In barely a week last March, America went from an uneasy sense of business-as-usual to massive lockdown in the space of little more than 10 days.
Never before – not during the Great Depression, World War II, or the Cuban Missile Crisis – had hotels, restaurants, factories, offices, schools, and stores from coast to coast simply shut down like that.
The rapid lockdown sent a shaky stock market into an all-out rout, plunging 34% by March 22.
All 50 states and the District of Columbia experienced unemployment levels greater than what they’d seen during the Great Recession.
But of course, America had an ace up its sleeve – its $2 trillion tech sector.
It helped keep 70 million people employed as remote workers, and kept millions more supplied with essentials during the lockdowns.
Tech enabled a historic economic rebound with 7.4% GDP growth in the third quarter. And it drove an unprecedented 85% run up from the Nasdaq’s March lows.
I don’t think I’m exaggerating when I say folks will look back on 2020 as the year tech saved America. I know I certainly will.
And I’m just as certain 2021 will be the year tech helps make regular investors a fortune, particularly if they focus here…
Tech Is Moving from Strong to Stronger in 2021
As I mentioned, the Nasdaq Composite – tech’s market “neighborhood” – surged more than 85% from its dismal, March 2020 nadir when just about everything was crashing.
That 85% figure is impressive – historic, even, in its own right – but it represents something critically important to investing…
In a word: momentum.
Naysayers might tell you that tech has run too far too fast this year, or that it’s in a “bubble,” overdue for a correction, or that it’s simply come as far as it can.
As a guy who’s worked in and covered Silicon Valley for a living for 35 years, I say not a chance; I’ve seen firsthand the sheer moneymaking power of this sector, and what tech can and will do when conditions are favorable, as they are now and will be for the foreseeable future.
My prediction is that the tech trends we’ll talk about in a minute, that have exploded onto the scene during the 2020 pandemic, will continue to get stronger and stronger in the year ahead. As I’ve seen time and again, Silicon Valley’s best leaders have the chops and vision to execute their plan, build on success, and adapt to changing conditions. They’ll see the end of the novel coronavirus pandemic as an opportunity to leverage what could be the most powerful economic recovery in history.
With all that said, there is some froth in the sector, particularly among some IPOs. This Money Morning “Investing in 2021” forecast series is designed to help you make an end run around those overinflated, flash-in-the-pan stocks.
In this installment, we’ll look at three companies that have leveraged three key, enabling technologies to have come front and center during the pandemic; they all crushed even a red-hot market this year, and they’re just getting started. If you missed out on them in 2020, put your buy orders in the second you can when the market opens today; if you were following along, add to your positions now.
Each of the stocks I’m about to name have what it takes to double your investment in anywhere from 12 to 24 months.
2021 Tech Trend No. 1: Cloud Computing
One deceptively simple factoid says it all: At the height of the pandemic, the Internet played host to more than 300 million video chats a day – that’s around two for every working adult in the United States.
See, every aspect of cloud computing – from wireless handsets and laptops to Wi-Fi routers to video compression to high speed servers – is much more advanced than it was just five years ago. It stands to reason, then, 2021’s technological advances will dwarf 2020’s.
Now, owing to the scarcity of the new coronavirus vaccines, millions of people still work from home, but Global Workplace Analytics estimates some 30% of the workforce will continue to work from home even after getting a vaccine.
And that plays to the advantage of cloud leader Salesforce.com Inc. (NASDAQ: CRM). It was one of the first cloud-centric software firms and is mostly known for customer relationship management (CRM), hence the stock ticker.
It’s now setting itself up to be the go-to for online collaboration and communication. That’s why Salesforce went out and snapped up Slack Technologies, a pioneer in that field.
News of the deal put CRM stock under selling pressure. However, I can’t see this as anything other than a historic buying opportunity; its recent share price of $230 will be in the rearview mirror before long. Salesforce has a history of making savvy acquisitions – Tableau, Mulesoft, Demandware, ExacTarget, to name a few – that ultimately add to the bottom line.
The firm is growing yearly per-share profits at 36%. At that rate, it will double by the end of 2022.
2021 Tech Trend No. 2: E-Commerce
COVID-19 absolutely decimated a brick-and-mortar retail landscape that was already on life support.
And yet, figures for the recent 2020 holiday shopping season suggest a 5%-plus boost in retail spending.
Little wonder, then, global e-commerce sales are set to reach an astonishing $4.13 trillion by the end of 2020.
The U.S. Census Bureau says consumers spent $211.5 billion through e-commerce channels just in the second quarter, the last period for full data. That was a nearly 32% increase, one of the biggest ever, in just three months.
In this space, I recommend Etsy Inc. (NASDAQ: ETSY) – an extremely undervalued play. Sales are up nearly 70% this year, the share price is up 289%, and, incredibly, this still hasn’t been “baked in” to the share price.
Etsy is a leader in one-of-a-kind, handcrafted, and customized wares, built around the notion that the item you’re buying is unique.
Etsy sold 12 million facemasks for more than $133 million dollars in less than a month after the CDC began recommending them. That’s how nimble the company is.
Now, the November news that a coronavirus vaccine was imminent did cause a sell-off in Etsy stock. In my view, that was a classic Wall Street overreaction predicated on the misplaced fear that a vaccine would somehow “turn the tide back with a spoon” and disrupt e-commerce.
Nonsense.
This year has marked a permanent shift in consumer behavior, one reason why Etsy crushed on third-quarter sales and earnings. Wall Street simply put the cherry on top and priced Etsy at an unbelievable discount from its long-term trajectory.
Etsy is growing its earnings at 71% a year, putting it on pace to double in the next 12 months alone.
2021 Tech Trend No. 3: Fintech
Here’s a sign of the times for you: My barber has stopped taking credit cards and has switched to mobile payments.
As for myself, I carry lots of cash but rarely use it these days. Instead, I now rely on Apple Pay or contactless credit cards.
Like millions of others, I don’t want to be touching card readers or cash that could be carrying COVID-19 or other germs.
Oh, I’ve no doubt that we’ll all use credit cards again before long – but nearly all of them will be equipped with secure near-field communications (NFC)-enabled chips for compatibility with hands-free readers. Those are here to stay.
Now, the contactless payment market, which includes both systems like Apple Pay as well as tap-to-pay credit cards, was worth $8.3 billion last year.
But that’s just one fintech segment. The overall sector is growing at 25% a year and will be worth $310 billion in 2022, according to the Business Research Co.
That’s where Square Inc. (NASDAQ: SQ) comes in. The firm supplies the software and hardware for more than 64 million businesses to accept contactless credit cards and smartphone payments as well as track sales, including online.
And this company hasn’t missed a beat with its contactless and chip reader. This enables people to accept chip cards, contactless cards, Apple Pay, and Google Pay anywhere.
Square is also the developer of the wildly popular Cash App for making payments or sharing payments via smartphones. It recently bought $50 million worth of Bitcoin cryptocurrency, even as it enabled a huge variety of Bitcoin transactions on its platforms – a shrewd move that puts it in pretty rare company.
Square is virtually all upside; with a yearly growth rate of 50%, per-share earnings are on pace to double in 18 months.
We’re all looking forward to our lives getting back to normal in 2021, as more people get vaccinated and we beat back COVID-19. I for one can’t wait for live music to start up again. But the monumental changes we’ve seen during this pandemic haven’t been all negative.
Some of these technological innovations were coming anyway; the pandemic just turbocharged them and sped them along. As the recovery continues, there will be even more opportunities.
— Michael A. Robinson
Source: Money Morning