This Tiny Device Is Driving a $41B Opportunity
In the legendary sci-fi movie Fantastic Voyage (1966), a submarine crew is shrunken to microscopic size and injected into the bloodstream of an injured scientist to repair damage to his brain. When I first saw Fantastic Voyage as a kid, my imagination was set on fire.
But this technology is no longer the stuff of Hollywood fantasies. “Inner-space” devices are all around us…and maybe already inside you.
It’s called Radio Frequency Identification (RFID), which uses tiny transponders called “tags” to pinpoint and track objects. Each miniaturized tag, many weighing as little as a grain of rice (0.0725 ounces), sports an embedded antenna that transmits and receives radio waves from an RFID transceiver.
According to research firm Statista, the global market for RFID is on track to exceed USD 41 billion by 2025, up from about USD 10 billion in 2014 (see chart).
Below, I examine a well-positioned RFID investment play that offers both growth and downside protection. First, let’s explore the exciting ramifications of this disruptive technology.
Tag! You’re it…
Miniaturized, wireless tracking devices for medicine, retail, manufacturing, transportation, logistics, and a wide range of other uses represent one of the hottest investment trends you can find.
Doctors use RFID sub-dermal implants in patients to monitor their whereabouts, bio-functions and medical history. Hospitals, keen to meet efficiency standards, use RFID to trace bio-specimens, supplies and equipment. Pharmaceutical firms use RFID to track millions of proprietary drug compounds in their product libraries. Laboratories use RFID to track tissue or fluid samples.
RFID tags also are used in tollbooths, at the gas pump, in retail stores, on automaker factory floors, and on the farm inside livestock. In the aviation field, they’re used to track aircraft parts and passenger bags.
Many businesses, from retailers to hospitals to factories, must keep increasingly close tabs on their inventory just to survive. For example, Amazon (NSDQ: AMZN), which can fulfill an order online or via mobile with the correct inventory quickly, has set a new standard in tracking and delivery via RFID.
A “Fantastic Voyage” of profits…
Wireless tracking systems such as RFID are a multi-year investing bonanza, especially as they are integrated into the Internet of Things.
All processor-based systems (think handsets, wearables, GPS devices, RFID tags, automobiles, airplanes, medical devices, HVAC controllers, and smart meters) continuously generate machine data, both structured and unstructured.
By the end of 2021, the installed base of web-enabled “things” is on pace to reach 200 billion worldwide, including some 30 billion installed autonomous devices, largely driven by intelligent systems that will be collecting data across both enterprise and consumer applications, according to research firm IDC.
The growth stock winners of the future will be the companies with disruptive technology, offering software platforms that enable organizations to gain operational intelligence by sorting through all of this data.
Sometimes disruptors are found in unlikely places…
Who says packaging companies are boring?
Maybe you’ve never heard of Avery Dennison (NYSE: AVY), but it’s the world’s biggest manufacturer of RFID tags. With a market cap of $17.6 billion, Avery Dennison also manufactures and sells everyday items such as pressure-sensitive labels, packaging products, and office supplies for a wide variety of industries.
Those products may seem boring, but many companies couldn’t function without them. An old-line legacy company in the conventional packaging industry, Avery Dennison is a classic “reopening” cyclical play on the pandemic-era economic recovery.
However, Avery also has maintained its competitive edge by embracing the research and development of RFID.
Avery foresaw the rapid growth of RFID applications long before anyone else and now dominates the field. With cash on hand of $378 million (most recent quarter), the company can continue its long-term growth strategy of acquiring small tech companies that are developing innovations in RFID technology.
The analyst consensus is for the company to rack up year-over-year earnings growth in the current year of 23.9%. The company should thrive in the post-COVID economy, when technologies such as RFID will be in even greater demand.
The stock’s 12-month forward price-to-earnings ratio is about 23. The dividend yield is a decent 1.28%. In an overvalued and volatile broader stock market, AVY is a reasonably priced “defensive growth” play, and a long-term bet on disruptive technology.
Got any questions about RFID or anything else? Drop me a line: firstname.lastname@example.org.
In the meantime, if you’re looking to reap exponential gains that crush the overall market, consider the investment advice of my colleague Jim Pearce. We’ve just launched Jim’s new premium advisory, called Personal Finance Pro. In this publication, Jim uses proprietary trading tools that he developed during years of painstaking research. Click here for details.
John Persinos is the editorial director of Investing Daily. To subscribe to John’s video channel, follow this link.