2020-2025: The 5G revolution is going to begin its ascent in 2020, and it is just about upon us. FMT Advisory believes enormous money is going to be made, and we are as excited as ever.
Innovation will be king; boring will be defense. Over the next couple of years, we believe a combination of both will help propel us to new highs in our accounts with relative long-term safety.
Whatever political party prevails next year shouldn’t have any impact on 5G because both parties back 5G for economic expansion.
The innovation that is going to explode out of 5G as it gains broad adoption is going to be monumental. Artificial intelligence (AI), machine learning (ML), cloud computing, cybersecurity, advancements in genetic editing, and precision medicine are just at their embryonic stages.
5G will ignite all of these areas and propel many businesses to stratospheric levels, potentially making investors much, much richer. We aim to be one of them.
FMT Advisory has been working night and day investigating the most lucrative opportunities upon us with 5G arriving in 2020.
We already own a few businesses that we feel offer us long-term opportunities within the upcoming 5G rollout.
The most obvious opportunity and trend to us is memory. We’re in a data revolution, and the world has created more data in the last two years under 4G-LTE than in all of human history. Even so, 5G is going to make the data revolution explode to yet another new level. All of this data needs more and more of one thing: memory.
There are only three companies in the entire world that can produce the kind of high-level memory chips we’re going to need over the next few years, and there is only one company domiciled in America: Micron Technology (MU).
We bought Micron Technology for our accounts at 5X normalized earnings and it appears to be a high long-term opportunity to us at such cheap prices.
Another no-brainer to us is the device renaissance that will manifest with 5G. All of our devices are going to need an upgrade to 5G specifications as time goes by, which will cause sales to go through the roof for original equipment manufacturers (OEM’s).
Many companies will benefit from the device renaissance such as RF filter companies (we own a small company in this space) to even chemical companies like our very safe pick-n-shovel investment Element Solutions (ESI). Of course, every new device will also have to have more memory loaded into them to keep up with data demand and for the increased speed with edge computing on the 5G network.
We have started to identify other huge opportunities that will go unmentioned here – we’ve just started to scratch the surface. Slightly unrelated, the CRISPR technology looks revolutionary to us in the healthcare space (Bill Gates is a big backer).
We believe there could be some market weakness that we hope to take advantage of, and if there is, we should celebrate, not despair.
FMT Advisory always loves opportunities to pounce during weakness, and we are well prepared to take bigger positions as 5G advances.
With such low interest rates (and with the Fed either on hold or lowering rates), companies that generate high returns on net tangible equity and sell at reasonable multiples should do very well.
Some of our companies are the crème de la crème as far as their internal economics are concerned, so we are thrilled with some of our holdings.
Completely market independent are Fannie Mae and Freddie Mac. The thesis is still on the track, but it is taking longer than we’d like on what should be an obvious outcome. In fact, our thesis didn’t include the U.S. court system going our way because we think the administration is on track to get it mostly right.
However, shareholders in Fannie Mae and Freddie Mac are winning in the court system with a huge 5th Circuit win, and Judge Sweeney recently stated in the Collins case that “an investor would have had a ‘reasonable’ expectation to make money in the GSE’s. But the government acted like a mob.”
If there happens to be damages awarded to the companies and a claw-back of stolen money through the court system, which was never in our thesis, the shares will be worth substantially more than we even anticipated.
FMT Advisory wouldn’t be surprised if the FHFA and Treasury struck a consent decree with plaintiffs in the suits to limit damage, which would make all parties happy.
Regardless of how the courts go (though it has been nice to see it go our way), there are several catalysts we think will spike the shares far higher over the next year as the administration moves forward.
The next big step for Mark Calabria at the FHFA (Federal Housing Finance Agency) is to set capital rules for Fannie Mae and Freddie Mac, and if the capital buffer for mortgage liabilities is held to around 2.5% (which it looks like it will happen based on his public statements), the shares should have a huge spark.
Once the capital buffer parameters are set, we believe the JPS (Junior Preferred Securities) will be then dealt with and settled, which could provide another spark. The only remaining agenda will be a date for the secondary offering, and we think these three catalysts could balloon into a lallapaloosa effect and a real windfall for shareholders.
2019 has been good. 2020-2023 should be epic for FMT Advisory investors.
Disclaimer: FMT Advisory doesn’t disclose our holdings or what we’re doing with them to the public in a timely way. Our desire is to benefit and prioritize our member-clients, so they are the primary beneficiaries of our value driven research. Good luck piggy backing on our ideas. We may buy or sell our holdings at any time without notice to the public. Our holdings overview is for informational purposes only. Past performance is no guarantee of future performance. You could lose all your money.