One of the most important, and underappreciated, aspects of investing in the technology sector is the need for a 'critical mass' in order to truly make change and, just as important, big profits. Just because an idea sounds revolutionary, it doesn't mean it makes for a great investment right now.
A couple of 'hot' industries over the past decade come to mind as cautionary tales in this regard. Segments such as fuel cells, 3-D printing, and drones are fantastic examples of this phenomenon. All three are more hype than substance right now.
Sure, any or all of these segments might be big in the years ahead, but none have been able to reach that important critical mass yet, and investors have suffered as a result. These segments aren't ready for prime time just yet and stock prices in these industries could languish until that time happens.
Reached a Critical Mass
Contrast this to some of the biggest world-changing technologies that have reached a critical mass in recent years. This includes smart phones, biotechnology, e-commerce or even more recently, cloud computing.
These have all become common terms to even the most novice of investor or technology consumer, and we have seen tremendous gains as a result. But again, we didn't see big profits until the technologies reached a critical mass. Cloud computing had been around for years before it truly took off and became an important profit center for giant companies like Amazon or Microsoft. The smartphone has been around for over 20 years, with it only reaching a critical mass with the development and widespread use of the iPhone in 2008.
If you had got in at the beginning of these trends, you would have been right about their world-changing potential, but you would have been far too early as well. It is unlikely that you would have been able to wait up to a decade for the industry to achieve its potential. That is what has happened to investors in fuel cells or 3-D printing. You don't want it to happen to your portfolio if you can help it.
Clearly, investors need to look at industries that haven't fully developed, but are still on track to reach their critical mass and see explosive growth from there. It is a difficult-to-find sweet spot for sure, but the rewards can be immense if you get in at the right time. So, are there any promising candidates right now to be the next game-changing industry?
More . . .
A technological revolution is beginning to expand across the globe at blinding speed. Over the next 3 years, more than 27 billion new devices are expected to go live, making it 10X bigger than the entire mobile phone industry.
Fortunately, there's still time for investors to get in before the potentially huge profits start pouring in. Zacks has a brand-new Special Report revealing 6 tickers to take advantage of what could be a $1.7 trillion market by 2020.
There is an industry that is on the verge of reaching its important critical mass. This could make for an excellent buying opportunity for investors who can get in to this impressive story in the beginning stages before the Amazons and Apples of this industry are minted.
Best of all, this market has the potential to be just as big as the world of mobile phones, if not bigger. That is because it will be all around you, with applications in industry, the home, infrastructure, and countless other ways.
Why might this industry achieve such widespread adoption?
This industry is really an extension and evolution of current processes more than anything. It takes a variety of current technologies — such as semiconductors, internet, mobile phones, wireless communication — and combines them into a single, unstoppable, force.
This impressive combination creates three primary benefits…
The best part about this new shift is its impact on efficiency. The industry in question augments current processes across a number of industries, giving analysts and managers new and better data regarding what is working and what customers demand.
These kinds of changes have far reaching effects. Better management of traffic patterns and local infrastructure improves overall economic activity, insurance companies with more accurate information are able to write better policies, and industrial companies can predict when a part is going to breakdown, preventing a stoppage before it ever begins. Anyone seeing the benefits here could become more efficient in the process. And massive increases in efficiency are great news for bottom lines.
Better data = better decisions
Every business craves predictability. Having a predictable pattern — or at least better metrics — is a clear way to better profits. Fortunately, the melding of this up-and-coming industry and big data will help on this front.
This combination looks to do what sabermetrics did for baseball. It will give decision makers a host of crucial data points that were once unconsidered, overlooked, or simply impossible to obtain with previously developed methods.
These new data points will come from billions of this industry's products out in the marketplace receiving and collecting information.
And much like how baseball was revolutionized by this new way of looking at tried and true methods, the same could happen when the broader business world approach critical mass in this burgeoning industry.
Increased revenues and better competitive position
With products running more efficiently and people making better decisions, it is easier to deliver revenue growth. And if companies adopting this technology run more efficiently and make better decisions (off of more informed data) than their rivals, they are undoubtedly in a stronger competitive position as well.
This realization will make many companies pile into this surging industry, potentially creating big profits for the forerunners of this new tech revolution. After all, who doesn't want an edge that will leave their competitors in the dust?
It isn't every day that an industry reaches a critical mass required to not only enter the parlance of the average investor, but to start producing real stock market winners too.
I have no doubt that you will hear more and more about companies trying to tap into the incredible opportunity unlocked by this industry's revolutionary potential over the coming months and years. One day you may look back on this market the same way a smartphone investor looks back at the iPhone launch.
Clearly, this is an opportunity not to be missed, especially if it really takes off in the months ahead as many industry observers expect to happen.
No wonder some of the biggest and most important companies in the world — from Amazon and Cisco to GE and Samsung — are scrambling to get their strategies and products ready for this new world!
You might already have an idea of what the industry is, but do you want to learn more about the space and some of its key applications as it approaches 'critical mass'? And most importantly, do you want to know which specific investments you need to watch for strong potential in the near future?
I've written a brand-new Special Report to help Zacks members target monster returns from what experts predict will be a $1.7 trillion market by 2020.
In it, I reveal 6 buys to exploit the ultra-fast growth of this industry for maximum gain potential. These tickers are "under the radar" today, but that could change at any moment.
Don't wait to check it out. Your chance to download the report ends midnight Sunday, March 19.
Eric Dutram is Zacks' specialisT for ETFs and earnings surprises. He looks to find companies expected to beat their earnings in the Surprise Trader, while he breaks down the ETF industry and its best investments in the ETF Investor Service.