One of my long term investment thesis that I have been discussing over the last 6 months is the technology bull market due to the internet and mobile smart phones. The first technology bull market in the dot.com boom was based off of the growth of the internet in developed nations. Today, there is a second technology bull market due to the internet growth in developing countries as well as the internet on smart phones. It was not that long ago that in order to get online, you had to be on a computer. Today you can be on the internet 24 hours a day no matter where you go. Today you can be driving in a car and go shopping on any website that you want via smartphones and tablets, both which Apple has pioneered in the last 5 years with the iPhone and iPad.
There are many ways to invest in this thesis of secular growth due to hand held devices and internet global growth. The traditional ways would be to put money into Apple and Google since they make these devices and own the internet search. Of the two I prefer Google as it has its cash cow of search as well as growing quicker than the iPhone right now with its Droid operating system. With the death of Steve Jobs recently, I also give a big edge to the management team at Google. Nothing against Tim Cook, but he has to prove himself while Larry Page is running on all cylinders right now. Another way to play the technology bull market is in the semiconductors that will make all the chips for all these mobile devices. Intel now pays a great dividend while still having growth so it is the safest play. Cirrus Logic’s biggest client is Apple so given the most recent blow out sales of the iPhone 4S, I am very confident this company will be back in the 20′s sooner than later.
TECHNOLOGY BULL MARKET IN INTERNET TRAFFIC
Now with these other options being said, I want to discuss what I feel is the best way to profit from it in the next 5 years. This is in owning the names that make the traffic of internet more efficient. Today, this thesis proved true with both F5 Networks and Akamai reporting solid quarters. Both names ended today up roughly 15% after their quarterly earnings. I have been talking about these names all summer as having great fundamentals long term because of this long term thesis. I also still feel Google could come in and buy them at any moment just because they have been on an acquisition rampage and it would be a great purchase in my opinion. Imagine how the developing nations are going to look 5 years from now. Think of how many iPhones and iPads are going to be searching for directions at all times. The numbers are going to be staggering in my opinion. This huge amount of traffic and growth spells a very solid future for Akamai and F5 Networks.
I would not run out and buy these names tomorrow. They both have had a big run up in the last month. I feel you will get a better buying opportunity in the very near future. Pick your entry points carefully as that is where you can pad your stats! This technology bull market is going to be around for a while as these companies have growth coming for years!