For years the “road to wealth” has been paved by tech, but now technology is much more than that.
High tech – as a culture – has embedded itself permanently into the American psyche. That’s one of the reasons why I say we have passed a “tech tipping point.”
Never before in history has technology – from smartphones to the connected car – become such an indispensable day-by-day component of our lives.
Indeed, because they make the products we need and the profits we target, Silicon Valley CEOs are becoming bona fide celebrities.
For proof, look no further than the hit CBS program The Late Show With Stephen Colbert.
In the first three weeks he was on the air, Colbert hosted three of the biggest high-tech CEOs on his show, which averages 3.2 million viewers. More important, many of those viewers are young people.
With that new level of high-tech validation as background, today I want to show you what these tech CEOs have to say when playing at celebrity.
Rock Stars or CEOs?
You may recall that Stephen Colbert recently took over The Late Show from David Letterman, having previously hosted his own show on Comedy Central, the often satirical The Colbert Report.
His team at CBS says the new program’s focus on tech leaders is a strategic decision – and it’s gaining traction thanks in part to some aggressive outreach.
Colbert recently scored ink in The Wall Street Journal about the tech-guest strategy. Program executives said they want to showcase the business leaders who are on the public’s mind.
“We love having our Hollywood people, we love having our authors on, we love our politicians,” the show’s co-executive producer Emily Lazar told the Journal. “But these innovators are as powerful right now as any other person who you would have on a late-night talk show. We’re just going where the heat is.”
And “the heat” is undoubtedly with high tech.
That puts recent Late Show guests such as Apple Inc. (Nasdaq: AAPL) CEO Tim Cook and Tesla Motors Inc. (Nasdaq: TSLA) CEO Elon Musk among some pretty exclusive company. After all, Oprah Winfrey, music legend Elvis Costello and film star Cate Blanchett also appeared on the show in its opening weeks.
Yes, Colbert asked some tough questions of his guests, but he also kept it lighthearted, bantering with the Silicon Valley CEOs like they were A-list celebrities – which they are quickly becoming
For example, when Musk appeared on Sept. 9, Colbert announced he personally drives a Tesla and loves it. The host also showed a clip of Tesla’s innovative new robotic car charger that looks and acts like a giant metal snake.
“Is that thing going to attack me in my sleep?” Colbert deadpanned.
“For the prototype, I wouldn’t suggest dropping anything near it,” Musk shot right back as the audience howled.
Colbert’s Sept. 10 introduction for Travis Kalanick, the CEO of the ride-sharing innovator Uber Technologies Inc., captured perfectly the way cutting-edge technology now saturates our daily lives.
“My next guest is the co-founder and CEO of the ride-hailing app Uber,” Colbert told the audience.
Then, mimicking the way you use Uber app to estimate when a driver will arrive (and clearly aware that his audience would relish the reference), Colbert tapped his iPhone screen and said, “He’ll be out here in 10 seconds.”
Another great moment occurred Sept. 15, when Apple’s Cook discussed coming out as a gay CEO. Turning a serious subject into something more relaxed, Cook told Colbert that friends and Apple colleagues already knew he was gay, so going public was “like discovering something on your iPhone that was always there – you just didn’t know it.”
The Convergence Economy
As I watched these segments play out over several nights, I was struck by how those three CEOs’ companies made up a near-perfect microcosm of the tech-centered world we now live in.
You had Apple, the very embodiment of an “ecosystem” as I’ve mentioned many times before.
But you also had Tesla, whose breakthrough vehicles surely represent the future of the $2 trillion auto industry.
Then there’s Uber, a truly disruptive company that probably wouldn’t even exist if it could not leverage another disruptive product – the smartphone, which we owe to… Apple.
What’s more, the Uber CEO pointedly told Colbert that his company was looking to acquire up to 200,000 of Tesla’s vehicles within 10 years, something that will surely act as a potent catalyst for Tesla.
That type of reinforcing interplay demonstrates something I talk about again and again: We’re living in a “convergence” economy where the various layers of technology support and strengthen each other, making available greater and greater opportunities for profit.
Colbert’s deft handling of his three Silicon Valley stars shows me that he clearly understands that high tech is as important, and as popular, as anything on the American cultural landscape.
How We’re Going to Profit
Naturally I agree.
And my job here at Strategic Tech Investor is to leverage this heightened mainstream embrace of technology into market-crushing performance.
That’s why I think the Technology Select Sector SPDR (NYSE: XLK) remains one of the best foundational tech plays you can make.
In fact, I included XLK in The Million Dollar Tech Portfolio on March 6.
With more than 70 stocks in its portfolio, XLK offers investors the chance to specialize in high tech while at the same time diversifying across multiple sectors.
With this ETF in your portfolio, you profit from breakthroughs in social networking, advanced semiconductors and sensors, “smart” data analytics, cloud computing, the mobile revolution and cybersecurity.
XLK holds several mega-cap firms like Alphabet (which makes up 9.7% of the ETF’s holdings), Apple (XLK’s largest holding at 15.46%) and Intel Corp. (Nasdaq: INTC). The fund is invested in Facebook Inc. (NASDAQ: FB) and Yahoo Inc. (Nasdaq: YHOO) as well.
Take a look at some other great tech leaders in the XLK lineup:
A High-Tech “Who’s Who”
- Red Hat Inc. (NYSE: RHT) just became the first open-source software firm to hit $2 billion in revenue and has topped forecasts for nine straight quarters. It’s moving into the market for cloud computing with operating systems, virtualization and storage. It counts Intel, Alphabet and com Inc. (Nasdaq: AMZN) as key allies.
- Avago Technologies Ltd. (Nasdaq: AVGO) is a Singapore-based semiconductor firm heavily focused on two key growth sectors – data centers used in cloud computing and mobile. It’s a key supplier for the iPhone 6 from Apple. Plus, Avago offers growth through acquisitions. It recently agreed to pay $37 billion for Broadcom Corp. (Nasdaq: BRCM) and earlier bought LSI Corp. for $6.6 billion.
- Intuit Inc. (Nasdaq: INTU) is also benefitting from a move to the cloud. Founded in 1983, this software firm is famous for TurboTax, QuickBooks and Quicken. The company boasts more than 1 million monthly Web-based subscribers. Through its app-centric Mcom, Intuit is also a play on mobile commerce.
- Motorola Solutions Inc. (NYSE: MSI) has made an amazing turnaround since it was spun off from Motorola Inc. back in January 2011. The company excels at supplying two-way radios and cellular communications and networking gear for public agencies. In August, private equity firm Silver Lake said it will invest $1 billion into the company for new growth.
The Long Haul
Trading at $41.40, XLK offers a cost-effective way to invest in several key tech sectors all at once. We also get a dividend, with an annual payout ratio of nearly 1.7%, giving us income as well as appreciation.
Finally, its focus on large-cap firms helps reduce volatility and also makes this one of the most liquid ETFs in the tech sector.
Over the past two years, XLK has returned 26.6%, beating the broad market by 68%.
Now then, when we talked about XLK last March, I suggested you play this over the long haul on a dollar-cost-average basis.
That means buying when the market is rising and adding to your position at a discount when the market is off as it was recently. I noted then that by using this strategy you’d be “putting your saving program on ‘autopilot.'”
And that’s exactly what you want to do with a great foundational play like this winning tech ETF.
- Strategic Tech Investor: Three Reasons Why Carl Icahn Is Wrong About Apple.
- Strategic Tech Investor: The Million Dollar Tech Portfolio.
- Strategic Tech Investor: This “Dinosaur” Is Far From Extinct.
- Strategic Tech Investor: The Last Three Months Have Been Smooth Sailing for These Five “Buys.”
- The Late Show on YouTube: Elon Musk Might Be a Super Villain.
- The Late Show on YouTube: Travis Kalanick Interview.
- The Late Show on YouTube: Tim Cook on Speaking Up for Equality.