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I just won a $10.5 billion bet.
Here's why I say that. I first began telling Strategic Tech Investor members – maybe you were one of them – about a certain great company back in May 2013.
At the time, it seemed like no one on Wall Street liked this firm.
The reason: While it was a pioneer in desktop publishing, many analysts still thought of the firm as rooted in that seemingly archaic sector.
But I pounded the table and said the Silicon Valley leader's then-young move into cloud computing would richly reward investors.
That's why I was so glad to see that on May 21, nearly five years later, this company said it intends to buy back up to $8 billion of its own stock through 2021. And that's on top of the current $2.5 billion plan that ends later this year.
That's the $10.5 billion bet I won.
But really, it's you folks who are the true winners here.
If you took my recommendation back in May 2013, congratulations – you're up nearly 390%.
But this tech stock isn't done.
Far from it.
In fact, another new catalyst for the stock just got put in place.
And that trigger sets this company up to double again in as little as 30 months…
From Software to the Cloud to E-Commerce
I'm talking about Adobe Systems Inc. (Nasdaq: ADBE) – the company best known for its photo-editing and PDF-making software.
Now, in addition to the huge buyback plan, Adobe's latest big catalyst is its $1.68 billion acquisition of the privately held Magento Commerce.
This isn't just any acquisition. This deal is going to largely shift Adobe's focus from digital content management and related analytics to e-commerce.
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Magento is a company Adobe knows well and should be able to integrate smoothly, as the two have worked together for years. It also means a huge boost in high-margin sales for Adobe.
Even though you've likely never heard of it, Magento is one of the biggest e-commerce companies around. It handles more than $150 billion in gross merchandise volume a year – nearly twice as much as eBay Inc.'s (Nasdaq: EBAY) $88.4 billion in 2017, according to data from FactSet.
I think of Magento as one the many "stealth" companies out there. Instead of dealing with consumers itself, the Campbell, Calif.-based company develops and markets software to corporate clients to build and run their web stores and to handle online purchases, shipping, and returns. Magento also helps merchants sell products through social media ads. Its customers include Canon Inc. (NYSE ADR: CAJ) and Rosetta Stone Inc. (NYSE: RST).
The merger shows you how far Adobe has come since 2009 when it began moving away from software retail sales to delivering products and services via the cloud.
Along the way, it has maintained its core leadership in creative content like brochures, photos, newsletters, and publishing. Its Creative Cloud platform now offers far more than just Illustrator for creating, editing, and managing graphics and Photoshop for managing and editing pictures.
Now, I told you before that Adobe is going to double in less than 30 months.
To see how and why, let's run it through our Tech Wealth Blueprint. Those are the five "filters" we use to screen stocks that can truly help you build your wealth.
Take a look…
Tech Wealth Rule No. 1: Great Companies Have Great Operations
These are well-run firms with top-notch leaders.
You'd be hard pressed to find a higher rated tech-sector leader than Adobe CEO Shantanu Narayen. Barron's named him one of the world's best CEOs in 2016 and 2017.
It's easy to see why. Under his leadership, Adobe has reached record revenue and a series of accolades. For 18 straight years, Fortune has named the firm one of the 100 Best Companies to Work For. Narayen served on the President's Management Advisory Council from 2011 to 2017.
Plus, Adobe's financials look great. It has operating margins of 31% and a 23% return on equity. It also has net cash on hand of more than $4 billion. Profits are growing more than twice as fast as sales, proving that its shift to higher-margin cloud sales has really paid off for investors.
And its shift to e-commerce should further that trend even more.
Tech Wealth Rule No. 2: Separate the Signal from the Noise
To create real wealth, you must ignore the hype and find companies with rock-solid fundamentals.
Had you listened to Wall Street back when I first started talking with you about Adobe back in 2013, you would never have entered the position. Back then, the Street was convinced that Adobe was an archaic software firm you should avoid in the era of cloud computing.
Had you listened to me instead, you would have scored roughly 457% gains in what has become one of the world's leading cloud-centric tech firms. Those returns are nearly 6.5 times that of the S&P 500.
And as I'll reveal in a moment, I see at least another double ahead.
About the Author
Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.
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