A tech powerhouse I’ve been tracking closely has gained some 290% over the past five years.
Plus, a beat-and-raise quarter sent shares up more than 6% on November 6 when the Nasdaq Composite was still in a correction.
That kind of strength in the face of weakness is reason enough to watch a stock.
But I’ve got more personal reasons for following this big winner.
See, I personally played a small role in its success.
During my 35+ years in Silicon Valley, I’ve served as a venture capital firm board member – and I’ve acted as a senior advisor to a dozen tech startups.
That’s a practice I continue today.
While I’ll bet no one at this tech firm realizes it, during its big run-up, it bought one the startups I advised – and that $126 million acquisition played a substantial role in its growth.
With that in mind, today I’ll show you why this Valley leader is making moves up while most of tech is tumbling.
And then I’ll show you exactly how long you’ll have to wait to pick up your own triple-digit returns on its stock (it’s not long).
Check it out…
The Story Behind the Story
Hardly a day goes by that I don’t use my VC background to help my readers score market-crushing gains.
But it’s rare that I get this much of a front-row seat to potential triple-digit gains.
That’s why, before I reveal today’s recommendation, I want to tell you a little more about that startup.
I can’t tell you how excited I was to get a chance to represent WhereNet. Based in Santa Clara, California, it boasted terrific technology in a field close to my heart.
See, I grew up in a military high-tech household and began following sensors while still in high school. I knew they were not just a key part of our defense arsenal, but had a wide range of applications.
Indeed, sensors are now at the core of our tech-centric economy. You’ll find them virtually all around you, embedded in your phone, tablet, car, video game console, and security systems.
I helped WhereNet develop strong corporate brand recognition. The idea was to create enough value in the minds of investors that we could raise venture capital, and then parlay that into a successful initial public offering (IPO) or a takeover by a larger established firm.
Like any great Valley startup, WhereNet had a unique focus. Its sensors were what are known as radio frequency identification (RFID) tags.
These small wireless devices are attached to physical objects to allow users to identify and track their assets. At the time, WhereNet was focused on logistics and supply-chain management.
After receiving $54 million in venture funding, the aggressive startup boasted such Fortune 500 clients as The Coca-Cola Co. (NYSE:KO) and Ford Motor Co. (NYSE:F). The latter invested in WhereNet along with the former Sun Microsystems.
These big players found WhereNet’s platform irresistible. It could manage inventory, track containers, monitor job orders, connect wireless call systems, and locate property – virtually in real time.
WhereNet’s approach was to use active devices. That means they were equipped with batteries, and the self-powered feature made them more viable in harsh conditions or for tracking assets in motion.
For Zebra Technologies Corp. (Nasdaq:ZBRA) – WhereNet’s tech proved a powerful lure and a great fit for the larger firm’s passive RFID products.
Which explains why Zebra bought WhereNet in 2007 for $126 million in cash.
And part of why I’m recommending Zebra to you today…
The RFID King
A half-century ago, Zebra (then known as Data Specialties Inc.) was launched to develop high-speed electromechanical products.
But in the early 1980s, it switched its focus to the rapidly growing on-demand labeling and ticketing systems market – barcode scanning – and, hence, became Zebra in 1986. For years, a heavy R&D push helped Zebra grab a leading market share in this industry, which grew 20% or more, year after year.
As barcode scanning settled into slower growth rates, the firm threw its engineering might behind RFID. Nearly 15 years ago, the launched its RFID platforms.
It was a full ecosystem of products, including…
- RFID handheld scanners
- RFID tracking software
- Mobile RFID tag printers
Zebra’s management built this new franchise by pairing internal R&D efforts with some savvy tuck-in purchases. Besides WhereNet, Zebra also acquired Retail Systems International, Swecoin, Proveo AG, and Navis Holdings.
All of these firms had deep expertise in RFID.
A Tech Powerhouse
Of course, there’s a lot more going on here than just the RFID market, which Statista forecasts as nearly doubling from $12.6 billion in 2016 to $24.5 billion in 2020.
Zebra has gone on to build mini-empires in two areas: asset intelligence and tracking (AIT) and enterprise visibility and mobility (EVM).
The AIT segment has become a $1.5 billion yearly business, focused on the firm’s core RFID and barcode systems.
But AIT isn’t even the crown jewel at Zebra. Instead, the EVM division, which now has more than $2.5 billion in yearly sales, is home to a range of data-tracking systems and software.
This platform helps big corporate and government clients get all their key data onto tough, shock-resistant handheld devices that can be used on the factory floor or out in the field.
Frankly, virtually every industry now uses these sorts of mobile data systems.
For example, retail employees can check in-store stocking levels while walking through display areas, and even dial up a firm’s e-commerce site to access inventories in warehouses or other stores.
Healthcare workers use Zebra’s handheld devices store patients’ vital medical records. Gone are the days when a doctor or nurse had to pour through reams of paperwork to see a patient’s medical progress.
With the massive growth in warehouses underpinning today’s e-commerce world, Zebra is seeing strong demand for its mobile devices that can display orders as they flow through the supply chain.
And as you’d suspect, factory workers benefit from having right in their hand access to all key production data and history.
Geared Up for the Next Decade
Zebra’s sales are poised to rise by double digits this year, to more than $4 billion. But the firm is just scratching the surface here. A series of recent acquisitions have helped it to broaden its product line and go after more new markets.
In fact, Zebra says that its target markets now exceed $24 billion. That’s up from just $9 billion a few years ago.
The firm clearly has ample momentum in place. Third-quarter profits of $2.88 were more than 10% ahead of consensus forecasts. I like this firm’s operating leverage. Compared to a year ago, 17% sales growth fueled 54% profit growth.
Throughout 2018, Zebra has been delivering above-forecast results, and forward estimates keep on rising. In other words, after 50 years of pushing tech boundaries, Zebra shows no signs of slowing down.
Based on its yearly profit growth of 28% over the past three years, I am conservatively projecting another double for the stock in four years.
See you back here soon.
— Michael A. Robinson
Source: Strategic Tech Investor