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The cloud computing sector has grown more than 306% since 2013, growing from a "mere" $58.6 billion to more than $236 billion last year.
Not coincidentally, 2013 was the year I recommended our first "paradigm shift" cloud computing play. If you've been with me since then, as many of you have, that impressive growth has handed you more than 1,143% in peak gains.
We were miles ahead of the pack on that call. Take a well-deserved victory lap.
Profits like that are the most effective way I know to "pound the table" with my strongest investing principles.
- It's critically important to take the long view.
- The road to wealth is paved with technology.
Today, I'm going to take the step of re-recommending these shares, because, as impressive as its 1,143%-plus performance has been, I really think there's more upside ahead - much more, in fact.
Because the same projections I've talked about show that this sector - and its star stock - aren't done growing yet, not by a longshot. The numbers indicate cloud computing is likely to grow another 204% to top $718 billion by 2027.
And I'm convinced this company could continue to do four times better than the sector as a whole...
Ride Unstoppable Trends to Incredible Profits
I have to admit I do have a bit of an unfair advantage when it comes to the field of cloud computing, where data, applications, and even performance are hosted remotely, in a "cloud" of machines.
I was an early advocate of this technology. I even met with a pioneer in the sector in the late 1990s in downtown Oakland; I vividly remember him drawing and labeling various interconnected technology clouds, saying all the while that computing would become so pervasive, it'd be as though data was raining down.
With this experience in mind, in 2013 I predicted, publicly, that cloud computing was going to give top-tier, big-cap tech companies the kind of explosive profit growth you'd normally only see in small caps.
When a company moves data and applications to the cloud, it slashes its overhead costs and makes operations more robust and secure. It turns those savings into much fatter bottom lines - and much bigger profit growth for shareholders like us.
The reasoning was simple. By moving data and applications to the cloud, big firms could greatly cut their overhead costs and turn those savings into larger bottom lines and profit growth for shareholders.
At the time, some 88% of 1,300 information technology managers surveyed said they moved operations into the cloud specifically to lower their costs. But 56% said making use of cloud services had already improved their bottom lines.
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Cloud computing saves in the long run, but it's even more powerful as a revenue driver.
We'd all agree that large software suites are very complex packages, with millions of lines of code that require a lot of computer space.
Time was, it would take software firms two years or more to come up with an update to these products. After that, the software would be burned onto CDs, placed inside boxes that utilize glitzy graphics and anti-theft packaging, and shipped out to retailers to sit on shelves until they were purchased.
In the cloud, those costs in time and money shrink rapidly while revenue grows quickly. Updates and features can be released quickly, and there's no time or money wasted on packaging and shipping. They can be "pushed" out to hardware automatically, even, as part of extremely lucrative scheduled, pre-agreed, pre-paid plans.
Our "re-pick" today has, over the past seven years, turned that business model into something like an art form. It's used the model I've just describe to take in record revenue in 2020, while growing its share price by more than 50%.
Picture Perfect Portfolio Performance
I'd been tracking Adobe Inc. (NASDAQ: ADBE) for some 30 years before that big call in 2013.
Founded in 1982, Adobe was and still is one of the most respected software firms in the world. It's held in high regard by creative professionals for its software packages, including Illustrator for creating, editing, and managing graphics, and Photoshop for managing and editing pictures.
But seven years ago, the slow and costly two-year cycle of releasing software on CDs just wasn't working. So, Adobe began moving over to its Adobe Creative Cloud, which clients subscribe to and pay a monthly fee to use a suite of Adobe's software services, automatically updated.
It's been an astonishing success, to put it mildly. Like us, Adobe's decision to take the long view here paid off wildly, as the stock grew from $42.91 a share to as high as $516.
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I think they'd agree with me when I say the best is yet to come. And given Adobe's recent earnings for the fourth fiscal quarter, there's still plenty of upside ahead.
Despite COVID-19, the firm broke its all-time quarterly revenue record with a $3.42 billion haul. That's 14% more than the same quarter a year prior. Operating cash flow also hit a record high at $1.8 billion.
Breaking records and shattering analysts' expectations has become business as usual for this company. Adobe's revenue for fiscal 2020 as a whole came in at $12.87 billion, 15% higher than the year prior. Net income for the year, meanwhile, grew a whopping 78%.
And for fiscal 2021, Adobe is targeting an even larger revenue jump of over 17%, to more than $15 billion.
At this rate, the firm is growing per-share profits at 29% a year, meaning earnings will double in roughly 2.5 years. By that time, Adobe will have been stuffing our pockets - generously - with cash for nearly a full decade.
In the spirit of taking the long view, consider willing your ADBE shares to your grandchildren. They'll thank you for it.
As impressive as the profits from Adobe have been, it's staggering to consider that, sometimes, the lion's share of profit-generation can come when a company is still privately owned; the next wildly lucrative cloud computing-style breakthrough could very well come from a small firm that's in the start-up phase today.
These companies, which, for all we know, could grow to dwarf today's biggest Silicon Valley juggernauts, are on the hunt for angel investors with the vision to help them make it to the IPO stage. People who take the long view here and step in could conceivably reap the highest possible return on their investments - 1,000% or maybe even more - in the years that follow. You can catch this interview with serial venture capitalist David Weisburd for more about the once closed-off world of angel investing that's recently become open to regular investors.
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About the Author
Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...
- He was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon.
- He was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
- As cyber-security was becoming a focus of national security, Michael was with Dave DeWalt, the CEO of McAfee, right before Intel acquired his company for $7.8 billion.
This all means the entire world is constantly seeking Michael's insight.
In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.
Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.
And even with decades of experience, Michael believes there has never been a moment in time quite like this.
Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.
To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.
His other publications include: Strategic Tech Investor, The Nova-X Report, Bio-Technology Profit Alliance and Nexus-9 Network.