Trends: Technology advances in battery power, power control, and GPS cell phones have great potential for significant growth in the future.
Jim Jubak at MSN Money describes three trends that may be where the next tech stock rockets start their climb. Click on the link below to see eight stocks he recommends. Excerpts below.
So where's the buzz, the fizz, the flash, the dazzling profits in tech stocks?
The potential rockets, I'd argue, are companies doing business in what are now emerging niches in the technology market. Right now they're small in revenue with products that still haven't met wide adoption. And they face the very real possibility that, once they prove a market, bigger competitors will jump in to steal, if not their thunder, at least their profit margins.
But these companies all have major economic and technology trends at their backs that give them the potential to capture a big share of a future market that now barely exists. No one column can capture all of the trends that could produce tomorrow's big technology markets. But today I'll describe three trends and give you the names of eight companies hoping to capture a share of those trends. Using these examples as templates, you can then go looking for more technology trends -- and stocks to ride them -- on your own.
Look for small, immature companies in markets that are so new that the price premium on a new product is very high and has the potential to last longer, since the big companies with their advantages of scale haven't yet put a foot into the market.
3 niches investors should watch
Here are three technology niches that fit that bill in my opinion.
1) Batteries: better things in smaller packages
There are two takeaway lessons from the fires that forced, and to recall almost 10 million lithium-ion batteries.
- Current battery technology has hit a wall. Lithium-ion battery technology, the technology of choice at the moment since it combines high power, fast recharge and steady voltage, is now 30 years old and it is showing signs that it can't meet the relentless demands from consumer electronics makers and customers for more and longer lasting power in smaller and smaller packages. As more and more powerful lithium-ion batteries are squeezed into smaller and smaller packages, the likelihood that batteries will overheat and burn increases.
- The demand for battery power for mobile devices is huge -- and growing. Lithium-ion batteries alone powered 50 million laptops, 800 million cell phones and 80 million digital cameras sold in 2005. And this doesn't count the lithium-ion and older nickel-cadmium batteries in use in devices such as cordless power tools.
2) More power from better power control
It's easier to understand this from an example than in the abstract. When Sony wanted to create a line of ultraslim digital cameras, the tough part was getting a battery powerful enough to run the camera inside a case less than an inch thick. The solution was to package a smaller and slightly less powerful battery with its own microprocessor. The chip constantly monitors the camera's energy use and the battery's energy output to minimize waste and help a smaller battery do the job of a bigger one. Power-management chips are likely to see hot growth over the next decade in mobile products, where the goal is to get more power and longer life out of a battery, and in the economy as a whole as higher energy prices make doing more with less energy a big cost saver.
3) Location, location, location
Not physical real estate mind you, but the ability to pinpoint your position in real space electronically using the Global Positioning System (GPS). GPS device makerjust raised its forecast for sales of standalone GPS devices to 10 million units in 2006, up from 4.6 million units in 2005. That snazzy 122% year-to-year growth, however, isn't the biggest prize in the GPS sector. The ultimate good news is that more and more wireless phone companies are inching closer and closer to adding full GPS capability to their phones. The wireless phone market, at a global 800 million units in 2005, dwarfs the standalone GPS segment.