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The United States has produced hands down the world's most powerful economic force. And most experts agree that three separate economic "revolutions" have been the catalysts for this success:
- The introduction of steam engines and railroads…
- The widespread use of electricity and the combustion engine… and more recently…
- The invention of the computer and the internet.
All three created massive opportunities for economic growth. Not just for the companies behind the innovations. But also for average Americans, whose wealth grew exponentially from the revved up economic conditions the new technologies spurred.
Today, a fourth revolution is underway. I'm talking about wireless communications. The interconnectivity of everybody. And everything.
We are still in the early stages. But make no mistake: This new revolution will prove to be every bit as powerful as the previous ones. Even more so. And it will soon re-establish America's role as the dominant global economic powerhouse.
The fact is it's already happening. As we speak profound changes are happening in the way people, businesses and, indeed our, our entire society interacts.
When you think of "connected" devices, you probably picture that new
smartphone you just bought, or maybe your Apple iPad.
But you're thinking too small – way too small, in fact.
Sure, these devices are essential to this new revolution. After all, they are breaking the new technology wide open, and bringing the wireless revolution to the masses. And they will continue to play a tremendous role in the future.
But what is happening – and what is about to happen – goes far beyond what you can hold in your hand today.
By 2020, there will be 50 billion connected devices in use worldwide.
That's not a typo. In fact, the estimate was made by Ericsson, one of the largest telecommunications companies on the planet. In the "connected" future, the possibilities are endless…
- The "connected" shoes of the elderly, or patients with health problems, could be monitored to make sure those folks are getting proper exercise.
- Connected vehicles can be remotely controlled to maximize fuel efficiency and to minimize traffic jams.
- You'll be able to use your phone to cool off your house via your connected air conditioner – as you drive home from work.
- A connected vending machine can signal when it needs to be replenished, saving the vendor from unnecessary visits.
- Your mobile device could be turned into a virtual wallet, or even a bank.
- And connected trees could signal a lumber mill, which monitors them to nurture a better crop, and a more-timely harvest.
Business, consumer electronics, healthcare, government … they'll all be affected in a huge way. By 2020, for instance, there will be:
- 3 billion subscribers with the means to buy information on a round-the-clock basis -either for a lifestyle improvement, or for personal security. In "mature" markets, these subscribers will typically have between 5 and 10 connected devices each.
- 1.5 billion vehicles in existence worldwide, many of them connected. And that doesn't include buses or railroad trains.
- 3 billion utility meters (water, natural gas and electricity).
- And a cumulative 100 billion processors shipped – each capable of being connected.
Whether it's a savvy Silicon Valley start-up developing a new and exciting technology for making the connections faster… or a "mom and pop" business building an "app" just to be included in this "new world order," companies around the globe are taking these new connection possibilities very seriously.
And so should you. The reason is simple…
There's a fortune to be made in this wireless revolution right now.
A global paradigm shift has been created… one that will give investors with vision innumerable investment opportunities.
And knowing who the winners and losers will be in this world of tomorrow is the stuff investors' dreams are made of.
Here is a snapshot of three best opportunities you can focus on today.
Wireless Spending Boom, Opportunity # 1
The New Standard In Wireless: 4G LTE
4G Long-Term Evolution (LTE) – often called "4G Lite" by the techno-wizards – is shaping up as the hottest thing happening in the smartphone and tablet world.
Now, especially, as the newly released Apple iPhone 5 touts LTE capability.
Make no mistake: This is the new standard in wireless, ending the five-year run of 3.5G as the dominant category in infrastructure spending.
Spending on 4G got started in 2007, and is quickly ramping up.
From a worldwide expenditure of $8.7 billion this year, 4G Lite outlays by wireless carriers will spike to a projected $24.3 billion in 2013 and keep on rising, until they reach $36.1 billion in 2015, according to market intelligence firm IHS iSupply Research.
The Wall Street Journal reports that some of the country's biggest cellphone carriers – Verizon Wireless, AT&T Inc. and Sprint Nextel Corp– have spent billions of dollars rolling out these new networks, even though right now only a small percentage of their subscribers will actually use them.
There's a reason carriers are making this mega-billion-dollar bet on 4G: They see it as the next big revenue driver for an industry that's always looking for that next big thing.
For one thing, it offers a vast improvement in speed.
You see, 4G requires less bandwidth to deliver data than 3G. That leaves more room for users to download videos, music, TV shows or even movies.
More room equates to faster download speeds.
And faster download speeds should, theoretically, accelerate data use — inducing customers to step into higher-sticker-priced service plans.
What's more, according to Strategy Analytics, worldwide LTE phone shipments are expected to skyrocket by nearly tenfold this year to 67 million units. That figure doesn't include the millions of tablet (like the Apple iPAD2) being sold which are also 4G-capable.
All of this means that 4G technology is beginning its major ramp-up right now, the perfect time for investors to jump in.
For this profit play, we like an industry leader… a big company with big potential upside.
I'm talking about microchip producer, Qualcomm (Nasdaq:QCOM).
Given its market cap of $114 billion, Qualcomm is big all right. But you have to like the fact that it is capitalizing on a number of cutting-edge trends – in addition to the LTE chipset.
For instance, consider the company's code division multiple access (CDMA) technology — a channel-access capability that's central to radio-communication technologies. The technology is a global standard and is well-protected by Qualcomm's patents.
Better still: Qualcomm was the sole supplier of baseband chips for the Apple iPhone 4S. And thanks to its broad patent portfolio, Qualcomm collects royalties on 4G technology, even when it isn't providing the baseband chip itself.
But Qualcomm's management is also shrewdly playing the field – the company has hooked up with Nokia AG (NYSE ADR: NOK) and Microsoft Corp. (Nasdaq: MSFT). Both partnerships have given it a solid beachhead in both India and China.
This past spring in fact, Nokia and China Telecom Corp. Ltd. launched the Lumia 800C and Lumia 610C wireless phones in China. The Qualcomm-powered CDMA version of both smartphones will be available for purchase in Nokia stores and through other retailers in that Asian nation. Indeed, the 800C is Nokia's first CDMA phone that uses the Microsoft Windows Phone operating system.
And this is just a snapshot of everything Qualcomm is doing. Given what we've seen, however, it's no surprise the company continues to grow at a spirited clip. For the fiscal year, the company is looking at revenue of between $18.7 billion and $19.7 billion – which would be an increase of 25% to 32% from the year before.
The bottom line: With 4G technology truly catching fire beginning this year… Qualcomm has positioned itself nicely to really take off.
Wireless Spending Boom, Opportunity # 2
The Rise Of The Digital Wallet
Imagine checking in at the airport, buying a cup of coffee at a local café, even paying for your clothes or groceries at the store's register… all with a quick wireless scan of your smartphone.
It's all possible today, thanks to a new type of technology called Near Field Communications (NFC).
No coins to fumble with. No waiting while the store's machine dials up your bank. No receipts to sign and then stuff into your pocket. The spread of NFC technology is a win-win for the customer and the merchant alike.
With NFC, your phone becomes your wallet. It's able to "talk" to any vendor, bank, brokerage, or credit card firm you like.
This technology is set to take the world by storm.
In as little as a decade, billions of people around the world will convert to digital currency as their means of paying for the things they need every day.
Of course, mobile phones have long been expected to become a dominant player in the way consumers make payments, perhaps even going so far as to replace cash transactions.
Surprisingly, the biggest push in developing mobile wallet technology is not in the United States. In fact we're currently far behind.
Swedes only transact commerce in cash 3% of the time. Swedish buses take text-message payments and you can even wave a mobile device at some church collection plates there.
Over 50,000 merchants in the U.K. can accept payment from mobile wallet users who merely need to wave their smartphones in front of stores' NFC terminals.
And it's not just the developed world that's embracing mobile wallets.
There's an even bigger push towards mobile wallet commerce and mobile-device person-to-person money transfers in the third-world than in the developed world.
That's because there are huge numbers of "unbanked" people in developing countries. The ability to "store" money and transact commerce through a mobile wallet has huge advantages in rural areas where there are few or no banks – or when bank fees are prohibitively high.
In Kenya, 14 million people, 70% of the adult population, use M-PESA (M for mobile and pesa is the Swahili word for money), a mobile phone banking application offered by Safaricom.
Can you invest in Safaricom, the country's largest mobile phone network carrier? No, but you can invest in Safaricom's parent company, Vodafone (Nasdaq: VOD).
Whether mobile wallets are serving the unbanked or being used by Italians whose government restricts cash withdrawals from banks to 1,000 euros at a time, the handwriting on the wall says: the sky's the limit when it comes to mobile wallets.
Here's the thing…
The technology is beginning to seriously take hold in the United States, too.
In fact, mobile wallet technology truly hit a home run this summer when Starbucks announced it is pouring $25 million into the mobile payments start-up company called Square.
Starting this fall, Square will process all credit and debit card transactions at Starbucks stores scattered across the United States.
According to Starbucks CEO Howard Shultz, the partnership with Square represents a "breakthrough deal for the marketplace."
In some ways, Starbucks is already ahead of the mobile payments crowd.
Since 2011, Starbucks has offered its own mobile payment app which already processes more than one million payments a week.
Customers will still be able to use the original app, but in a few months' time they will also have the option of using the Square's app, called "Pay With Square."
To start the transaction, Starbucks customers will simply have to open the new app and show the merchant a bar code that appears on their smartphones. A quick scan completes the deal.
"People have their phone on them all the time, it's a seamless transaction," Schultz said.
But that's just the beginning.
Eventually, when Starbucks implements Square's full GPS technology, customers will be able to place their order for a "skinny, mocha grande latte with a dash of cinnamon' and charge it to their credit cards by simply saying their name.
As each customer arrives, their name and photo will automatically be displayed on the cashier's screen. The payment is completed when the match is made.
According to Shultz, these types of payments "are causing seismic changes in consumer behaviors and creating equally disruptive opportunities for business."
Expect the Starbucks deal with Square to be the first of many in the new mobile wallet technology era.
The biggest banks in the world are also working on mobile wallet applications. So are most large regional banks in the U.S. and many smaller community banks.
Eventually, some large banks will start working together to engineer mobile wallet economies of scale.
But because of intense competition for essentially the same customer base, the big banks are each vying for a leadership role in the digital world and specifically the mobile wallet future.
Banks are already hedging their big bets on going it alone by partnering directly and indirectly with competitors vying to serve private label card issuers and giant retailers.
These "shared" relationships are driven by retailers and merchants who don't want their customers to be restricted in any way when it comes to paying for merchandise.
And, as competitors from outside the banking world succeed in grabbing market share from banks — as they most certainly will do early in the race (especially in the U.S.) — banks may eventually brave cries of "cartelling" and join forces. They'll have to in order to stem what is shaping up to be a direct assault on the hegemony they once enjoyed providing consumer banking services.
But in the early stages of the mobile wallet movement, banks will not be the best pure-plays.
Instead your best bets will be the device makers who provide the terminals and technology against which mobile wallets are swiped, waved, tapped and talked into.
We recommend companies like VeriFone (NYSE: PAY), Ingenico, and TNS Inc. (NYSE: TNS), to name some of the big players who are major stakeholders in the digital wallet's future.
Wireless Spending Boom, Opportunity # 3
Making Digital Money Bulletproof
As I just mentioned, in as little as a decade, billions of people around the world will convert to digital currency as their means of paying for the things they need every day.
There's just one thing slowing it all down right now – mobile security.
Using mobile phones as de facto wallets alarms some people. They fear that if your phone gets stolen, thieves could gain access to every bank, brokerage, or store account you have.
But that's about to change…
Indeed, much to the chagrin of thieves and con artists, mobile security will hasten the advent of bulletproof digital money used around the world.
According to Michael Saylor, author of the best-selling new book "Mobile Wave: How Mobile Intelligence Will Change Everything," it's now possible to create a mobile identity system that runs on a smartphone which is anywhere from 100 times to 10,000 times more secure. Not only are they more secure, it's impossible to counterfeit and impossible to forge."
In fact, there are three key security features Saylor believes will make mobile commerce the standard of safe business transactions in just a few years.
Mobile Security Feature No. 1: Fingerprint Scanning
Fingerprint tech is a standard security feature around the world. It works because no two people – not even identical twins – have the same fingerprints.
Since many smartphones have touch-sensitive screens, by definition, they work with your fingertips.
All we need to do is convert that screen into a scanner that takes the place of a password. That way, it only works for you. If you lose your phone or someone steals it, the device goes dead.
That's probably why Apple Inc. (Nasdaq:AAPL) just spent $356 million to buy AuthenTec, a mobile network security firm. The journal ZDNet says AuthenTec's sensors are state of the art in touch-based security.
"These fingerprint swipe sensors use a patented sub-surface technology to read the live layer of skin beneath the skin's surface where the fingerprint is first formed," according to the author of the ZDNet article. This makes them "much harder to fool than traditional fingerprint sensors."
Many tech experts believe this acquisition signals that Apple will soon employ fingerprint scans in both the iPhone and the iPad.
Mobile Security Feature No. 2: Eye Scans
The public already has a good sense of how this works. We saw it featured in the popular James Bond film "GoldenEye" from 1995 and the first "Mission: Impossible" that came out a year later, as well as 2002's "Minority Report." In that film, Tom Cruise's character John Anderton undergoes a back-alley eye transplant operation to evade the ever present eye scanners of the authorities.
Right now we have two main ways to scan the eyes.
The first is to focus on the retina, the round tissue in the back of your eye that contains a "screen" of cells that respond to light. That annoying "red eye" effect you see in bad photos is actually the camera capturing the retina when the bright flash goes off too fast for the pupil to close.
Saylor notes that the retina serves to "pre-process images," adding that scientists actually consider it a part of the brain.
Scanning the retina works to establish identity because it has a pattern of blood vessels unique to each person.
The second way we have of establishing identity via the eye is the iris – the colored ring around the pupil. It's a jumble of patterns. See, no two are alike. Even the iris in your left eye differs from the one in your right.
"The New York Police Department uses iris scans when booking suspects," said Saylor. "The city of Leon, Mexico, deploys iris scanners in crowded public spaces, where they can identify up to 50 people at once."
Mobile Security Feature No. 3: Voice Recognition
Most investors already know about voice recognition. They've seen it for decades in TV shows like the original "Star Trek" and in the movie "2001: A Space Odyssey."
In 2012, speech recognition tech has quickly been gaining ground. Apple uses it as a digital voice assistant named Siri that's in the most recent version of the iPhone. So millions of people already have a sense that voice tech is the wave of the future.
In the future, you'll have all sorts of biometric security features that will protect your assets and your identity. All of them can both protect corporate assets and empower the individual.
So who do we recommend for this hellacious profit opportunity?
Fortinet (NASDAQ: FTNT)
Founded in 2000 and based in the heart of Silicon Valley, Fortinet provides network security solutions to enterprises, service providers, and government entities worldwide.
They're very well respected – and connected, calling a majority of the 2011 Fortune Global 100 customers.
With a market cap of $3.2 billion, it has a 14% profit margin and earns 19% on equity. It has $428 million in cash and no debt.
They recently announced the release of an extensive grouping of products that can accelerate performance, while working to keep multiple "connections" secure, with multiple layers of security.