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Top 5G Investment Picks Set to Outperform!

Stocks mentioned in this report: Corning (NYSE: GLW), Verizon (NYSE: VZ), Xilinx (NASDAQ: XLNX), Qualcomm (NASDAQ: QCOM), Ericsson (NASDAQ: ERIC), Crown Castle (NYSE: CCI), VMWare (NYSE: VMW), Marvell Tech (NASDAQ: MRVL), : Global X Internet of Things ETF (NASDAQ: SNSR)

Let’s just put it bluntly, right up front. In case you haven’t heard, 5G amounts to a massive investment opportunity.

5G is the next generation of wireless networks! This next phase of wireless expansion promises up to 100X the data and speed compared to 4G, which we are currently using today.

Just diving into the basic research on this market is almost overwhelming—the upcoming impact of 5G is unimaginable—there’s simply so much going on, touching almost every facet of our lives.

From self-driving cars to online medicine, Smart Cities, fully connected drone fleets, hypercommunications, investment markets, education opportunities, military applications, homeland security, critical medical connections with hospitals & surgeons, emergency response services, water supply, food distribution channels, you name it—a tidal wave of innovative new goods and services all driven by real time big data and Artificial Intelligence (AI)—and we’ve barely heard the starter’s gun go off. That’s what 5G really means.

 

“…5G… is a unifying connectivity fabric for a diverse range of services and devices, expanding mobile technology from more than five billion humans to trillions of things, disrupting virtually every industry.”[1]

 

Simply put, 5G explodes today’s data pipeline by one hundred times. Kind of like replacing a footpath with a data superhighway. We’re talking uber-wide and super-fast beyond anything you can imagine right now. This is 5G!

 

 

So, in a world where our quality of life has become inextricably tied to the Internet, a hundred-fold boost in speed and capacity will bring humongous change. Think IoT (Internet of Things) on super steroids.

To simplify the techno-jargon, 5G will allow a matrix of technologies that will let us connect everything to anything in real time! And it will do so in new ways that we cannot yet foresee.

Just as important, the adoption curve will stretch for decades and new opportunities for innovation and investment will crest the horizon continually for the foreseeable future. Savvy investors stand to make fortunes. Especially those who move early.

This is change and opportunity writ large. The World Economic Forum goes so far as to describe 5G as the Fourth Industrial Revolution.[2]

Qualcomm claims that 5G will be bigger than electricity, and their prediction says by 2035, it will be a $12 trillion goods and services economy.[3]

 

Source: www.independent.ie

 

Twelve. Trillion. Dollars. Want a piece?

Examples of 5G transmitters, referred to as small cell nodes, located on telephone and light poles in order to build out dense networks in primary areas.

I could go on and on quoting dozens of sources and top industry players about the impact and extraordinary scale of 5G, but I’ll leave that reading to you, should you care to pursue it.

The thing is… 5G is so massive that the biggest challenge is sorting out which investment opportunities make sense today—for you. Of course, a lot depends on the type of investor you are.

So, first off, know that 5G is a lot more than just Huawei and the propaganda surrounding it. There are scores of players in the field, big and small, and there are new companies joining the race every quarter. New investment targets in 5G abound.

To get you started, here are some of the giants in the field, in no particular order. Understanding who the key players are can give you an early finger-hold on working down the ecosystems to find a range of investment targets to suit your portfolio goals and risk qualification, matching your propensity for capital market risk.

 

8 Companies and 1 ETF to Get You Started…

 

Corning (NYSE: GLW)

As the maker of Gorilla Glass, the tough, scratch-resistant glass you’ll find on so many devices today, Corning’s products will certainly be built into many of the devices that will comprise the IoT.

Gorilla Glass has been used on more than 5 billion devices made by 40 different manufacturers—including smartphones, wearables, automobiles, 3D sensing technology, and hologram reality devices.

Cellular phone upgrades from 4G to 5G alone will create considerable demand.

In 2018, Corning released Gorilla Glass DX and DX+, designed specifically for wearables. The two new versions of Gorilla Glass “provide enhanced anti-reflective optics and scratch resistance” solutions for wearables. 5G will set off an explosion in wearable functionality and user adoption.[4]

Corning has also formed an agreement with WaveOptics, a leading designer of diffractive wave guides used in wearable augmented reality devices, to provide ultra-flat, high-index glass wafers.

The company projects that it will double its mobile consumer electronics sales over the next several years.

Corning also looks like a smart 5G investment due to its leading position in optical fiber. The world will need more fiber to carry the vast data expected to come with the penetration of 5G.[5] The company had produced more than 1 billion kilometers of optical fiber as of mid-2017, more than one-third of the total global production ever at the time.

 

Verizon (NYSE: VZ)

All major telecom carriers are beginning to ramp up for 5G wireless speeds, and Verizon seems to be positioned to be in a market leadership role with real 5G coverage in several major markets across the U.S.

According to CEO Hans Vestberg:

“2018 was a year of 5G firsts. We were first to complete an overlay of data transmission on the 5G global standards. We were first to complete the 5G data session on a smartphone. And in October, we proudly were the first in the world to commercially deploy 5G with our 5G Home product. As we finish the year, our confidence is high as we are heading to the 5G era and the beginning of what many see as the fourth industrial revolution.”[6]

Verizon plans an ambitious rollout of 5G technology. In its 2018 annual Investor Meeting, management stated that it would be entering 30 commercial markets with 5G wireless coverage in 2019. They also believe it will be able to offer high-speed internet via 5G wireless to 30 million homes within five to eight years, starting in 2019.

Verizon not only looks like a bright investment in 5G simply because it will be early to the marketplace, but as its smart city initiative shows, the company also seems to have a much more holistic vision than other telecom carriers of how 5G can benefit society.

Verizon dominates the ownership of key 5G spectrum bands, controlling 76% of the 28GHz band and 46% of the 39 GHz band–crucial high-frequency transmission areas central to 5G’s promise of higher data transfer rates. Verizon is also making bold steps into the hi-res domains of 3D and 8K mobile imaging.[7]

After a year of hype, the RED Hydrogen 1 is billed as a “holographic” phone with an 8K camera and points the way to a revolution in mobile device imaging. I’m watching and let’s see how this holographic 8K initiative develops. So far, reviews have been met with angst.

The applications at the consumer level (think immersive gaming), and industrial level, such as live, remote surgical procedures, or complex, dangerous maintenance tasks and robotic work, will be immense.

VZ is noted to be one of the best stocks to buy for 5G largely for its spectrum holdings and near-certain staying power. A 4.2% dividend doesn’t hurt either. [8]

 

Xilinx (NASDAQ: XLNX)

Xilinx, Inc. is an American technology company that is primarily a supplier of programmable logic devices. It invented the field-programmable gate array, and is the semiconductor company that created the first fabless manufacturing model.

This $29 billion chipmaker is one of the earliest companies to cash in on the next generation of wireless networking, and as such rightfully deserves a place as one of the best 5G stocks to buy.

Xilinx designs, develops and markets programmable logic products, including integrated circuits (ICs), software design tools, predefined system functions delivered as intellectual property (IP) cores, design services, customer training, field engineering and technical support.

As infrastructure spending increases, Xilinx will be a direct beneficiary since its chips are used as components for much of the evolving 5G build-out. Revenue in XLNX’s communications segment soared 74% year over year in its most recent quarter. This type of growth cannot be ignored.

An impressive portfolio of radio frequency and system-on-a-chip technologies now can be used in all spectrum bands below 6 GHz, which will be important in helping to project 5G coverage over long distances.[9]

 

Qualcomm (NASDAQ: QCOM)

Any list of 5G investments would be less than complete without Qualcomm, another chipmaker that also happens to have an incredibly impressive portfolio of intellectual property related to 5G tech.

A recent settlement with Apple (NASDAQ: AAPL) allows Qualcomm to supply chips for the iPhone for at least the next six years. Apple can now release a 5G-compatible iPhone sooner than previously expected, with Qualcomm licensing issues hammered out, benefitting both companies. Good to see they’ve learned to play nice.

Thanks to its broad 5G intellectual property patents, royalties should be significant to shareholders for years to come. Offering a 3.4% dividend, QCOM is fairly valued to boot.

QCOM is a great “widows and orphans” way to  ride the big wave of the 5G revolution.

 

Ericsson (NASDAQ: ERIC)

Swedish communications equipment company Ericsson will certainly play a starring role in the global rollout of 5G technology, helping telecom companies upgrade their networks to the new higher speed networks.

Recent national security concerns surrounding direct competitor Huawei’s technology should benefit Ericsson, as it picks up market share.

First-quarter profits of 4.9 billion Swedish krona ($US528 million) blew past consensus expectations for 2.8 billion krona in earnings, partly driven by U.S. adoption of 5G. In June, Ericsson forecast global 5G subscriptions to be 1.9 billion by 2024, a 27% increase from its November forecast.

Artificial intelligence (AI) stemming from the latest mobile communications innovations is the subject of the company’s latest market research report: “Employing AI techniques to enhance returns on 5G network investments.” The downloadable report offers sharp, peer-based guidance for today’s service providers facing a range of AI/5G critical business decisions. [10]

 

VMware (NYSE: VMW)

The transition from 4G to 5G won’t just require a buildout of physical infrastructure, it’ll also require new software systems.

VMware provides technology that allows carriers to run multiple networks on the same hardware.  It has already secured deals with the likes of AT&T (NYSE: T), Vodafone (NASDAQ: VOD) and Ericsson. That’s essential for the effective operation of the 5G matrix, because 5G relies on a combination of different network technologies.

VMW revenues have risen from $6 billion in fiscal 2014 to $9 billion in fiscal 2019, while over the same period earnings per share have nearly tripled, soaring from $2.04 to $5.85. Shares have enjoyed a healthy run-up since early 2016 as the anticipation of the coming network transition has increased.

Interestingly, the company plans to invest US$2 billion in VMware-specific efforts in India between now and 2023 as part of the company’s overall global investment strategy.[12]

“India is a key cornerstone of our overall global investment strategy, providing outstanding engineering talent for our global R&D operations that are helping to drive innovation across our entire product portfolio.”
—Pat Gelsinger, CEO, VMware

India is embracing development of Smart Cities, promising a spiraling array of goods and services that touch every point of daily life and spin out scads of new business opportunities.[13]

To see just how big this will be, have a look at my recent article on Smart Cities, here.

 

Marvell Tech (NASDAQ: MRVL)

This consumer semiconductor products company has its hands in a number of high-growth, interrelated areas, including 5G, cloud, artificial intelligence, enterprise hardware and the automotive space, especially after its $6 billion 2018 Cavium acquisition.[14]

While I definitely categorize Marvell as a long-term play on 5G—the vast majority of additional revenue from the 5G rollout will come in 2020 and beyond—there could be significant upside should MRVL lock down design contracts with additional manufacturers.

Its most recent major design win was with Samsung to provide chips to power LTE and 5G base stations, which are integral to improving connectivity. MRVL trades for 19 times forward earnings and pays a 1% dividend.

 

Crown Castle (NYSE: CCI)

The future build-out of new cell towers will make up one big infrastructure expense required to achieve 5G connectivity.

The last leg of 5G transmission, unlike 4G, will require installation of antennas or small cell sites within several hundred yards of a connected device to ensure signal strength and speed. Previously, towers could beam connectivity over much longer distances. That means a lot more towers and small cell node locations that will be needed.

Somebody is going to have to build the tens of thousands of smaller cell sites. CCI boasts 65,000 small cell nodes, and plans to build 20,000 more in 2020. Let me say that again, that’s a lot of towers and small cell nodes that need to built out across America.

Even better, carriers mostly rent tower space rather than build, so this growth will translate into vast recurring revenue streams in upcoming years. This 5G stock also pays a 3.3% dividend.[11] And did I mention a lot of cell towers and small cell deployment?!

 

IoT ETF: Global X Internet of Things ETF (NASDAQ: SNSR)

Perhaps a more interesting approach for some investors would be the ETF route. The Global X Internet of Things ETF (NASDAQ: SNSR) doesn’t directly invest in companies bringing 5G to the world, but benefits from one of its direct beneficiaries, IoT, or better known as the Internet of Things, which consists of billions of devices that connect to the internet and each other in order to automate, control, and monitor different applications and functions.

The Global X Internet of Things ETF seeks to invest in companies that stand to potentially benefit from the broader adoption of the Internet of Things (IoT), as enabled by technologies such as WiFi, 5G telecommunications infrastructure, and fiber optics. This includes the development and manufacturing of semiconductors and sensors, integrated products and solutions, and applications serving smart grids, smart homes, connected cars, and the industrial internet.

As 5G becomes reality, the IoT is expected to explode in size, with estimates from Cisco Systems projecting that 500 billion devices will be connected to the internet by 2030.

The Global X Internet of Things ETF seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Indxx Global Internet of Things Thematic Index.

 

The Impact of 5G Could Be Bigger Than the Internet

I’ll continue to keep 5G investment opportunities on my screen. My big question is who is set to build this vast 5G network out? What players are best positioned at the front of this new trillion dollar industry?

As of now, we have a 5 year runway in front of us to build out 5G where investors can participate along the way. I believe investors positioned early will benefit the most. No doubt we’ll find some gems—venture class opportunities that give us the opportunity for exceptional gains as 5G and the IoT pick up momentum going forward.

Sign up to FNN’s investment news service to stay up to date on 5G, and how it will transform the world.


Blake Desaulniers, Contributor
for Investors News Service

P.S. To discover more opportunities in the hottest sectors in North America, sign up now to the Financial News Now newsletter to get the latest updates and investment ideas directly in your inbox!

DISCLAIMER: Investing in any securities is highly speculative. Please be sure to always do your own due diligence before making any investment decisions. Read our full disclaimer here.

Published August 2019


Sources:

[1] https://www.qualcomm.com/media/documents/files/fierce-wireless-ebrief-5g-release-16.pdf

[2] https://www.weforum.org/agenda/2018/01/the-world-is-about-to-become-even-more-interconnected-here-s-how/

[3] https://www.qualcomm.com/media/documents/files/fierce-wireless-ebrief-5g-release-16.pdf

[4] https://www.wareable.com/wearable-tech/how-5g-is-going-to-change-wearables-5445

[5] https://www.reuters.com/brandfeatures/venture-capital/article?id=86937

[6] https://www.verizon.com/about/investors/quarterly-reports/4q-2018-quarter-earnings-conference-call-webcast

[7] https://www.pcmag.com/news/364648/at-t-verizon-launch-3d-red-hydrogen-one-phone

[8] https://money.usnews.com/investing/stock-market-news/slideshows/best-stocks-to-buy-for-the-5g-revolution?slide=2

[9] https://money.usnews.com/investing/stock-market-news/slideshows/best-tech-stocks-to-buy-this-year

[10] https://www.ericsson.com/en/blog/2019/5/ai-in-5g-networks-report-key-highlights

[11] https://money.usnews.com/investing/dividends/slideshows/best-dividend-stocks-to-buy-this-year

[12] https://www.vmware.com/company/news/releases/vmw-newsfeed.VMware-plans-US-2-billion-direct-investment-in-India-over-next-5-years.1622966.html

[13] https://www.information-age.com/smart-cities-in-india-123474005/

[14] https://www.marvell.com/products/

Blake Desaulniers

For more than 25 years, Blake Desaulniers has worked for some of North America’s most prominent investment newsletters and advisory services. His specialty is identifying important trends and technologies before they become common knowledge, and pinpointing the companies best positioned to capitalize on them. Blake has provided direction and editorial for Equity Magazine, BC Business, Financial World, Prospector News, and is the current Editor in Chief at Northern Equity Research.