanical power more efficiently and reliably.

The company’s autonomous products serve the aerospace; government and military; architectural; healthcare; food and beverage; data center; mining and minerals; oil and gas; rail; residential; utilities; and vehicle sectors.

As a bonus, Eaton Corporation has paid out dividends on its shares since 1923.

Lattice Semiconductor

Lattice Semiconductor Corporation (NASDAQ:LSCC) would have felt at home under the “5G” heading, but it’s also an automation stock. The company is a leading provider of programmable, smart connectivity technology.

Lattice Semiconductor solves the biggest communication, data center, industrial, automotive, and consumer challenges. In addition to having the lowest power and smallest size, the company’s devices have the highest security.

This might explain why Lattice Semiconductor has a strong foothold in growing markets such as communications (5G wireless, switches/routers); computers (servers, client); industrial (IoT, factory automation); consumer and broadcasting (smartphones, wearables, smart homes, etc.); and automotive (infotainment, advanced driver assistance).

In fact, only Lattice Semiconductor is investing in small, low-power field-programmable gate array (FPGA) for these markets. An FPGA is an integrated circuit that can be programmed in the field after being manufactured.

Best Cybersecurity Stocks in 2020

We no longer work in a world dominated by filing cabinets and “Gestetner” machines. A growing number of businesses are paperless, opting to move their data to the cloud. This allows employees to access information from virtually anywhere.

Judging by the number of security breaches in the past few years, moving data to the cloud has increased the need to protect all that data. That, in turn, has been a boon for cybersecurity stocks.

Check Point Software Technologies

Check Point Software Technologies Ltd. (NASDAQ:CHKP) is a leader in network and Internet security, as well as a pioneer in firewall technology.

The Nasdaq 100-listed business has sells to many companies around the world. It also has an aggressive acquisition strategy, purchasing several companies since the start of 2018.

Palo Alto Networks

Palo Alto Networks Inc (NYSE:PANW) is the global leader in cybersecurity. The industry juggernaut has an international clientele in the energy, education, financial services, government, healthcare, media, and telecommunications sectors.

Palo Alto Networks continues to be one of the most reliable cybersecurity stocks. The company has a long history of strong organic revenue growth and aggressive, strategic acquisitions. In 2019 alone, it announced four major acquisitions.

Fortinet

Fortinet Inc (NASDAQ:FTNT) is a lesser-known cybersecurity stock, but it provides the most-deployed security network. The company sells its firewall, anti-malware, web filtering, and anti-spam technology to customers around the world.

It’s the only cybersecurity company to excel in all key stages of network security: detection, prevention, remediation, integration, performance, and value.

Despite stiff competition from the likes of Palo Alto Networks, Fortinet continues to report strong, double-digit revenue growth and provide a strong outlook.

CyberArk Software

CyberArk Software Ltd (NASDAQ:CYBR) develops and sells cybersecurity software to a global customer base.

The company counts more than half of the Fortune 500 companies and more than 30% of Global 2000 companies as its customers. They include banks, energy companies, telecom companies, and manufacturing firms. (Source: “Why CyberArk?” CyberArk Software Ltd, last accessed January 7, 2020.)

CyberArk may be one of the smaller cybersecurity firms, but some of the biggest companies in the world turn to it in dire times. Of the companies involved in the largest security breaches in recent years, more than 40% of them turned to CyberArk. (Source: “Investor Presentation, November 2019,” CyberArk Software Ltd., last accessed January 7, 2020.)

Analyst Take

There’s obviously more to the technology industry in 2020 than just the tech stocks discussed above.

But when it comes to AI, 5G, IoT, cloud computing, automation, and cybersecurity, the aforementioned stocks could end up being the biggest winners.