Friday File: 5G Time!

A new focus on 5G in the Real Money Portfolio, plus a few updates on Starbucks, Altius and NVIDIA

By Travis Johnson, Stock Gumshoe, October 19, 2018

The next wireless standard to be adopted by telecom service providers might be the biggest one since 3G enabled the first real “high speed” data and reasonably useful internet access by smart phones.

And new wireless standards are always of interest to investors, not least because the growth of smartphones has tracked the improving networks — the first iPhone was released with older 2G/EDGE network technology in 2007, but the faster 3G network made the first iPhone upgrade a year later, the iPhone 3G, truly revolutionary as it went beyond “novelty” status and added GPS mapping and push email and the App Store and other features… and the last two big jumps in unit volume for iPhones were in 2012, when they introduced their first 4G phone (LTE connections and much faster data that made mobile video possible… that’s still the current standard), and in 2015 when they released their first bigger screen phone and made a huge splash in the China market.

And I’m starting to think that 5G, the next standard that will feature data speeds perhaps 100X faster than the current mobile internet, is being under-appreciated by the markets… though that could be starting to change, and I added to my “5G portfolio” this week.

Let’s start with the news: Ericsson (ERIC) reported yesterday and provided some more real optimism for 5G enthusiasts… Nokia (NOK), their major non-Chinese competitor for equipment that will be needed in the rollout of 5G networks, will report late next week. There’s no magic here, but both of these companies have been positioning themselves to be core equipment suppliers as 5G networks are built out by telecom companies, and it looks like their plan is finally starting to work.

There is the near-certainty of rising investment by telecom companies in 5G networks over the next couple years, with AT&T, Verizon and T-Mobile/Sprint all installing equipment in their first test markets, and Ericsson appears well positioned — they and Nokia have both had a rough couple years as telecom infrastructure investment has been soft because of the maturity of 4G/LTE networks that has kept equipment orders down, but their investment in new technologies and cost cutting seem to have helped bring gross margins up and make them profitable again.

Ericsson’s share price is up something like 40% this year, so some of that recovery is already ...

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