Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
If there is any silver lining to the 2020’s disruptions, it’s that stock forecasting has become more predictable. With more promises of stimulus bills in the near future, and with the stock market having the Federal Reserve as its guardian, the trends dominating 2020 should continue into 2021.
More people than ever have embraced the virtual world for their work, shopping, trading, socializing, and education. As the 5G revolution continues to churn, companies that saw the big picture of digital transition will reap the rewards in 2021. Most likely, you are already using some of their services and products, so why not consider investing in them as well?
With a number of easy-to-use stock trading apps, investing in stocks is also soaring in popularity. The digital age makes many processes easier, which has extended to the world of stock trading.
Not often in the public spotlight, the healthcare system is also undergoing digital transformation. Under the umbrella of eHealth, telemedicine and telemonitoring are just some of the growing sectors to offset the costs of the rare healthcare resource. Based in California, VEEV works in the background as a cloud software platform to support biotech, pharma, and life sciences.
VEEV gives companies in these sectors a cloud-based productivity tool, ridding them of burdensome regulatory paperwork and streamlining their trial data. All with an extra benefit of providing an interface for sales via its CRM tool – customer relationship management. As a result, VEEV has accumulated a $44 billion market cap, with a bright future ahead.
Starting with December, VEEV’s financial report for Q3 accounted for $377 million worth of sales, representing a 34% YoY increase. Likewise, VEEV’s profit climbed by 25%, settling at $101 million. For Q4, its sales are forecasted at $307 million.
Another company based in California, Salesforce was founded all the way back in 1999. This gave it plenty of time to become the go-to solution for any business looking to improve their CRM – customer relationship management. Today, the company’s market cap holds at $210 billion, with a massive ecosystem of third-party apps.
Covering the entire spectrum of online ventures – marketing, sales leads, customer support, commerce – CRM recently acquired Slack to expand into online collaboration. While the $27 billion acquisition caused CRM shares to drop by 18%, it was overshadowed by its strong financial report. For Q3, CRM’s sales went up by 20% YoY, at $5.4 billion, with the forecast for the year’s revenue going up by 23%, at $21 billion.
However, despite its leading CRM position, keep in mind that Salesforce may not be able to expand its sales along with a string of new acquisitions. Moreover, the company’s stock-based compensation program has gone through the roof, at $2.2bn – representing 51% of CRM’s cash flow for the year. While this is good for retaining quality talent pool, it may backfire in the long run.
Becoming a synonym for everything related to digital photo and video editing, this software company made big inroads into the CRM space, much like Salesforce. Thanks to Adobe’s shift to cloud-based software distribution, it quickly expanded into Marketing Cloud as well. This online software package provides cutting edge tools for data analytics and marketing campaigns, naturally linking to its formidable suite of content creation tools.
Adobe’s December financial report accounted $12.87 billion in revenue, representing a 15% YoY increase and beating the year’s forecasts. Its Digital Media and Digital Experience divisions have seen a 19% YoY growth. Its current market cap is $238 billion. Given such strong growth indicators, it is no surprise that, during Q4, Adobe repurchased about 1.6 million shares.
Taking Advantage of Chip Miniaturization and 5G
The other two companies you should consider are related to IoT – the Internet of Things. Sometimes called the Fourth Industrial Revolution, it relies on sensors and fast, wireless interconnectivity, provided by the emerging 5G infrastructure.
Maxar Technologies is specialized in developing optical sensors, which are then harnessed by AI-boosted software for creating 3D photorealistic imagery. This tech will be used in surveying crops, oil & gas industry, urban planning, military & aerospace, surveillance, and logistics. Maxar’s current market cap is at $2 billion, with a net income of $85 million and consolidated revenue at $436 million for Q4 2020.
Lumentum seeks to take advantage of the rise of auto-pilot systems in commercial vehicles. Building upon its legacy of laser diodes for telecom infrastructure, the company is shifting to 3D sensors/lidars for autonomous vehicles. However, Lumentum also has a close relationship with Apple, providing them with tech for biometric authentication and augmented reality for the new generation of iPods and iPhones.
With a market cap of $7.5 billion, its Q4 2020 report reveals a record net revenue of $1.68 billion for the year, while Q4’s revenue reached $368.1 million. More importantly, its operating margin (profit after accounting for expenditures) was at 12.2% for the year. With the rising demand for its high-tech products, Lumentum is positioning itself to become a dependable growth tech stock.
Between Bitcoin and tech stocks, on which asset do you place your hopes for the long run? Let us know in the comments below.
Disclosure:Tim Fries has no positions in any of the stocks mentioned, and has no plans to initiate any positions within the 72 hours following the publishing of this article. This article expresses the opinions of Tim Fries. Tokenist Media LLC has no position in any of the stocks mentioned, and does not plan to initiate any positions within 72 hours of the publishing of this article. Please consult our website policy for more information.
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firms specializing in sensing, protection and control solutions.