In Las Vegas, folks are gathering for the once-a-year CES – Consumer Electronics Show — this week.
No doubt we’ll see a spate of news stories about 5G networks — the superfast mobile data technology that promises to replace our current 4G networks, with speeds at least 10 to 20 times faster.
As a former financial journalist, I’ve been to conventions of this type before. It’s easy to get terribly confused and bewildered.
One analyst says 5G is overhyped. Another says it’s a game-changer.
But the key is remembering that, especially in the telecom field, major advancements are more of an evolution rather than a revolution.
As investors we expect fireworks. But the reality is more of a slow-burning fuse.
So it’s easy to miss the best opportunities waiting to see the flash-and-bang news that the “5G Era” has finally begun.
The Road to 5G
The consultants at McKinsey noted this in their Road to 5G report.
When the prior 4G network was launched in 2009: “Mobile operators didn’t see the great returns they’d captured with earlier generations [of 1G, 2G and 3G networks]. … Revenues showed flat or tepid growth.”
In other words, 4G didn’t get off to a roaring start either. The fireworks weren’t obvious until later.
Mobile users upgraded their phones and realized just how much faster they really were. Then a new generation of social media companies like Facebook came along to take advantage of that faster connectivity.
It will work the same way with 5G. So how do investors get an early start benefiting from this major shift in how we communicate?
Start big, then go small.
In other words, look at telecom stocks first. They’re the low-risk way to profit from the 5G trend.
How to Profit
Telecom companies are spending big bucks to deploy 5G networks across their systems. From there, look at the “picks-and-shovels” companies that stand to garner the lion’s share of orders.
I have a pair of major 5G telecom stock trades recommended in the Total Wealth Insider model portfolio working on both ends of this opportunity.
For investors without such options, the best way to profit from the 5G trend is with the iShares Global Telecom ETC (NYSE: IXP).
I recommended it three months ago, calling the shares “as undervalued as they’ve ever been.” Turns out they became even more undervalued.
The shares are down 6% since then, and now trade for about 12% less than book value.
By way of comparison, the last time we saw this degree of a discount was in the fourth quarter of 2008 and the first quarter of 2009.
And need I remind you it happened just before the broader markets took off in March 2009, and the telecom industry began to deploy its then-state-of-the-art 4G mobile networks.
Jeff L. Yastine
Editor, Total Wealth Insider