Mobile World Congress 2018 kicks off today, Feb. 26, and runs through the end of the week. Why is this annual event, which is a showcase for mobile technology, one big investment signal? On the surface, the event will once again focus on the growing number of connected devices, and we suspect several new flagship models for smartphones will be announced from the likes of Samsung, LG, Huawei and others.
Already we've heard of several from Samsung, including its new flagship model the Galaxy S9 that includes an organic light-emitting diode display that should help alleviate demand concerns and support Universal Display (OLED) shares, a holding in the Trifecta Stocks portfolio. As more companies such as Nokia (NOK) , Huawei, LG and others announce devices, both flagship and other, at the event, we suspect year-over-year more models will include organic light-emitting diode displays. Of course, we'll look to confirm that suspicion and as we do so we'll take note of the number of models that have larger screen sizes as well as front and back glass housings, a positive for Trifecta holding Corning (GLW) .
We're also likely to get a hefty dose of "techy talk" on 5G as carriers such as AT&T (T) , Verizon (VZ) , Sprint (S) and T-Mobile USA (TMUS) will launch commercial 5G networks in 2019. In tandem we should expect press releases and at least a few breakthrough announcements from the likes of Ericsson (ERIC) , Alcatel Lucent (ALU) and others when it comes to 5G data speeds and their network solutions. Cisco Systems (CSCO) did some of that yesterday. We'll be watching this flow of information with regard to shares of specialty contractor Dycom Industries (DY) as that company derives the bulk of its business from building networks for AT&T, Verizon and Comcast (CMCSA) .
Dycom will report its quarterly earnings later this week, and we've held off adding the shares to our active portfolio as we expect the business to be negatively impacted by the harsh winter temps experienced late in the fourth quarter and early in the current quarter. As that is factored into the consensus view, we'll look to revisit DY.
Now let's take a few steps back and think on the bigger picture when it comes to mobile and Mobile World Congress...
With each next-generation mobile technology we've seen a dramatic expansion in what can be done wirelessly. In the 2G world it was voice and text. With 3G we saw the debut of the true mobile internet and the start of apps. With 4G/LTE the app transformation continued and streaming content, both video and music ranging from video calling to watching the latest TV or film to bopping along to your favorite songs as you walk down the street.
Faster network speeds and greater bandwidth have been a key enabler and the result has been a near quenchless thirst for data and content. So much so that we see extreme user frustration when our smartphones drop down to 4G or even 3G from an LTE connection. One would think anarchy was about to ensue. 5G networks with far faster data speeds compared to 4G/LTE are poised to push the mobile boundaries even further.
At Mobile World Congress 2017, Samsung showcased its 5G Home Routers, which achieved speeds of up to 4 gigabits (GBs) per second -- that's 500 megabytes per second. Translated into real world speak that would let you download a 50 GB game in under two minutes, or a 100 GB 4K movie in under four minutes.
How does that stack up against the average internet speed in the U.S.? As of 2016 that speed was 55 megabits per second, which translates to a woeful 6.5 megabytes per second.
This means 5G networks will more than likely foster another sea change in what, how, where and perhaps even why mobile technology is used. Applications already being bandied about include the Internet of Things with applications ranging from connected farms and smart cities to the remote control of heavy machinery and enabling autonomous vehicles. These all require 5G capable chips in devices and incremental network infrastructure, including backhaul that will drive wireline and optical demand.
Will we see more cord cutting as 5G networks go mainstream and even more mobile content consumption? Will we see connectivity in a growing number of devices around the home, in the workplace, in factories and in the car?
Our view is a resounding YES and we see this as a positive for at least four of our other portfolio holdings. As we move out of 4Q 2017 earnings season, we'll look to evaluate other companies that are positioned to ride this tailwind.
This commentary was originally sent to subscribers of Trifecta Stocks on feb. 26. Click here to learn more about this portfolio, trading ideas and market commentary product.
-- Bob Lang and Chris Versace are co-portfolio managers of Trifecta Stocks.
