When you’re talking about the new digital era, one key point to understand is that without a digital infrastructure, all the cool gadgets, tools, and machines that we rely upon wouldn’t work. That’s why every growth portfolio that wants to take advantage of digital transformation needs to include digital infrastructure companies.
I’m not talking about just blindly buying some cool start-up or a headline grabber. It’s about buying the quality companies that have the reach and reliability to continue their growth and dominance in this growth sector for years to come.
As you can see above, there’s a significant amount of growth that is happening in these markets, even today. The digital transformation may be 20 years old, but it’s not maturing. It’s still a kid! That’s why it’s important to not only find the leaders in today’s market, but the companies that will also continue to lead the way for the next two decades.
It’s the digital infrastructure companies that will lead the way because once their products are wired into enterprise and governmental and consumer systems, it’s very difficult to unembed them and switch to new technologies.
For example, in the illustration above, you can see some of what’s meant by digital infrastructure.
These are companies that are elemental in digitizing any city, institution, or region. Once they’re in place, they’re not going to be completely replaced by an up-and-coming company, like you replace a smartphone or even an automobile.
Also, remember that it’s not just the cable or tower or data centers, it’s also the hardware that builds them into the larger system, as well as deliver those services down to an individual level.
Asia Is Just Starting
In the West, we see this kind of digital infrastructure transformation happening in sweeping ways. The US is building out its fiber optic connections at a rapid pace post-pandemic, and Europe is doing the same thing.
However, Asia has yet to jump on this aspect of the bandwagon. Between India and China, there’s nearly 3 billion people in those markets alone. This provides enormous opportunities to MegaTrend companies, like Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ: GOOGL), and Amazon (NASDAQ: AMZN) in their cloud services divisions that are also their highest margin business units.
Digital business services provided by companies like Descartes Systems Group (NASDAQ: DSGX) and the three above are also part of our digital infrastructure MegaTrend.
On the backend, where it’s about end user interfacing with the digital infrastructure, you can add companies like Qualcomm (NASDAQ: QCOM) and Apple (NASDAQ: AAPL).
The point is, for most people it’s still tough to wrap our heads around the massive digital transition our world and societies are currently undergoing, but it’s happening and will continue to happen. That’s why it’s so important to think about the next 20 years rather than the next two.
When you have the right stocks, even in years when there might be a downturn, the long-term has significantly more upside than a short-term downside. This is what MegaTrend investing is all about, and what it continues to deliver.
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