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You may ask whether I'm missing out on the big trends because I'm such a fanatic about the prices I pay for the businesses I own.
After all, using rigid pricing requirements such as those used in Heatseekers, means that we will avoid investing directly in significant trends like artificial intelligence, big data, driverless cars, e-commerce, hypersonic weapons, cybersecurity, and even cannabis.
These are all super exciting investment themes that fetch high multiples of revenues and often elusive profits.
But just because we avoid investing in these themes directly doesn't mean we can't take advantage of them indirectly.
So what's one example of how we can do that? Simple…
Because they represent one of the cheapest sectors in the stock market today.
And because all of the big new trends depend on them.
Let's explore that in more detail here…
Semiconductors Are Everywhere, and They Will Be More Prevalent Through IoT
Semiconductor companies have been hit particularly hard this year due to a temporary oversupply in that market.
But this temporary setback is no reason to avoid them. It's actually the perfect reason to buy them.
Semiconductor chips are everywhere, and they are an essential part of our world today. You can think of semiconductors in nearly the same way you think of infrastructure. Just as roads and bridges help keep us connected in the everyday world, semiconductors keep us connected in the technology world.
In today's world, you are rarely more than a few steps away from a collection of semiconductor chips that are making life better, smarter, and faster. Computers, laptops, smartphones, iPads, smart TVs, and smartwatches are just a few examples of their prevalence.
But those are just some examples of existing technologies that have been using semiconductors for quite some time. Emerging industries will use them too.
Yes, even the cannabis revolution will implement semiconductors. A commercial grow house is full of sensors and computer-driven watering systems for the cash-producing crops.
Also, every big medical breakthrough will be made using tools that involve a massive number of semiconductors.
And even more nascent, the Internet of Things (IoT) is in the early stages of the growth cycle and will explode much further over the next several years. While I'm not personally a big fan of the IoT, as I think there is such a thing as letting technology do too much, this trend will place more and more semiconductor chips in your appliances, your lighting system, your vacuum cleaner, your thermostat, and pretty much every other thing in your house.
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It is not just your house either. The IoT will put lots of chips in your car as well.
Now, I drive a base model truck with roll-up windows – but my wife's car has electronic everything, including a Bluetooth phone system and a back-up camera. And every parent of young children knows the value of in-car entertainment systems on long road trips. Some car companies are even selling cars with Wi-Fi capabilities, which for my money is one of the dumbest ideas ever – have we learned nothing from the texting and driving problems of the past few years?
So regardless of our opinion of semiconductors, the industry will continue to grow at a pretty good clip since we will see products and technologies that demand an ever-greater number of them.
One Semiconductor Stock and Counting… Here's When We're Buying More
About the Author
Tim Melvin is an unlikely investment expert by any measure. Raised in the "projects" of Baltimore by a single mother, he never attended college and started out as a door-to-door vacuum salesman. But he knew the real money was in the stock market, so he set sights on investing - and by sheer force of determination, he eventually became a financial advisor to millionaires. Today, after 30 years of managing money for some of the wealthiest people in the world, he draws on his experience to help investors find "unreasonably good" bargain stocks, multiply profits, and build their nest eggs. Tim tirelessly works to find overlooked "hidden gems" in the stock market, drawing on the research of legendary investors like Benjamin Graham, Walter Schloss, and Marty Whitman. He has written and lectured extensively on the markets, with work appearing on Benzinga, Real Money, Daily Speculations, and more. He has published several books in the "Little Book of" Investment Series and a "Junior Chamber Course" geared towards young adults that teaches Graham's principles and techniques to a new generation of investors. Today, he serves as the Special Situations Strategist at Money Morning and the editor of "Max Wealth" and Heatseekers.