by James Brumley | April 30, 2013 10:34 am
If there’s one thing veteran investors can tell you, it’s that nothing lasts forever … not even Warren Buffett’s positions in his so-called “forever” stocks.
Oh, he might hold them for years, but even the Oracle of Omaha knows it’s tough for a company to be a dominant name forever; time will eventually make every company obsolete.
This is even true of technology titans like Microsoft (NASDAQ:MSFT), International Business Machines (NYSE:IBM) and Intel (NASDAQ:INTC). Ten years ago, when PC sales were flying through the roof — most of them running Windows operating systems — many observers felt Microsoft would be the proverbial king of the software hill forever. And Intel was expected to remain the undisputed champion of processors and chipsets.
A funny thing happened on the way to forever, though: Tablets and smartphones were introduced, crimping interest in personal computers. Cloud-based software and applications were introduced, negating the need for traditional software. AMD (NYSE:AMD), Qualcomm (NASDAQ:QCOM) and Nvidia (NASDAQ:NVDA) got a running start with proliferation of tablets and smartphones, keeping Intel at bay on that front.
The point is that things change … even things that seem staunchly permanent.
With that in mind, there are three major tech trends that might seem like mere curiosities compared to the sector’s traditional focal points, but likely will dominate the technology sector within a couple of years. And the top companies within these sectors will be along for a wildly bullish ride.
A year-and-a-half ago, most consumers probably didn’t even know what a three-dimensional printer was. Now that prices have fallen to as low as $1,000 per printer, It’s entirely possible for consumers to own a 3D printer.
And make no mistake — these printers are poised to change the world, giving anyone the ability to set up a mini-factory inside their homes to make any sort of object out of plastic, glass and even metal.
Some observers believe 3D printer-owners could use them to break into the world’s $10 trillion annual market for manufactured goods. Even at a mere 10% market penetration, that’s $1 trillion worth of business being won by folks who had a couple thousand extra bucks to set up a shop in their garage or basement.
In the meantime, the actual annual “spend” on 3D printers is projected to reach $3 billion by 2018, with high-end estimates of $5 billion by 2020. That’s not a massive market, but there aren’t many players getting a strong foothold in the game either.
Top prospect: 3D Systems (NYSE:DDD)
Not that it wasn’t on the radar already, but after first lady Michelle Obama’s credit card profile was hacked in mid-March, the need for cybersecurity became even clearer.
The market is expected to grow faster than it ever had before. Experts forecast that cybersecurity spending will exceed $120 billion by 2017, which is well up from last year’s market size of about $70 billion.
The accelerant for the cybersecurity market is, of course, the ongoing migration to cloud-based computing in addition to the adoption of mobile web devices. But the real winners of this space will be the companies that can provide a completely integrated solution.
Top prospect: Checkpoint Systems (NYSE:CKP).
The Internet awed us because it could feed us any information from anywhere at any time. But it used to be a one-way interface with limited scope — users had to be in front of a computer to use it.
Since then, however, the Internet has become mobile, and most household and handheld devices are now connected. It’s a movement that has been (un-poetically) summed up as “the Internet of things.”
Stupid name notwithstanding, there’s actually some practicality to being able to control your thermostat from your smartphone or hibernating your electric water heater while you’re on vacation.
While the possibilities are endless, the opportunity is still a fuzzy one, as the concept is still in its infancy. But Cisco thinks connecting everything to … well, everything else could create $14.4 trillion in value, via saving and efficiency and accuracy. That’s not the market size, mind you … just the fiscal benefit of it.
Experts see the market size for this kind of communication equipment growing rapidly. The actual machine-to-machine market should be worth something around $86 billion by 2017, up from only a few billion now. That’s a big chunk of change.
The challenge with capitalizing on “the Internet of things” is finding a relevant company that’s positioned to lead the charge — there aren’t many. But …
Top prospect: Tiny Sierra Wireless (NASDAQ:SWIR, $340M market cap) is worth a look. The company designs and builds the wireless communication hardware for these devices, and some pros predict the wireless device sliver of this market is going to grow an average of 27% per year through 2016.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
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