You may not have heard of STMicroelectronics NV (ADR) (NYSE:STM), but you’ve heard of the technology behind STM stock. STM makes application-specific integrated circuits (ASIC), which in 2016, brought in about $7 billion in revenue.
Less technically speaking, STM builds chips and sensors for one of the hottest emerging markets in the world — embedded computing. Basically, that means putting computers and sensors in devices that aren’t computers, like washing machines, cars, houses and toasters.
STM also is one of the biggest players in the Radio frequency identification (RFID) sensor trend, which was the first step toward the embedded computing trend. RFID chips are put on large numbers of items, so they can be tracked when they ship.
For example, a container ship carries about 10,000 40-feet long trailers. These trailers are packed with manufactured goods from, say, China. There’s not enough manpower to scan each of these trailers when the ships arrive in port.
But if each item in the trail has an RFID tag and each trailer has one, you can scan the trailer and know its contents, its destination, etc. This tech also allows companies like big pharmaceutical firms to track shipments of their high-priced, name-brand drugs and ensure there’s no supply chain disruptions from the lab to the pharmacy.
This kind of automation makes today’s consumer-driven society possible. It keeps prices down for consumers while allowing companies to ship and sell products at sustainable margins.
But the next iteration of this is what makes STM such a hot commodity now. Now, aside from growing uses in mobile phones, STM’s ASIC technology is a driving force in the Internet of Things, driverless cars and new power grid technologies.
Add to that, STM is a key supplier of ASICs for Apple Inc. (NASDAQ:AAPL). That can be a double-edged sword however, since if Apple phone sales drop, traders also cut STM.
But STM is bigger than just an AAPL supplier. Think of it as Nvidia Corporation (NASDAQ:NVDA) in a different market sector. Both were low-key producers of an important if not unique product in a unique niche. Both had the foresight to take their understanding of their markets to the next level and began to position themselves outside their narrow verticals.
Then, when the broad tech trends gained traction, these companies were there as the best in class suppliers for their respective markets. And those markets are now enormous.
Just as everyone is now stunned at the incredible growth in NVDA, the same is starting to happen with STM. Revenue, operating income and margins are rising. NVDA stock is up more than 170% in the past 12 months, 43% year to date.
To top it all off, STM stock offers a 1.5% dividend yield. Its dividend may not be the sole reason to buy the stock, but it’s better than most three-year certificates of deposit and it has a heck of a lot more growth potential.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.