Daily Archives: November 9, 2017

Growth Stocks

3 Tech Stocks Up More than Apple, Facebook, and Google

Perhaps the most exciting segment of the Singularity for me is the Industrial Internet of Things (IIoT), which will change forever how things are made. It’s the reason some are calling it the Fourth Industrial Revolution.

I’ve written often about two of the main sectors contained in the IIoT. The first is cobots or collaborative robots that will work together with humans in manufacturing. The second is additive manufacturing, which is also known as 3D printing because it involves building objects layer by layer out of substances such as metals or polymers.

But I’ve barely touched upon a third area – digital twins. Let me now fill you on this and point to a few companies heavily involved in the use of digital twins.

What Is a Digital Twin?

A digital twin is a virtual copy of a real machine or system. It is sometimes described as a bridge between the physical and digital worlds. These virtual models are built up based on many gigabytes and terabytes of sensor data. It is an outgrowth today of much cheaper and better sensors, data transmission and data analytics.

In simplest terms, a digital twin works on a simulation platform connected to a predictive analytics platform and which gathers data from a range of sensors from a wide scope of devices/machines and then analyzes the data.

However, a digital twin is not exactly a new concept. NASA developed the concept of a digital twin for its space shuttle program.

Here is a basic example of the usefulness of digital twins: In the past, car companies would build prototypes and then crash them to see whether the cars would hold up to real world situations. Now with digital twins, car companies can use CAD (computer-aided design) data and simulate crashes to see how well their car design will hold up.

Of course, the uses for digital twins extend far beyond cars. It includes oil rigs, jet engines, wind turbines, power plants and pretty much anything worth monitoring.

The value of digital twins to companies is obvious. It offers them numerous advantages throughout the entire lifecycle – from product design, production planning and engineering, to commissioning, operation, servicing and modernization of plant systems and equipment.

Virtual twins allow companies to validate designs earlier and test the configuration of a machine or product or system in the virtual environment. By carrying out checks earlier in the engineering process, the risk of failures and errors in critical phases of the lifecycle, for example during commissioning, is reduced. Eliminating such risks would otherwise only be possible with great effort, cost and time.

Any subsequent modifications can be tested and verified in exactly the same way, accelerating the introduction of a new product. Furthermore, with the help of these virtual models, the operating data can also be used to optimize parameters for production such as energy consumption.

Digital Twin Market Potential

As you can imagine, the potential for virtual twins is vast. According to the German Association for Information Technology, Telecommunications and New Media, every digital twin in the manufacturing industry will have an economic potential of more than 78 billion euros (over $90 billion) by 2025.

A report from TechSci Research says that the digital twin market is expected to grow at a compound annual growth rate (CAGR) of 37% during the forecast period 2017 through 2022. The report points to high demand from the electronics and electrical/machine manufacturing industry as the main driver behind this high growth rate.

Not surprisingly with any rather new technology, the growth geographically is coming from the Asia Pacific region. The firm Research and Markets says that region led the way in 2016 in the overall digital twin market and is expected to continue leading in the 2017 to 2023 period.

This kind of growth rate is what you should look for in an investment and is similar to what I’ve seen in the robotics sector.

Digital Twins Investments

So how can you invest into this exciting new part of the Industrial Internet of Things?

There are a number of very large companies involved in the space including tech giants Microsoft (Nasdaq: MSFT)and Oracle (NYSE: ORCL) as well as industrial powerhouses General Electric (NYSE: GE) and Siemens (OTC: SIEGY).

But instead of these large companies, I prefer the smaller software companies that are involved with CAD design modeling. Here are three companies to consider.

Living in western Pennsylvania, the company at the top of my list is from the area – ANSYS (Nasdaq: ANSS). It is a dominant player in the high-end design simulation software market and is used by most of the well-known manufacturing companies.

The company generates revenues in two areas – software licenses (57.5% of 2016 revenues) and maintenance and services (42.5%). Revenues in 2016 were about $988 million. I expect revenues to climb significantly in the years ahead as the company expands its simulation solutions to areas like 5G  telecommunications product designs, autonomous vehicles and ADAS systems, as well as the Industrial Internet of Things.

Its stock spiked 10% last week on the back of a great earnings report. It also recently closed a three-year contract worth over $45 million, which was the largest in the company’s history. The stock is now up 60% year-to-date and 77% over the past 12 months.     

The second company is Cadence Design Systems (Nasdaq: CDNS). Over 90% of its revenue is recurring, which is outstanding.

In addition to IIoT, it is also involved other fast-growing sectors such as aerospace, autonomous vehicles and augmented and virtual reality (AR/VR). It has won orders from Infineon and MobilEye who are developing advanced driver assistance systems (ADAS) technologies. However, its core currently remains the semiconductor market and the design of integrated circuits.

The stock’s performance has been stellar with a gain of 75% year-to-date and 77% over the past year.

The final company is Autodesk (Nasdaq: ADSK), which generated over $2 billion in revenues in fiscal 2017. It serves customers in architecture, engineering and construction, manufacturing, and digital media and entertainment.

The company’s business transition from licenses to cloud-based services should benefit it over the long-term through higher subscriptions and deferred revenues. Its management forecasts long-term CAGR of 20% from subscriptions that will lead to 24% CAGR in recurring revenues.

That forecast along with its results have propelled the stock 68% higher year-to-date and nearly 80% over the past year. One caution though – on a non-GAAP basis, it is still losing money.

I do expect though all three of these companies’ stocks to continue outperforming the general market.

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Energy

Global Demand Is Surging for Renewable Energy

Health care. That’s the market that’s going to explode.

When I first started working in the financial industry a couple decades ago, that was the refrain I heard constantly.

All eyes were on the baby boomers. Numbering nearly 75 million, there were growing worries about their increased health needs.

We would need more doctors. More nurses. More physical therapists. More home health aides. More personal care aides.

And they were right.

The U.S. Bureau of Labor Statistics estimates that job growth for home health aides will swell by 46.7% from 2016 through 2026. Jobs for personal care aides are forecast to grow 37.4% during that same time frame.

 But there is one industry that is growing even faster, creating even more job opportunities. And more opportunities to profit…

Renewable Energy: The Booming Industry

Whether you believe that climate change is an important issue or a complete hoax, the fact remains that renewable energy is a growing market all around the globe.

The U.S. Bureau of Labor Statistics reported that solar panel installers were projected to see job growth of 105.3% from 2016 to 2026.

There are approximately 260,000 Americans working in the solar industry.

As prices drop and technology continues to advance, more companies and even residents are going to flock to renewable energy.

In 2016, solar installations accounted for 39% of all new electricgenerating capacity, beating out all other tech for the first time ever. And for the first half of 2017, solar has accounted for 22% of all new capacity, coming in second to natural gas.

The U.S. has more than 47 gigawatts of total solar capacity now installed. This is enough to power 9.1 million homes.

Part of this phenomenal growth has come from the price of solar panels dropping. Since 2010, the cost to install solar panels has plunged more than 70%.

As prices drop and technology continues to advance, more companies and even residents are going to flock to renewable energy.

As installing solar panels has become more affordable, more residents have turned to it as a viable way to slash their energy bills and utilize a cleaner form of energy.

But solar isn’t the only renewable energy that’s creating a buzz of opportunities.

Wind Power Soars

Wind power is seeing significant growth as well. Wind turbine service technicians are expected to see job growth of 96.1% — double that of home health aides.

At the start of the month, WindEurope reported that European wind energy set a new record on October 28 after roughly 24.6% of the EU’s electricity demand was met by wind power. This was up from the previous record set earlier this year of 19.9%.

The late-October storm that sent German wind turbines spinning resulted in the creation of 39,409 megawatts. That’s the equivalent of 40 nuclear reactors.

In July, Scotland broke a record by generating the equivalent of 118% of the nation’s electricity for six days.

And New York is considering a plan for adding up to 40 turbines across 60 square miles with the expectation of generating 124 megawatts. That’s enough power to 20,000 homes.

New York’s wind power generation has grown from 48 megawatts in 2005 to 1,827 megawatts in 2017. However, it still lags behind Texas with its wind power capacity of 20,320 megawatts and Iowa’s 6,911 megawatts of wind power capacity.

The key thing is that there is still ample room for growth.

The Next Gem for Your Portfolio

As prices drop and technology continues to advance, more companies and even residents are going to flock to renewable energy as a source of power.

We are seeing more and more stories pop up regarding renewable energy farms and plants fueling our energy needs despite the falling prices of oil and natural gas.

Solar and wind power are on the rise.

But while wind and solar power frequently capture all the headlines, there is another source of renewable energy that is available just about everywhere around the globe and could see a massive boom in demand.

Profits Unlimited Editor Paul Mampilly has identified a key renewable energy technology that he believes could skyrocket investors to massive gains. Click here to read his special report.

When looking for new opportunities to grow your wealth, the renewable energy sector continues to provide excellent upside potential … and a lot less uncertainty than health care.

Regards,

Jocelynn Smith
Sr. Managing Editor, Sovereign Investor Daily

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