| The Penny Sleuth Features: Penny Stocks, Options and High-Growth Opportunities! |  |      | Ride the Wireless Data Trend to Profits in 2011
By Ray Blanco
February 3, 2011
Increasing demand for wireless data is creating some impressive opportunities for investors who want to get in on the ground floor of a profitable trend that’s just starting to get legs. Here’s a look at why the wireless data trend is soon to be the lynchpin of the cellular carrier business — and how you can play the trend for your portfolio right now…
From time to time, we’ve discussed the creation of transformational technologies on mobile platforms.
The main enabler is technology, of course, but the main driver is demand. Consumers are in love with the electronic equivalent of a Swiss army knife — and they are buying up increasing volumes of them.
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As you know, this is a trend long in the making. Moore’s Law has enabled exponential improvements in semiconductor manufacturing, which in turn have made the mobile phone the most rapidly adopted technology in human history. Adoption rates have been faster than of past technologies, including the land phone, television and the Internet. Even the transistor radio and polio vaccine paled by comparison.
Consider the fact that less than three decades have passed since Motorola introduced the first commercially available mobile phone. Even a decade ago, there were only half a billion people on wireless networks. Today, however, nearly three-quarters of the globe pays for a mobile service. Unique wireless subscriptions blew through the 5 billion level in September 2010.
In the U.S., we have become quite used to having early access to all the latest and greatest technologies — yet the pervasive nature of the cell phone is truly astounding at the global level. Remote villages in developing nations that don’t have even running water or modern sanitation have mobile phones. As a matter of fact, two-thirds of the mobile phones in use are in developing nations.
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Naturally, the mobile phone innovators, and the investors that have funded them, have been rewarded with fantastic returns on their investments. Looking at past growth, it is possible that some investors think the trend is over, but they could not be farther from the truth. “Phase 2” of mobile growth has already begun, and this is a data, not voice, revolution.
Although voice is nearing market saturation, the use of mobile devices as data platforms is still a long way from reaching that point. Billions of people with low-end phones will be upgrading to smartphones in the months and years ahead. Just this past fall, 77 million smartphones were purchased by customers. This is where the real boom is, and the smartphone segment is surging at multiples of the overall mobile phone market.
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Even over the course of a global financial crisis and a sharp recession, hardly a dent has been made on the growth of this sector.
It is estimated that mobile users downloaded 300 million applications in 2009. That number is up to 5 billion for 2010. Mobile Twitter use is up over 300%. Each and every day, 100 million YouTube videos are downloaded to mobile devices.
Impressive numbers, yet we haven’t even mentioned mobile social sites like Facebook, which are showing explosive growth as well. In fact, Facebook is now surpassing Google in total page views. A lot of that Facebook traffic is from smartphone apps.
These numbers will continue to grow in 2011 and beyond. A Cisco market report projects wireless data to double every year, reaching 40 exabytes by 2014. As more subscribers switch to iPhones, BlackBerries and Droids, wireless data use will climb. These users are data hungry: A typical BlackBerry smartphone user consumes more data traffic than 30 nonsmart mobile phone users.
Mobile phones aside, we must also consider the rise of tablets. Just as the Apple iPhone has served as a catalyst for smartphone adoption, the iPad is serving as one for tablets. This is a whole new consumer product class still in its early stages. Vendors showcased dozens of new tablet models at this year’s Consumer Electronics Show. Many of the new tablets either possess, or will possess, 4G wireless data connectivity. In 2011, tablet sales are expected to triple 2010’s volume.
The increased use of connected devices, however, creates problems for wireless carriers. They have to find a way to accommodate all the new wireless connections. The growing burden creates an urgent need for investment in wireless infrastructure.
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…And that creates a phenomenal opportunity for small-cap investors to get in on now.
Editor’s Note: There are a handful of companies with solid exposure to the wireless data trend. Here’s a glimpse at a few of them:
- Digital Realty Trust (NYSE: DLR): While this REIT is a bit outside small-cap territory, it’s nonetheless a great way to play the need for increased infrastructure. With a portfolio of datacenter and internet gateway properties spread throughout major metropolitan areas in the US, this firm should see demand continue to climb from wireless carriers in 2011.
- FiberTower (NASDAQ: FTWR): This small-cap firm provides backhaul services to wireless carriers, with a number of spectrum licenses, fiber aggregation points, and switching centers. Simply put, FiberTower is one of the behind the scenes players in delivering wireless service to US subscribers. Existing deals with 9 major wireless carriers bode well for the firm.
- Leap Wireless (NASDAQ: LEAP): Leap is a small-cap wireless carrier that’s making waves with its low-cost, all-inclusive cellular plans. As a result, it’s one of the most interesting ways to play the wireless data trend right now. That said, faulty fundamentals could hurt shareholders in the near-term… Ultimately, this stock could make for a strong buyout candidate.
We’ll continue to keep an eye on these burgeoning technologies in 2011.
Ad libertas per scientia (Towards liberty through science),
Ray Blanco
P.S.: My colleague, Patrick Cox, and I have just come across another — more intriguing — way to get small-cap exposure to the wireless data market. To find out how to get our full analysis, click here…
Ride the Wireless Data Trend to Profits in 2011 is featured at Penny Sleuth.
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