A Special Note from Michael: Before we get started with today’s chat, I wanted to mention the reports coming out of Walter Reed Medical Center. They say that President Trump’s battle with COVID-19 is going well, thanks in part to a treatment developed by Regeneron Pharmaceuticals Inc. (REGN). On the first day of trading after the news broke, their stock was up 7% in less than 3 hours. But that’s just the tip of the iceberg. This rapid share price movement is one example of the power of biotech stocks to produce rapid results… but Regeneron is just an experimental treatment. With a vaccine on the way, this is where you should pay attention if you want a chance to see your investment multiply by ten in just 12-18 months.
The Trump administration is doubling down on its drive to become a 5G global powerhouse.
Just last month, the Pentagon asked for firms to help with a new approach that would blend civilian and military capabilities for the new ultrafast broadband cellular system.
It’s a novel approach in which the Pentagon would allow private companies to build up 5G capabilities using parts of the wireless spectrum usually reserved for the military.
Here’s the thing; this dual-use structure would allow companies to access the system without the need to invest billions in bidding for wireless licenses at auction.
As such, it could be a big help in the rollout of connected cars, factories, and hospitals using the next-gen network.
And it comes just six months after the president signed a pair of bills into law designed to boost and secure 5G networks throughout the nation.
I believe those laws and the Pentagon’s involvement actually improve the prospects of this breakout technology that began rolling out in earnest earlier this year.
With that in mind, today I want to reveal a great backend play
It’s a storied firm set to double its earnings in less than 2.5 years…
A Basis for Connectivity
Now then, there’s a lot more going on here than Trump’s ambitions for military and civilian communications.
Fact is, the White House is proving just what I have been saying for some time now – 5G is set to become ubiquitous throughout the global tech ecosystem.
For instance, you can’t have true autonomous cars on the road without this ultra-broadband wireless communication.
Driverless cars and trucks will need to communicate in what amounts to real-time if the roads are to remain safe. They will also “talk” with road infrastructure such as sensors embedded in roads or traffic lights.
At the same time, it’s impossible to have the $14 trillion Internet of Everything reach its true potential without the new wireless standards.
That’s because well north of 50 billion devices around the world will be interconnected in a few short years.
Bear in mind, this is a very conservative estimate. I say that because I believe we will see the advent of roughly 1 trillion sensors in use in as little as a decade from now.
Markets&Markets says that firms will be spending $33.72 billion per year on 5G by 2026. And that may be conservative. Another prediction, by Research&Markets, pegs the 5G sector at $251 billion by 2025.
That’s just corporate spending. IHS Global Insight has pegged 5G’s total economic impact at $12.3 trillion over roughly the next decade.
What we are looking for in a case like this is a broad backend play that allows us to tap the power of many firms at once.
And that’s exactly what we get with Keysight Technologies Inc. (KEYS).
Lean 5G Focus
Don’t worry if you’ve never heard of this firm before. It’s been flying under the radar for some time now.
That’s largely because it was spun out of storied Agilent Technologies Inc. (A) in November 2014. At the time, Keysight was stuck in first gear with just under $3 billion in yearly sales.
That’s because it was looking backwards: it focused too much on the life sciences and electronics and other testing gear like oscilloscopes and atomic force microscopes.
Today, the revamped Keysight is heavily targeting 5G clients and had sales last year of roughly $4.3 billion. The firm provides testing tools for advanced wireless software, chipsets, devices, and networks.
Keysight execs say those tools will be needed to fully harness the power of 5G and ensure that all the related hardware and systems work smoothly.
Getting 5G systems to work just right takes a lot of focus. The firm’s gear can assess wireless signals across the telecom spectrum, look at how 5G traffic co-exists with other parts of the spectrum, and also identify potential security threats.
For 5G players to gain a strong foothold, they’ll have to start moving faster to bring solutions to market and line up key supply contracts.
After all, all the major wireless carriers have begun adopting this standard in at least a few key markets. The same thing is happening in Asia and Europe.
The KEYS to Success
No wonder that over the last few years, Keysight has logged double-digit 5G order growth.
It’s using targeting products to help snag more sales as the new wireless standard affects everyone from cellular providers to semiconductors firms to smartphone makers, just to name a few.
For example, Keysight offers a 5G New Radio-ready channel emulation solution. It’s already been adopted by five major communications customers.
As the term implies, the platform allows clients to test their chipsets, network, and other gear in a lab emulating real-world conditions.
No wonder Keysight has such a great client roster. Among its 32,000 customers, it works with:
- All of the 10 Top Telecom Equipment Companies
- All of the 25 Top Semiconductor Suppliers
- All of the 25 Top Technology Companies
- 24 of the 25 Top Telecom Operators
And there’s more good news. The stock is currently out of favor because COVID has slowed down what was set to be an aggressive 5G rollout this year.
But over the last three years, it has grown per-share profits by an average 31%.
At that rate, they’re on pace to double again in less than 2.5 years.
So, 5G won’t just give you a new high-speed system for your communications needs.
With a stock like Keysight in your portfolio, it also can help you achieve financial independence.
Cheers and good investing,
Michael A. Robinson