If you’ve been riding along with me for any length of time, you know I get really revved up whenever I talk about the “Mobile Wave” in technology.
The truth is, I can’t help it: I look at the forecasts, calculate all the money that can be made, and end up feeling as jazzed as can be about the windfall profits we can reap from this transformational trend.
And I’m not the only one who’s feeling this technology-fueled ebullience: The folks over at Amazon.com are clearly experiencing the same adrenalin-driven affliction.
Amazon, you see, is coming out with its own smartphone.
And not just any smartphone. Amazon’s entry into smartphone derby is going to be one cool mobile device – highlighted by a 3D screen that will display photos so realistically that you’ll want to just reach out and touch them.
Why in the world, you might ask, is an “e-tailer” entering the wireless-phone business?
Just look at the numbers.
One billion consumers will have smartphones by 2016, says a brand-new report by Forrester Research. American consumers alone will own 257 million smartphones and 126 million tablets.
The worldwide work force will be revolutionized by the Mobile Wave: By 2016, 350 million workers around the world will be using smartphones – and 200 million of those folks will “bring their own” … even covering half the costs themselves.
But here’s the capper: Over the next three years, global spending on the Mobile Wave will grow to $1.3 trillion – or 35% of the world technology economy.
Now you can see why Amazon wants a slice of that pie.
And you should feel the same way: The Mobile Wave is one of the single-best ways for you to generate life-altering profits in just a few short years.
But Amazon isn’t the pony you want to bet on – it’s more of a longshot. The stock is overpriced, and the company is so big that even a hit product won’t meaningfully benefit sales or profits.
There are actually much easier ways to double or even triple your money over the next two, three or four years – as the mobile wave hits its stride.
And I’m going to show you one of my favorite ones today …
The Mobile Wave: The Planet’s Most Investable Tech Trend
There’s never been anything quite like the Mobile Wave.
Just look what it’s done to the PC – the last tech device that really revolutionized the world.
Global PC sales totaled 76.3 million units during the first quarter of the year, according to researcher IDC.
That sounds like a lot until you compare it with global smartphone shipments – which came in at 373 million units during the same period, says market research firm Strategy Analytics.
That’s about a 5-1 ratio… and is what I call decisive.
So we know that a lot of smartphones are being sold. And we even know the companies that are selling them – firms like Apple Inc., HTC, Samsung… and soon Amazon.
But here’s where you need to separate opportunity from hype – the essence of Rule No. 2 on our list of the Five Tech-Investing-Wealth Rules we’ve talked about at length over the past few weeks. You see, most of the companies that I listed here aren’t “pure play” investments, meaning we’d face the same profit challenges that I just detailed for Amazon.
The best way to make big money from the Mobile Wave is to identify class-of-the-field supplier firms. These are the entrants who provide such key “enabling” technologies as software, applications, bandwidth, security and digital-payment systems.
But the best-of-breed profit plays here may be the components firms – the ventures that make and market the parts that go inside the smartphones themselves.
In other words … the specialists.
I like these companies a lot because the best ones have unique, patented technologies, and “play the field” by providing those components to multiple manufacturers. The great thing about that is no matter which phone is tearing up the market, we win big.
Take the case of InvenSense Inc. (NYSE: INVN), a double-your-money profit opportunity that meets all five of our rules for generating high-tech wealth.
As a Mobile Wave participant, this components provider easily meets Rule No. 3 – by riding an unstoppable trend.
In fact, InvenSense actually rides two. The Sunnyvale-based firm is all about a critical area known as “motion sensing” – a newly emergent sub-trend that’s fueling the Mobile Wave. And InvenSense know-how doesn’t just go into smartphones; you’ll find it in tablet computers and a wide range of consumer electronics – including gaming consoles and smart TVs that connect to the Internet.
InvenSense forged its reputation on older tech – in gaming consoles like those for Nintendo’s original Wii. That’s no longer a growth sector.
But mobile is, and thanks to InvenSense’s operational excellence (Rule No. 1), the “Wave” today accounts for 80% of the company’s sales.
The company actually made itself very relevant by focusing on the growth portions of the mobile wave (Rule No. 4).
The main reason smartphones and tablets have exploded in popularity is that businesses and consumers can do so many things with them – thanks to the “mobile apps” that let you play games, get driving directions, make reservations, watch your favorite movie or TV show, shop for deals, “drive” a steam locomotive or the RMS Titanic – the possibilities are endless.
The worldwide mobile apps market is projected to zoom from about $18 billion in 2012 to $56 billion in 2015, and InvenSense has two key technologies that make apps possible.
One is gyroscopes – a big deal because those tiny gadgets you can’t actually see are what allow you to turn your smart phone upside down … and have the screen turn with it. InvenSense itself says that shipments of gyroscopes used in smartphones could grow to 358 million units next year, up from 49 million back in 2010.
The other InvenSense contribution is embedded compasses.
I have several apps on my phone that need to know pretty much my exact location to fully function. And for that you need an embedded compass.
(If you don’t think this is vital, think about how you’d get turn-by-turn walking or driving directions with no embedded compass. And how do you find your way to the restaurant where you have a reservation five minutes from now if your phone doesn’t know where you are?)
InvenSense considers its technology to be so unique that it this week filed a patent-infringement lawsuit against STMicroelectronics NV, claiming the Swiss firm ripped off its motion-sensor technology.
But don’t let that patent action – which has become much more commonplace in recent years -obscure the key point here: InvenSense is a stock that has double-your-money potential (Rule No. 5).
At a price of roughly $13 a share – about one-twentieth of Amazon’s – InvenSense has a market value of $1.1 billion. And it’s got much more of an upside than the e-tailer-turned-smartphone-venture.
INVN has both a profit margin and a return on stockholders’ equity (ROE) of 24%. It trades at a forward Price/Earnings (P/E) ratio of only 14. It has $175 million cash on hand and no debt.
Thus, InvenSense has everything we’re looking for in a strategic tech investment: It’s in a hot sector, is operationally excellent and has great fundamentals.
It’s also a fast-grower.
Based on my analysis, I’m forecasting the company will increase earnings at an average annual rate of 25% over the next five years. That means the stock could very well double in less than three.
And doubling your money at a reasonable level of risk is the run for the roses here at the Strategic Tech Investor – the ultimate goal and the path we want to travel as we work together to build your wealth.
Wait ’til you see what we have planned for you next …