By Cody Willard
We’ve always made our biggest money by getting in front of trillion-dollar trends before they are noticed.
And I had an epiphany the other day. I realized there are three burgeoning Revolutionary trends that are in the sweet spot for us. We should focus our buying exclusively on these three sectors.
The App, Cloud, Streaming, Crypto and EV revolutions are still crowded, as everybody wants to be a Revolutionary Technology Investor.
I want to exclusively focus my time, energy and investing on these sectors for the foreseeable future:
1. The Re-Domestication of the Supply Chain Revolution. (I’m trying to come up with a catchier name that fully conveys the concept. I’m open to suggestions from readers.) The boards at every company on the planet that source anything from China or the Middle East are sitting around talking about how they can’t continue to use the same globalization playbook. They have to bring as much of their supply chains, factories and logistics to their home country as possible. That means hundreds of corporations are going to spending trillions of dollars building factories, distribution networks, and other supply chain services and products in the next decade.
Companies are going to invest as much as possible upfront to make sure these factories are as laborless as possible. Despite the focus on laborlessness, the onshoring of trillions of dollars of annual output into the U.S. will create millions of new jobs; it’s just the output per employee will be at previously unheard of levels.
In some sense, Tesla /zigman2/quotes/203558040/composite TSLA +7.67% is the model for what will happen across an array of manufacturing industries as they domestically source and build as much of each product as possible. Likewise, it’s possible that someday Tesla’s human-shaped robots will indeed provide laborless labor for factories too. Tesla as a robotics company? They already build their own factory robots anyway. The point here is that The Onshoring Revolution — a better name? — is real.
My favorite stock for this revolution is Intel /zigman2/quotes/203649727/composite INTC +4.05% . Intel is the only company on the planet that can help the U.S. and Europe create their own chip-supply chains. If they don’t do it, the entire Western economy, and perhaps civilization, will collapse if China ever takes over Taiwan Semiconductor Manufacturing /zigman2/quotes/204359850/composite TSM +4.60% and shuts off U.S. access. The company will let governments pay for most of the fabs, and Intel could be a monopoly in the West in the single most important supply chain for our economy: making chips. (I’d also mention: Intel could be taking market share for the first time in a decade; it trades at less than seven times three-years-out profits, and less than 10 times next year’s estimates; it has a rock star CEO.)
I’ve just started building a full-sized position in Rockwell Automation /zigman2/quotes/206335564/composite ROK +1.77% , a company that focuses on smart manufacturing. I’ve got a spreadsheet full of names, but this is the only that I’ve warmed up to so far as both its valuation seems compelling at nine times my 2025 profit estimates, with double-digit topline growth and very strong marketplace positioning in several subsectors. The stock has been moving up in a straight line for the last week or so as I’ve just been finishing up my homework on the name. I’d welcome the chance to scale into a larger position if it falls toward recent 52-week lows. I’d also mention that I’ve decided to sell the other half of my Roku /zigman2/quotes/205087179/composite ROKU +9.58% stake. I guess you could say I’m dropping the “U” in Roku as I swap in ROK.
See, the Streaming Revolution in 2022 isn’t new or burgeoning in the way it was a decade ago when I was hard at work learning how we would eventually invest in it. I’d rather look for the next unrecognized trillion-dollar marketplace. Rockwell is better-positioned for more potential upside while being a less-crowded investment than Roku is. Intel’s better-positioned with more potential upside while being a less-crowded investment than Netflix /zigman2/quotes/202353025/composite NFLX +8.75% is. I’ll write more about Rockwell in coming weeks.
2. The Space Revolution. Costs to get stuff and people to space are plummeting, and the technological abilities get more advanced. The Space Revolution is at the first-batter-up-at-the-top-of-the-first-inning stage, and most of the best long-term Space Revolution stocks are still privately held.
Rocket Lab and Terran Orbital
Rocket Lab /zigman2/quotes/222592018/composite RKLB +5.81% is my favorite publicly traded space stock. I’ve also started nibbling on a new space stock called Terran Orbital, whose symbol is “ /zigman2/quotes/226307768/composite LLAP -3.28% ” — live long and prosper. (Get it?) I’ll write about this stock in coming weeks. Five years from now, I expect we will have hundreds of publicly traded space stocks to choose from and a handful of names that will be on the way to attaining trillion-dollar valuations. Now’s the time to learn how to invest in space, just like it was back 10 or 15 years ago when we were learning how to invest in The Streaming Revolution.
3. The Biotech Revolution. This is a sector that’s been left for dead for a long time but is about to see a bunch of new near-miraculous medical, life-extending, life-bettering breakthroughs. I’m not as savvy in the biotech/medical industries as I am in most other tech sectors, so I’m treading lightly and slowly, and using a basket approach. In the biotech sector, I own iShares Biotechnology ETF /zigman2/quotes/206189322/composite IBB +3.22% , SPDR S&P Biotech ETF /zigman2/quotes/205950134/composite XBI +4.55% and small positions in Dynavax Technologies /zigman2/quotes/203017054/composite DVAX +4.46% and Provention Bio /zigman2/quotes/207615026/composite PRVB +2.96% , and a couple other names in the hedge fund. This sector, unlike the prior two, isn’t exactly brand new and, indeed, is already a trillion-dollar marketplace. Just something to think about.
Cody Willard is a columnist for MarketWatch and editor of the Revolution Investing newsletter. Willard or his investment firm may own, or plan to own, securities mentioned in this column.