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Looking for the Levi Strauss of 5G Companies

Investor Insights:
  • The 5G revolution will have big winners … and big losers.
  • But all 5G-enabled devices will need more of one thing.
  • Here’s one example of a company that could benefit from the rush to 5G.
Looking for the Levi Strauss of 5G Companies

Looking ahead, it seems certain that 5G will be one of the biggest trends of the decade.

This technology will change many parts of your life. And it will create many investment opportunities.

Investors are excited about this technology revolution. But they need to be realistic. They must understand there will be winners and losers.

In the end, some investors will pick winners. Others will pick losers.

A few will take the path Levi Strauss followed.

You Can Mine for Gold, or You Can Sell Pickaxes

Strauss headed west in the 1850s when news of the California Gold Rush broke. But he never made it into the gold fields. Instead, he set up a mining supply store in San Francisco.

Strauss gave up his dreams of finding gold. Instead he sold pickaxes and denim jeans to gold miners.

Many of the miners found nothing and ended up broke. A few ended up rich. But Strauss created a family fortune that’s estimated at over $4 billion today.

This story is widely studied in business schools. It’s the simple idea of: You can mine for gold, or you can sell pickaxes. History shows that many great businesses sell supplies.

Looking at 5G, there are likely to be a few “pickaxes.”

5G Devices Will Need at Least 33% More Memory

Phones and other devices using 5G will be more powerful than their predecessors, and that means they will need more memory.

It will be difficult for investors to pick winners in the 5G industry. But no matter which 5G-enabled devices consumers choose, they’ll need more of one thing.

(Source: Micron)

As the chart above shows, 5G phones will need at least 33% more memory than current phones just to operate. Many applications will need more than the minimum, demanding even more memory.

More memory is needed so that phones can process the vast amounts of data that make 5G useful. But phones are not the only solution for 5G.

For example, one use of 5G is to stream video. Consumers will truly be able to cut the cord with this technology, eliminating both a cable bill and a home internet connection.

Phones are one way to watch video delivered by 5G. But consumers could also use a tablet, a laptop or a smart TV. In the future, all these devices could be 5G enabled.

These Companies Are Likely to Come Out Ahead

This is one example of how difficult it will be for investors to pick winners in an industry that’s likely to have many losers.

But no matter which devices consumers choose, there will be a need for increased memory.

Micron Technology Inc. (Nasdaq: MU) is one memory maker positioned to benefit from the rush to 5G devices.

Micron estimates that mobile memory is already a $39 billion market with rapid growth averaging about 28% a year. Its revenue in that market is growing an average of more than 100% a year.

With the industry expected to continue growing rapidly, Micron is in position to grow its market share.

There will be big opportunities in the companies that provide consumers with 5G devices.

In fact, one company in my colleague Ian King’s Automatic Fortunes service has already partnered with Verizon, AT&T, Sprint and T-Mobile to dominate the next phase of the massive 5G rollout.

But no matter which company wins that competitive contest, Micron and other memory makers are likely to come out ahead in the long term.

Regards,

Michael Carr, CMT, CFTe

Editor, Peak Velocity Trader

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