Tech's Fastest Growing Sector Could Make You Rich
Companies / Tech Stocks Oct 08, 2014 - 08:35 AM GMT
By: Money_Morning
Short sellers have their knives out for GoPro Inc.
And that's the least of the wearable sports camera maker's problems right now.
GoPro's share priceseems to be flopping around wildly on news: surging 11% after a new product announcement, then sinking the same after the company's founders found a loophole that allows them to sell some of their stock early.
The stock has spiked again since then – but I don't expect that to last.
I believe GoPro has done this well for this long – soaring more than 180% since its June initial public offering – because it is the poster child for a market sector that is set for a major boom.
According to the IDC forecasters, wearable tech will grow 78.4% through the end of 2018. If we want to get on the road to wealth that tech provides, then this is a sector we must cash in on.
But I don't want us to get hurt by messing with a risky stock like GoPro.
That's why today I'm going to show you a way to play the entire wearable-tech sector with a single investment that offers both safety and big profits…
Way Beyond Action Cameras
Don't get me wrong. I love GoPro Inc. (Nasdaq: GPRO) as a company. I like its story and I'm a fan of its technology – wearable cameras that "extreme" cyclists, surfers and skiers use to capture and post their incredible stunts.
In this market, however, we just can't justify paying 80 times forward earnings. And besides being a risky stock, GoPro is just a start to the world of wearable technology.
That became abundantly clear Sept. 9 when Apple Inc. (Nasdaq: AAPL) introduced the Apple Watch. Due out next year, the smart watch can be integrated with the iPhone, used with the new Apple Pay mobile-payments system and loaded up with dozens of goods from the App Store.
More to the point, I think it will be a huge success. Morgan Stanley agrees, saying that the Cupertino, Calif.-based tech giant could sell 30 million to 60 million Apple Watches in the first year alone.
That's huge.
According to the researchers at ON World,consumers purchased just 4 million smart watches last year. But ON World predicts shipments will hit 330 million in 2018 – a stunning 8,150% increase in just five years.
And that's only one segment of the wearable tech market. Wearables also include medical devices, fitness and health monitors, GPS trackers and virtual-reality headsets.
Google Inc. (Nasdaq: GOOG) has several fingers in the wearables glove. You know Google Glass. Worn as eyeglasses, the system displays text messages and maps, takes notes, records video, takes pictures and displays video.
And Google is using its Android operating system to make an ecosystem play. Android Wear is designed to work with wearable devices from several developers and makers.
As much as I like GoPro, Apple and Google, it's important to note that we're still at the dawn wearable tech.
It's a bit early to try picking the winners from the losers. What we're looking for now is a way to capture as much upside as possible from the whole sector.
That's where the Vanguard Information Technology ETF (NYSE Arca: VGT) comes in. It's an exchange-traded fund composed of 90% technology stocks, most of which are based in the United States.
Vanguard Info Tech has some 413 holdings, but more than half of its assets are in the fund's top 10 stocks. For instance, Apple and Google make up 22.6% of the ETF's holdings.
That right there gives us two major wearable plays. But Vanguard Info Tech holds at least four other wearable leaders. Take a look…
Wearable Vanguard No. 1: Intel
After nearly striking out on the mobile revolution, VGT holding Intel Corp. (Nasdaq: INTC) wants badly to sell its Edison semiconductor chips to wearable developers.
And to bolster and promote the entire sector, Intel is sponsoring the Make It Wearable contest, with a $500,000 grand prize for the most innovative product.
Besides selling chips, Intel is also making some moves into consumer products.
Earlier this year, the world's leading semiconductor firm acquired Basis Science Inc. That $100 million play gives Intel a line of wearable fitness devices.
Intel plans to further expand into wearables with a line of MICA smart bracelets. The fashion-centric line is the highlight of Intel's recent partnership with watchmaker Fossil Group Inc.(Nasdaq: FOSL) and clothing retailer Opening Ceremony.
The Santa Clara, Calif.-based company also offers Jarvis, a smart headset that functions similarly to digital assistants like Apple's Siri and Google Now.
Wearable Vanguard No. 2: Microsoft
Meanwhile, Microsoft Corp. (Nasdaq: MSFT) is focused on the software aspect of wearables. Like Intel, Microsoft largely missed the mobile revolution, but it has no intention of making that mistake with wearables.
Microsoft recently released a software suite for wearable devices, primarily smart watches. OneNote, a free app designed for Android Wear, is being offered through Google Play.
At the same time, Microsoft will soon release its own smart watch. The sensor-laden device will serve as a fitness tracker and will sync with iPhones, Android phones and Microsoft's own Windows Phone system.
Wearable Vanguard No. 3: Garmin
Primarily known for navigation devices, Garmin Ltd. (Nasdaq: GRMN) is not only leveraging off its GPS expertise. With wearables, it's also focused on fitness and health, which is the company's fastest-growing division.
For instance, Garmin's fitness bands allow users to track their physical activity, including daily number of calories burned and steps taken as well as sleep patterns.
The company clearly picked a growth segment. According to market forecaster Canalys, we bought 1.8 million smart bands like those made by Garmin last year. That number will likely climb to more than 45 million by 2017.
Garmin also makes several sport watches that feature GPS tracking and fitness monitoring. And its Forerunner watches feature touchscreen technology that helps swimmers improve their stroke.
Wearable Vanguard No. 4: Ambarella
And then there's Vanguard Info Tech's backdoor play on GoPro – our old friend Ambarella Inc. (Nasdaq: AMBA).
Ambarella makes the video-processing chips that make GoPro's cameras such a success.
And the company goes well beyond the wearable market. It makes video processing chips used in just about every digital camera we own – auto backup cameras, surveillance cameras, smartphone cameras, TV broadcast cameras.
And that, in turn, reinforces one of the great selling points of Vanguard Info Tech – diversification.
This ETF not only gives us a broad play on wearables but also covers a wide swath of other technology, including software, semiconductors, cloud computing, Big Data and mobile.
Trading at roughly $98.50 a share, Vanguard Info Tech is well ahead of the overall market. Over the past six months, it has doubled the S&P 500's 3% return, and it's nearly 40% ahead of the market over the past year.
With its lineup of top tech names – and a concentration in tech's fastest-growing sector – this is a great long-term play.
Vanguard Info Tech is an investment that captures the quick profit potential in wearables while still helping you build a solid investing foundation.
Throw in market-beating performance and you have a real winner on your hands.
Do you own any wearable tech? Are you going to buy an Apple Watch for yourself or a grandkid when it debuts? Even better, are you invested in any wearable companies? Let me know in the comments below.
Source : http://www.wallstreetinsightsandindictments.com/2014/10/lets-watch-big-bank-fixers-scramble-flee/
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