If you ask me, tomorrow – Sept. 12 – should be declared Jack St. Clair Kilby Day.
Don’t feel bad if you’ve never heard of this electronics genius. Few investors have.
But I believe the invention he unveiled 60 years ago tomorrow should make him as big a tech folk hero as Alexander Graham Bell, Steve Jobs, or Elon Musk.
An amateur radio buff and inveterate tinkerer, Kilby (pictured below, center seated) invented the thermal printer and the handheld calculator.
While those were important contributions to modern society, they pale in comparison to what he unveiled to his boss at Texas Instruments Inc. (Nasdaq: TXN) on Sept. 12, 1958.
Historians now use that date as the day the world saw its first integrated circuit.
Of course, that early model was crude by today’s ultra-small and power-packed semiconductors.
But Kilby’s creation did manage to unleash a tidal wave of innovation that continues to this day to reshape the world around us, touching virtually every part of our lives.
Today, I’m going to show you a tech play Kilby made possible that has been tripling the overall market’s returns for TK years.
And will keep on doing so for years to come.
Kilby’s Killer Innovations
Now, despite Kilby’s early contributions, he remains largely overshadowed by Robert Noyce, the famous cofounder of Intel Corp. (Nasdaq: INTC). Noyce unveiled his early semiconductor a few months after Kilby, but was the first to receive a patent.
This all got started in the summer of 1958. Texas Instruments had a mandated summer break that Kilby skipped as a new employee with only one month’s seniority. Plus, he was onto a new invention that demanded his time and considerable focus.
So, while others were having fun at the beach, Kilby decided to combine a transistor, capacitor, and three resistors on a piece of exotic metalloid element known as germanium.
The result was the first integrated circuit (IC). By today’s standards, it was massive. It had just one transistor and was a half-inch long. Today’s chips are smaller than a postage stamp and contain several billion transistors.
Chips, of course, lie at the heart of what we’ve been the Convergence Economy, in which overlapping rings of technology keep combining – and then driving each other forward – at an exponential rate.
I’m talking about a laundry list of advanced tech: smartphones, tablets, televisions, cars, stereos, PCs, the Web, artificial intelligence, and the cloud, just to name a few.
No wonder Kilby won the Nobel Prize in Physics in 2000, five years before his death.
To put Kilby’s breakthrough in context, consider the impact that just one IC-driven device – the smartphone – is having on the world. We’re talking yearly sales of more than 1.5 billion units, and a market worth roughly $480 billion, according to data aggregator Statista.
I realize that chips are small part of a smartphone’s overall retail value. But the point is that’s nearly half a trillion dollars in sales for a device we wouldn’t even have if not for Kilby’s pioneering summer in 1958.
And that’s just one aspect of the convergence economy the inventor helped create.
Consider e-commerce, which relies on the web, PCs, and handhelds. Retail online sales are forecast to hit $4 trillion by 2020, according to eMarketer.
As big as that sounds, it pales in comparison to the impact analysts expect to see from the emerging world of the Internet of Everything (IoE), in which some 50 billion devices around the world will be connected to one another, mostly through the wireless web.
John Chambers, the former CEO of networking giant Cisco Corp. (Nasdaq: CSCO), pegs the value of the IoE at some $14 trillion. Bear in mind, that’s just accounting for the profits that companies will ring up from IoE applications…
Our Top Convergence Economy Play
Now, as important as the semiconductor is, it pays to look beyond it – and to invest in the whole range of technologies that form the Convergence Economy that shows no signs of slowing down.
That’s why I continue to be so bullish on the iShares North American Tech ETF (IGM). Holding nearly 290 stocks, this exchange-traded fund covers satellite communications, the IoE, cloud computing, e-commerce, chips, robotics, AI, 3D printing, and much more.
As you might expect, IGM owns some of the leading names in tech today – the companies have most helped the stock market deliver historic gains in the nine-year bull market.
Take a look…
- Micron Technology Inc. (NYSE: MU) has come to see the virtues of industry dominance. The memory and data storage chipmaker has made a string of purchases that has increased its sales pace and its global tech reach. Micron’s devices are used across the board, from data centers to smartphones, tablets, and laptops, to AI and supercomputing.
- ServiceNow Inc. (Nasdaq: NOW) is making a fortune by helping its clients outsource their IT services. More than 800 members of the Forbes Global 2000 firms use ServiceNow products. A decade ago, the market for IT services delivered via cloud platforms barely existed. But this year, total global sales for this sector are projected to hit $127 billion. CEO John Donahoe formerly ran both eBay Inc. (Nasdaq: EBAY) and PayPal Holdings Inc. (Nasdaq: PYPL).
- Adobe Systems Inc. (Nasdaq: ADBE) has made one of the more stunning movements from desktop publishing to cloud sales. Its Creative Cloud platform now offers far more than just Illustrator for creating, editing, and managing graphics and Photoshop for managing and editing pictures. Adobe says its total addressable market will be $80 billion at the end of 2020. Not bad for a firm that only got involved in digital content back in 2009.
- RealPage Inc. (Nasdaq: RP) provides on-demand software for rental property managers and owners, making it a great play on the global real-estate market. The Dallas area-based firm serves more than 12,400 clients worldwide from offices in the United States, Europe, and Asia. Talk about scale – it helps manage rental properties with more than 30 million residents using a platform that processes more than 600 billion transactions yearly.
A Market Crusher
The firms captured in the iShares ETF make it a cost-effective way to play the Convergence Economy. It gives us broad diversification in the American firms that are the key drivers of innovation today.
IGM has a cost ratio of just 0.48% and trades at roughly $210. For that price, you get market-crushing performance.
Consider that so far this year, IGM has rallied for 24.5% gains. That compares with the S&P 500’s 2018 profit of 8.3%, meaning this ETF nearly tripled the broader market’s earnings.
With this one investment, we get not only exposure to a wide range of chip leaders, but to just about every aspect of the Convergence Economy.
In other words, this is the sort of investment you can count on to build your wealth for many years to come.
And when it comes to spotting new tech trends, I’ve got another one that’s going to change how everything you currently use electricity or will work in the future.
This new form of electricity is going to end the combustion engine as we know it and send electric car production through the roof. And that’s just the tip of the iceberg.
According to Allied Market Research, this market could quickly balloon by more than 1,000% to $37.2 billion in the first few years.
And there’s a tiny company at the center of this revolution that’s about to go from virtual obscurity to household name.
Finally, before I go, I wanted to let you know we are coming up on another big tech anniversary that I will be telling you about soon. And I’ll show you a great way to cash in.