Trade Alert – Starting a basket of Drone Revolution plays
It’s easy to get lost in the back and forth of the near-term action of the markets. And I, for one, do think it’s wise for even long-term investors to take some stock exposure off the table when markets are at all-time highs (as I was suggesting and doing myself back when the markets were at all-time highs a couple months ago).
But in the end, the key to long-term outperformance and making big money in the stock market is find and own the best and most revolutionary companies who are disrupting or creating new marketplaces that will have huge growth ahead. Say, like Apple and Google were positioned to do back when the smartphone/tablet and search markets were just being created. Indeed, were you aware that as of this week, Apple and Google, respectively, are the two most valuable companies in the United States? That means, I’ve owned the two largest market cap stocks in the US for more than a decade, having first bought Apple at $7 and Google the day it came public at $95 in the open market after it started trading.
With this Revolution Investing approach, we’re trying to find the next Apple and Google like I did the first Apple and Google.
Which leads me to today’s topic of why I’m adding two new names to the portfolio. One, like Apple, when I first bought it back in 2003, has been around for a long-time but is down huge from its all-time highs even as its finally positioning itself for a new round of growth. The second is a newer company that’s only been public for a short time but that is about to ride a new revolutionary growth trend.
First up, is JDSU, which I’ve actually successfully traded back a decade ago. The company’s main product line is fiber optic laser and other telecommunication components that go into the switches and transmitters made by the likes of Ciena, Juniper, Alcatel-Lucent, etc. Their biggest competitor in this area is $FNSR . As you know, I’m long Ciena and Juniper as part of a basket of telecom infrastructure plays that are benefitting from the ongoing spending cycle from the carriers like Verizon, AT&T, etc. JDSU will likely benefit from that same cycle here for the next several years. But in addition to that part of the business, the main reason we are adding JDSU today is because the company is actually going to be a big player in the future of drones. That is, the company has positioned itself as a leader in next-generation geolocation-component-for-drones. Read this for example, MTS Selects JDSU to Launch Canada’s First 3G-LTE Geolocation Solution.
You know that Amazon’s going to be delivering packages using drones in a few more years. You know that you see remote-control drones on TV — I even saw one on Modern Family, not exactly a tech-centric show, as my wife watched it last night. There are military and police enforcement applications for drones already spiking in use around the US and the world. JDSU is likely going to have a component or two in many of those future drones and nobody knows it yet. The stock is down about 25% from its 52-week highs and is down — I’m not kidding 99% plus from its all-time bubble highs back in 2000.
The other name is InvenSense, which, makes and sells micro-electro-mechanical system (MEMS) gyroscopes for motion tracking devices for all kinds of applications including smartphones, tablets…and drones. Drone growth, again, will be huge over the next five to ten years, and this is a company that is likely to have a component or two in many of the drones that will be sold and developed.
INVN is up a bunch in the last week — just as I’ve been wrapping up this research and getting ready to add it to the portfolio, ugh! — but I think it could be a triple from here over the next five years and maybe even more than that over the next decade if the company continues to execute on its leading roadmap for these gyroscopic components.
Like I said above, we’re trying to find another Google and/or Apple. I do think we’ve got several in the portfolio already, including Facebook, Sandisk, and others and I think we are getting ahead of a huge trend before anybody else here with these two names today. I’m not looking for a 20-30% gain in these, I’m looking to own them for the next five to ten years and to make the kind of return on these that I’ve made in Google and Apple over the last ten years.
I’m adding a first tranche buy of about 1/3 to 1/2 as much as I’ll want to start off with here in $JDSU and $INVN. To the future.