By Kris Sayce, editor, Casey Daily Dispatch
There’s more than one way to play a fast-growing trend.
So if you only play the trend one way, we’d argue you’re doing it wrong.
For example, if you want to profit from 5G and you only own, say, the biggest wireless carriers, you’re making a mistake.
So what do you want to do instead?
Just like in our “10 x 10” Approach… You want to invest in a basket of related stocks.
And that can include anything from so-called “picks and shovels” plays… to “royalties” plays… and more. Let us explain…
If this is your first time reading the Dispatch, welcome. If you’ve been here before, welcome back.
At the Dispatch, we have two goals:
To introduce you to the most important investing themes of the day, and
To show you how to profit from them.
We do this by showcasing ideas from our in-house investing experts: Dave Forest, Nick Giambruno, and the founder of our business, Doug Casey.
In today’s Dispatch, we stay with one of today’s hottest investment trends – 5G. But we look at it from a different angle.
The Safer Way to Play the 5G Trend
That different angle involves the “picks and shovels” and “royalties” stories.
As a reminder, “picks and shovels” are the companies that supply equipment to an industry. So in mining, for example, “picks and shovels” companies provide, well… picks and shovels… and other equipment… to the miners.
And the “royalties” companies supply the land.
We believe the only sure way to make money in mining is to be in these businesses. (You can never be sure to make money in mining from explorers or producers alone – it’s too speculative.)
The same is true in tech. And specifically, 5G tech.
Today, we’ll look at one of those alternative approaches. For now, we’ll put the “picks and shovels” to one side (we’ll get to those another day) and we’ll focus on “royalties.”
In this case, we’re not dealing with land (as such), but the infrastructure that goes on the land.
In the case of 5G… the “land” looks like this:
To put it simply, 5G “royalties” companies make money by leasing their “property” to the 5G network players.
It’s a terrific business. It means that regardless of how much money the 5G companies make (or don’t make), the “royalties” companies cash in.
And best of all, whereas a mining royalties company only has one miner operating in an area, these 5G “royalties” companies can have multiple tenants.
They may have two or three at once… which means two or three times the revenue for the “royalties” company.
What a great business. But it gets better.
You’re Making a Big Mistake if You Don’t Own These
According to investment expert Dave Forest, this is a great low-risk way to play this hot trend. In fact, Dave has just released important research on this entire 5G theme. You can find it here.
(Naturally, because of that, we can’t give too much away. We have to protect the integrity of Dave’s research.)
But look at the chart below:
Over the past five years, two of the biggest wireless companies and players in 5G have seen their stock prices rise 11.6% in the case of Verizon (VZ) and fall 24.3% in the case of AT&T (T).
Over the same timeframe, Dave’s “royalties” companies are up 138% and 105%.
And even if you counted the dividends, an investment in AT&T would be no better than breakeven over that timeframe.
For Verizon, it would only increase the overall return to 36%.
That’s still well below the return from the “royalties” companies… and we haven’t even added in the dividends they pay.
It goes to prove what we said above – Dave’s “royalties” plays pretty much couldn’t care less whether the wireless companies make a buck or not. These stocks continue to collect “royalties.”
It’s hard to think of a better business for the long term. And that’s why Dave and the rest of the team at Casey Research are so excited about the 5G trend. Not just because of the technology and what it will allow businesses to do.
We’re excited about it because of the great investment opportunities… and huge profit potential… in a wide range of related sectors.
There is so much more to the 5G trend, and Dave is completely on top of the best stocks to profit from it.
Editor, Casey Daily Dispatch
P.S. By the way, it’s a perfect trend to dedicate one of your “10 x 10” columns to… As always, our preference is to buy the individual stocks. But we also know that some investors like to use exchange-traded funds (ETFs) to play a big trend. If that’s you, check out the chart analysis from technical trader and colleague, Imre Gams, below. He proves that 5G is growing… and gives you the easiest way to play it.
Welcome to Casey Daily Dispatch’s Chart Watch. We’ll look at the best technical opportunities in the market. You’ll see that chart analysis is a very powerful edge that every investor should have in their toolbox.
Our mission is to simplify price charts. We remove all the clutter and the noise, leaving you with a crystal clear view of the markets.
Proof That 5G Stocks Are on the Move
By Imre Gams, technical analyst, Casey Research
The promise of 5G is lightning-quick internet. As the technology matures, it will be life-changing for millions of people.
Due to the speeds available with 5G, it will make things possible that previously weren’t with the 4G or 3G wireless networks. For instance, imagine having access to the best medical care in the world, no matter where you are. Doctors will be able to treat their patients regardless of where they live… even doing remote surgery if needed.
The expected impact of 5G on the American economy is huge. 3G boosted GDP by 15%, while 4G has boosted it by about 27%. David Knight, CEO of Terbine, believes 5G has the potential to drive additional growth of 40% or more by 2030.
And as Kris mentioned above, there are many ways to profit from investments with exposure to 5G. In today’s Chart Watch, we’ll look at the Vanguard Communication Services ETF (VOX). This ETF tracks the performance of stocks involved in communications services. It’s a diverse index, including social media companies, wireless carriers, video streaming companies, and telecommunications firms.
Now, simple is almost always the best approach when it comes to price chart analysis. And there is nothing simpler than drawing a trendline.
We create a trendline by connecting at least two sets of lows or highs. The more points of contact on the trendline, the more significant it is.
A lot of traders spend way too much time trying to figure out where to draw a trendline. But as you’ll see, the process is really easy.
Let’s look at the price chart of the VOX ETF and I’ll show you what I mean.
VOX went on a 60% run after putting in a significant low in March 2020. After such a burst of energy, it’s normal for a market to take a breather. This allowed VOX to pull back and put in a significant low in October.
With two significant lows in place, we can then draw our trendline.
You’ll notice that prices have touched this trendline once again. When a trendline is so obvious, as it is in VOX, it tends to be magnetic.
As prices were drawn back to the trendline, you can see that a strong bounce followed. This is clear evidence that this ETF is getting ready for another big run. This is definitely an ETF – and sector – worth watching. But remember, you can access Dave’s research on individual stocks to play this trend here.