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Investors are gearing up for an exciting 2017. The new White House has exciting and lucrative plans for our nation. Stocks have already performed extremely enthusiastically to the pending changes.
Many investors are particularly excited about the ramp-up in infrastructure spending about to be released on America’s aging bridges, roads, and waterways.
At the same time, there is a quiet revolution taking place in the infrastructure space.
I am not talking about traditional infrastructure like most others.
You can’t as easily see, touch, or feel this critical American infrastructure; but it is every bit as important to our economy as the traditional infrastructure.
This is internet infrastructure, also known as the “backbone” of the web. Companies involved in this sector are poised for substantial gains in 2017 and beyond.
I have identified three such companies that are poised to ride the wave higher.
The way I see it, there are three main factors that will be driving this boom.
First, the pending statutory corporate tax rate reduction will encourage U.S. Internet infrastructure firms to use savings to expand and improve their products and services.
Second, the repatriation of corporate cash from large-cap tech companies such as Cisco Systems (Nasdaq: CSCO) should boost their shares and could have a trickle-down effect on the entire sector.
Lastly, and perhaps most rarely considered, is Donald Trump’s son-in-law, Jared Kushner. Kushner is well known as a huge supporter of high technology and has compelling experience working with internet infrastructure projects. One example is his involvement with WiredScore.com. WiredScore.com labels commercial buildings in the United States by their internet connectivity.
Make no mistake; Trump is a Luddite when it comes to high-tech. However, Jared has his ear and should be very influential in a positive way. In fact, I overheard some chatter that the potential “infrastructure bank” may have a mandate for internet infrastructure.
Here are 3 stocks primed to ride the infrastructure wave.
Arista Networks (NYSE: ANET)
This cloud networking solutions company is trading higher by more than 83% from its 52-week low. Based in Santa Clara, California, Arista boasts a market cap of nearly $7 billion with annual revenue of slightly under $1 billion.
Stated in everyday language, the company’s network switches make communication faster among servers in data centers and speed up interconnected servers in multiple buildings so they can act like one large server. Tech giants like Facebook (Nasdaq: FB) and Microsoft (Nasdaq: MSFT) utilize Arista. The shares were held back due to a copyright infringement lawsuit brought by Cisco over the company’s user interfaces. In mid-December, a jury found that Arista did not infringe on Cisco’s copyright. Shares jumped 2% on the news.
Barclay’s Mark Moskowitz bullishly stated, “We think this development sets the stage for Arista to exhibit upward momentum with both the top-line and gross margin over time. In general, enterprise customer engagements can possess better economics, given the industry typically exerts less purchasing power versus the cloud service provider’s greater scale. Plus, enterprise customers can require more post-sale services and support given these outfits may not have as much technical expertise in-house.”
Acacia Communications (Nasdaq: ACIA)
This fiber optic company is a provider of interconnected products for the communications networks relied upon by cloud infrastructure operators and content and communications service providers. Its mission is to deliver high-speed products that transform communications networks, through improvements in performance and capacity and reductions in associated costs.
Acacia boasts a market cap of just under $2.5 billion and is ideally positioned to benefit from the growth of “smart” infrastructure.
Cisco Systems (Nasdaq: CSCO)
Boasting a market cap of over $153 billion and annual revenue of nearly $50 billion, Cisco Systems is the big brother to all internet infrastructure firms.
The network equipment maker’s shares pay over 3% in annual dividends and are higher by 10% in 2016. Cisco is a company with large foreign cash reserves, meaning that the possible repatriation of the money will result in a higher dividend, buybacks, and M&A activity, all of which are very bullish for the shares.
Risks To Consider: All high- tech companies are exposed to competitive risk. The nature of the business is that upstarts are always nipping at the heels of established firms and have the ability to steal customers and market share quickly and without warning.
Action To Take: Look to buy the above stocks on breakouts or selloffs depending on your investing style. All three companies stand to thrive under the new presidential administration.
– David Goodboy
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Source: Street Authority