Opinion: Get in front of these three stock sectors before they become mainstream darlings
We’ve always made our biggest profit by beating trends to trillions of dollars before they’re noticed.
And I had an epiphany the other day. I realized that there were three revolutionary trends on the rise that suited us perfectly. We should focus our purchases exclusively on these three sectors.
You may recall that we were early investors in the streaming revolution, the smartphone/app revolutions, the cloud revolution,
Cryptocurrency revolution and electric vehicle revolution.
The app, cloud, streaming, crypto and EV revolutions are always crowded as everyone wants to be a breakthrough tech investor.
I want to focus my time, energy and investment exclusively on these areas for the foreseeable future:
1. The re-domestication of the supply chain revolution. (I’m trying to come up with a more catchy name that fully conveys the concept. I’m open to suggestions from readers.) The boards of every company on the planet that source anything from China or the Middle East are sitting around talking about how they can’t keep using the same globalization playbook. They should bring their supply chains, factories and logistics to their home country as much as possible. This means that hundreds of companies will spend billions of dollars building factories, distribution networks and other supply chain services and products over the next decade.
Companies are going to invest as much as possible up front to make sure these factories are as unemployed as possible. Despite the focus on unemployment, relocating trillions of dollars of annual production to the United States will create millions of new jobs; it’s just that output per employee will be at levels never seen before.
In a certain sense, Tesla TSLA,
is the blueprint for what will happen across a range of manufacturing industries as they source and manufacture domestically as much of each product as possible. Likewise, it’s possible that one day Tesla’s human-like robots will also supply factories with out-of-work labor. Tesla as a robotics company? They are already building their own factory robots anyway. The point here is that The Onshoring Revolution – a better name? – is right.
My favorite stock for this revolution is Intel INTC,
Intel is the only company in the world that can help the United States and Europe create their own chip supply chains. If they don’t, the entire Western economy, and possibly civilization, will collapse if China ever takes control of Taiwan Semiconductor Manufacturing TSM,
and cut off access to the United States. The company will let governments pay for most fabs, and Intel could be a monopoly in the West in the supply chain most important to our economy: chipmaking. (I would also mention: Intel could take market share for the first time in a decade; it’s trading at less than seven times three-year earnings and less than 10 times next year estimates; it has a CEO rockstar.)
I have just started building a full role within Rockwell Automation ROK,
a company that focuses on smart manufacturing. I have a spreadsheet full of names, but it’s the only one I’ve prepared so far, because its valuation looks compelling at nine times my 2025 earnings estimate, with double-digit growth and a very strong market positioning in several sub-sectors. The stock has been moving up in a straight line over the past week as I just finished my homework on the name. I would welcome the opportunity to move into a larger position if it breaks to the recent 52 week lows. I would also mention that I decided to sell the other half of my Roku ROKU,
stake. I guess you could say I drop the “U” in Roku when I change ROK.
You see, the streaming revolution in 2022 is not new or booming like it was a decade ago when I was hard at work learning how we would eventually invest in it. I prefer to look for the next unrecognized trillion dollar market. Rockwell is better positioned for more upside potential while being a less crowded investment than Roku. Intel is better positioned with more upside potential while being a less crowded investment than Netflix NFLX,
is. I will write more about Rockwell in the weeks to come.
2. The space revolution. Costs for transporting objects and people into space are falling and technological capabilities are becoming more advanced. The Space Revolution is in the stage from the first batter to the top of the first inning, and most of the best long-term Space Revolution stocks are still privately held.
Rocket Lab and Terran Orbital
Rocket Lab RKLB,
is my favorite publicly traded space stock. I’ve also started munching on a new space stock called Terran Orbital, the symbol of which is “LLAP,
” – live long and prosper. (Get it?) I will write about this stock in the coming weeks. Five years from now, I expect we’ll have hundreds of publicly traded space stocks to choose from and a handful of names that will be on the way to trillion-dollar valuations. Now is the time to learn how to invest in the space, just like 10 or 15 years ago when we learned how to invest in The Streaming Revolution.
3. The biotechnology revolution. It’s an industry that’s been left for dead for a long time, but is about to see a slew of near-miraculous, life-extending, life-enhancing new medical breakthroughs. I’m not as savvy in the biotech/medical industries as I am in most other tech sectors, so I go easy and slow, and use a basket approach. In the biotechnology sector, I own iShares Biotechnology ETF IBB,
SPDR S&P Biotech ETF XBI,
and small positions in Dynavax Technologies DVAX,
and Provention Bio PRVB,
and a few other names in the hedge fund. This sector, unlike the previous two, is not entirely new and, in fact, is already a trillion-dollar market. Just something to think about.
Cody Willard is a columnist for MarketWatch and editor of the Revolution Investing newsletter. Willard or its investment firm may hold or plan to hold the securities mentioned in this column.