My Bold Prediction for 2021 and Beyond: Explosive Wealth Growth
Take Advantage With an Unloved Blue Chip Innovator
This year I have a big prediction: As much wealth will be created in the next 10 years as was created in the previous 30.
In a moment, I’ll show you how and why.
I’ll also reveal a company that will allow you to take advantage of this coming era of unprecedented wealth creation. Immediately.
It’s one of the world’s leading technology firms, with huge investments in cloud computing, data analytics, cybersecurity, artificial intelligence (AI) and other cutting-edge industries.
Yet despite the company having dozens of breakthrough products and gee-whiz services that will leave you shaking your head, its shares are unloved, dirt cheap and yielding 5.3%.
It is both a superb growth stock and a deep-value play, an opportunity for capital appreciation and a generous income provider.
No wonder corporate insiders are piling into the stock. I believe this company will be the best-performing component of the Dow Jones Industrial Average in 2021 – and perhaps for years to come.
Progress Marches On, Faster Than Ever
It’s easy to underestimate the pace of technological progress.
Today, 60% of the world’s population has internet access, even though we only crossed the 50
% milestone in 2018 and only a tiny percentage of us had even a dial-up connection in 2000.
The number of Google searches alone has increased 2,000-fold over the last 20 years.
Part of this growth is due to the increase in connection speed by end users. This has grown tenfold in the last decade.
According to Pew Research, 81% of Americans now own a smartphone. This is 46% more than when the polling organization began asking the question in 2011.
The number of mobile subscriptions is now greater than the world population. (Global mobile penetration was 108% by 2019.)
And the advancement of 5G networks and technology will only accelerate smartphone adoption. Ericsson projects that mobile 5G subscriptions will increase elevenfold by 2025.
This will lead to an explosion of connected devices. Cisco estimates that within two years we’ll have more than 1 billion connected wearable devices in the world.
That, in turn, will cause a dramatic increase in demand for battery storage to power all these devices. According to McKinsey, we will see a seventeenfold increase in battery demand by 2030.
We should also see at least 100 billion additional units of 1-gigabyte dynamic random-access memory (a type of memory chip used in most laptop and desktop computers) shipped worldwide over the next three years.
Global e-commerce sales soared 133% between 2015 and 2019, from $1.5 trillion to $3.5 trillion. Statista estimates that global e-commerce sales will hit $7 trillion by 2023.
The global inventory of electric vehicles has increased sevenfold over the last five years. They now make up approximately 1% of the global car fleet.
Solar power generation, the most important renewable energy source, increased twentyfold from 2010 to 2019. This will soon provide us with both cleaner energy and a healthier environment.
According to McKinsey, the market for industrial robots has been compounding at 19% per year since 2013. Shipments are up fivefold since 2010. And double-digit growth is expected again in 2021.
The adoption of 3D printing is rising. Indeed, the market doubled in size from 2015 to 2018.
The cost of sequencing the human genome has plummeted. It cost $100 million to sequence an individual’s genome in 2001. Twenty years later, it costs less than $1,000. And it is headed to less than $100, transforming human health and personalized medicine.
Explosive Growth in Processing and Profits
The majority of today’s technology trends are exponential.
The majority of today’s technology trends are exponential. Yet most people don’t appreciate what that means.
If something doubles 10 times, it results in 1,000 times growth. But if something doubles 30 times, it results in 1,000,000,000 times growth.
Yes, 1 billion times.
We’re not talking about money compounding at that rate, of course. That would be impossible. But technology is built on ever-increasing computational power.
For example, processing efficiency has improved by orders of magnitude in the last 30 years. Since 1990, it has increased by a factor of 100,000.
These trends are leading – almost inexorably – to a more prosperous society and a far, far wealthier world.
Global GDP was $22.6 trillion 30 years ago. In 2019, the World Bank estimated that it was $87.7 trillion. That’s the power of world economies growing at 4.3% annually for three decades.
But the exponential growth of computing power in the hands of nearly 8 billion people will add an extra point to that growth over the next 10 years, leading to a global GDP of $135.6 trillion.
That increase is approximately equal to the amount of wealth created over the last 30 years. But compressed into one decade.
Needless to say, this will create enormous opportunities for investors. But selectivity is key.
With that in mind, let’s take a look at an overlooked business leader that will play a major role in the coming era of mind-blowing technological development: International Business Machines (NYSE: IBM), more commonly known as IBM.
Big Blue Takes a Quantum Leap
Long known as “Big Blue,” IBM is a perennial blue chip that has been a member of the Dow Jones Industrial Average since 1979. It has a lengthy history of innovation, and that legacy is accelerating today.
IBM helps businesses and government reconfigure their IT departments for the cloud era. It ensures that technology systems are not only faster and more efficient but also far more secure.
It is focused on blockchain and the industrial internet. And it is the world leader in AI.
AI enables computers, robots and other connected devices to mimic the perception, learning, problem-solving and decision-making of the human mind.
AI is creating remarkable achievements. Computers are able to perform specific tasks with increasing accuracy and without human intervention. Applications are now used for speech recognition, language processing, virus and spam prevention, autopilot technology, image recognition, real-time recommendations, and even automated stock trading.
IBM has invested billions of dollars to accelerate the commercialization of IBM Watson, a cognitive technology that processes information more like a human being than a computer.
(In healthcare, Watson has already treated more than 100,000 patients. And it will soon have a major impact on financial services and scores of other industries.)
Information technology is one of the most dynamic and fast-changing industries in the world. And IBM is committed to high-value innovation, not just product commoditization.
The company invested billions to create IBM Bluemix, its cloud platform for software developers. That means businesses can develop and consume cloud services anywhere and from any cloud, public or private.
And two years ago, IBM bought Red Hat, the world’s leading provider of enterprise open-source solutions.
Cloud computing is on-demand access to computing resources – applications, services, data storage, networking capabilities and more – hosted at a remote data center managed by a cloud services provider. It allows businesses and other organizations to “plug into” IT infrastructure rather than installing and maintaining it on-premises.
This lowers costs, saves time, and allows businesses and other organizations to scale up more easily.
IBM is betting that education organizations, businesses and government agencies will turn to its hybrid cloud.
(The hybrid cloud is IT architecture that allows customers to leverage the world’s innovations, predict and automate workflows, and enjoy proven compliance and security on mission-critical processes.)
And with advances in quantum computing, we’ll see an explosion of information-processing capability.
By 2023, for example, IBM expects to reach 1,121 qubits with its processor code-named Condor. This would be a seventeenfold increase from today.
The company expects 2023 to be the inflection point for the commercialization of quantum technology. And IBM will be the world leader in the field.
Looking Forward, Not Back
This all sounds exciting. But shares of IBM have been anything but lately.
The stock is no higher than it was in October 2009, while the S&P 500 has gained more than 250% over the period.
While investors have poured money into megacap tech stocks like Apple, Amazon, Microsoft, Google parent Alphabet and Facebook, they have given IBM a collective shrug.
It’s not hard to see why. Despite generating annual revenue of more than $75 billion, profits at IBM are up just 2% year over year, while sales are actually down 3%.
But look forward, not back.
Thanks to the company’s new focus on cloud computing, analytics and cybersecurity, sales are likely to hit $77 billion in 2021.
Earnings per share should rise from $8.43 this year to more than $13 in 2021.
That’s a 54% increase. Yet the stock is lying on the bargain-basement table, selling for 10.5 times projected earnings and yielding a mouthwatering 5.3%.
(That’s more than three times the yield of the S&P 500. And IBM’s dividend will rise along with net income in the months and years ahead.)
Other financial metrics are also strong.
IBM enjoys double-digit operating and profit margins. Management is earning a massive 40% return on equity. And the company is using its $15.6 billion cash hoard to buy back shares – as it has for decades.
In short, IBM is a growth stock priced like a value play. This has not escaped the attention of longtime director Sidney Taurel, former CEO of Eli Lilly. He recently bought 5,000 shares at a cost of more than $550,000. He now owns 28,798 shares.
Likewise, director Bill McNabb III – retired chairman and CEO of Vanguard Group – paid just under $1 million for 9,250 shares.
These individuals know that IBM is under new management (CEO Arvind Krishna took over in April 2020), has superb business prospects and is almost ridiculously undervalued.
The stock is an excellent way to capitalize on the exponential growth in computing power – and global wealth creation – that we will experience in the months and years ahead.
Action to Take: Buy International Business Machines (NYSE: IBM) at market. And use a 25% trailing stop to protect your
principal and your profits.
Report created in January 2021 | Nothing published by Liberty Through Wealth should be considered personalized investment advice. Any investments recommended by Liberty Through Wealth should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.