If you are looking for multibagger opportunities—investments that can provide a return of 100% or more—the technology sector is one of the best places to start. Over the years, there has been no shortage of tech stocks delivering triple-digit returns to investors.
In fact, the sheer size of gains from tech stocks has allowed some investors to turn a relatively small investment into a seven-figure position. For instance, if you had bought $30,000 of Netflix Inc (NASDAQ:NFLX) shares on the first trading day in 2010, by the end of 2019, that position would have been worth almost $1.4 million.
But of course, past performance is no guarantee of future results. And it usually takes some secular tailwind for a tech stock to keep soaring. In the case of Netflix, the tailwind comes from the shift of consumers moving from cable television to on-demand video streaming.
So, what could be the catalyst to create the next millionaire-making tech stock?
Well, 5G looks like a solid contender.
5G Stocks Could Be the Next Big Thing
“5G” stands for fifth-generation wireless technology. Right now, 4G networks are still the bread and butter for wireless carriers in America.
And for many of the things we do with our smartphones, 4G seems to be enough. So people may wonder: why is 5G considered the next big thing?
Well, first of all, 5G will be much, much faster. To give you an idea, today’s 4G networks usually top out at transmitting 100 megabits of data per second.
5G networks, on the other hand, are capable of reaching up to 10 gigabits per second. That is, when it comes to data transmission, 5G could be 100 times faster than 4G.
With the latest iteration of cellular mobile communications technology, people should be able to download a full high-definition movie wirelessly within seconds.
Simply put, if you consider the move from 3G to 4G mobile networks to be an evolution, going from 4G to 5G would feel more like a revolution.
Yet, the increase in speed might not even be the biggest selling point of 5G. The best part about the fifth-generation wireless technology might be its extremely low latency.
You see, even though wireless communications can seem instantaneous, it does take time for devices to respond to each other over the wireless network, and that delay is called latency.
3G networks typically had a response time of 100 milliseconds. For 4G networks, the latency is usually around 40 milliseconds. With 5G networks, latency could be dropped to as low as one millisecond.
To put that in perspective, it takes us on average 100 to 150 milliseconds to blink an eye. So you might be wondering what the big deal is with latency.
Well, if you use 5G to send e-mails or chat with friends, you probably won’t even notice the reduction in latency. But for the more mission-critical tasks, having ultra-reliable low latency communication can be of utmost importance.
One example is self-driving cars. Right now, most self-driving technology relies on the vehicle scanning the environment around it, processing the information, and acting upon it. The process is self-contained.
In the future though, when there are many self-driving cars on the road, they will need to interact with each other to improve safety. And that interaction requires ultra-low latency.
Think about it: when vehicles are travelling at high speeds, a 40-millisecond faster reaction time could help prevent an accident.
I would go so far as to say that, in order for fully autonomous cars to become reality on a large scale, roads will need ultra-low latency 5G coverage.
Mind you, self-driving cars are just a part of the upcoming Internet of Things (IoT) era, when billions of devices are connected without human intervention.
Again, low latency is critical. Whether we are talking about robots coordinating their actions or drones flying in the air, being able to communicate with minimal delay is a top priority.
And then there’s the applications in healthcare.
For instance, if a patient has undergone several tests and has the imaging diagnostics done but is too sick to travel to meet an expert diagnostician thousands of miles away, 5G network infrastructure can provide the bandwidth and low latency needed to transmit video and image files while allowing participants to collaborate via video conferencing.
Looking further ahead, the advancement of telemedicine, combined with 5G networks, may allow surgeons to operate on patients remotely using a robot surgical system.
What Are the Best 5G Stocks?
There have been plenty of articles written on the topic of “What are the best 5G stocks?” The usual list includes wireless carriers such as Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T), smartphone makers like Apple Inc. (NASDAQ:AAPL), and semiconductor makers like Qualcomm, Inc. (NASDAQ:QCOM).
No doubt, 5G will deliver a big boost to these companies, and that boost could arrive very quickly.
In my opinion, though, there’s another group of companies that could turn out to be the biggest profit-makers for investors in the 5G era—and they might not even be considered 5G stocks today.
I’m talking about companies that develop the applications that could revolutionize industries—applications such as self-driving cars and telemedicine.
The opportunity could be huge, because the market is starting from virtually zero but has the potential to become enormous. And as we saw in the past, whenever a small company has made it big, its stock price has usually shot through the roof.
Of course, whether it’s IoT or remote healthcare, new applications could take years to implement in the 5G era. So these companies are not an overnight profit play. Instead, 5G stocks will likely be a multi-year opportunity.