Markets

These 3 Tech Sector Stars Get Another "Buy" Signal from SXSW Interactive 2015

MoneyMorning.com Report - Wearable tech, medical tech, and cybersecurity are three of the most promising tech sectors we like investing in today. And all of those fields were the stars of the South by Southwest (SXSW) Interactive 2015 festival in Austin, Texas, this past week.

Exiii demonstrators show off their robotic arm technology at SXSW Interactive.

SXSW Interactive is one of the largest festivals of its kind in the world. More than 32,700 attend the 1,100 conference sessions on technology, digital media, Web audience development, and the future of publishing.

Tech innovations are on full display at the festival's exhibition halls, where nearly 600 exhibit spaces are rented. In just four days, more than 65,000 people file through dozens of aisle ways to see demonstrations and product unveilings from robotics, virtual reality, gaming, and more.

SXSW sounds like it's mostly for tech junkies, but it's a treasure trove of profit opportunities for investors. It points to where the money will flow.

One example - Twitter Inc. (NYSE: TWTR ). The site launched March 21, 2006, but it was the SXSW Interactive festival almost a year later that launched the company to fame. Six years after that, the company held one of the biggest social media IPOs ever, raising $14.2 billion. Today, the micro-blogging company is worth $31 billion. The stock has had a bumpy overall run, but has been steadying, with a 60% climb since May 2014.

We've been recommending these three trends for years, but this was one of the most exciting buy signals we've seen yet. Check out the time, energy, and money the brightest tech minds in the world are investing in these sectors...

SXSW 2015 Tech Sector Star No. 1: Wearables

Wearable technology was by far the largest trend we saw in the Austin Convention Center at SXSW Interactive 2015. That includes everything from fitness products, wearable remote controls, virtual reality headsets, and even a "smart" dog collar.

The research firm IDTechEx estimates sales of "wearables," which includes both external wearable items and apparel, will rise to $70 billion by 2024. Annual sales were $14 billion in 2014.

Smart clothing alone is expected to go from practically no sales in 2014 to more than 10 million units in 2015, according the Gartner Group. By 2016, that will reach 26 million.

Money Morning 's Defense and Tech Specialist Michael Robinson first told investors about wearable tech's potential in 2012. He has made a few wearable-tech stock picks since then - but singling out the winners is tricky.

"It's important to note that we're still at the dawn of wearable tech." Robinson said. "It's a bit early to try picking the winners from the losers. What we're looking for now is a way to capture as much upside as possible from the whole sector."

That's why he likes Vanguard Information Technology ETF (NYSE Arca: VGT).

Apple Inc. (Nasdaq: AAPL) and Google Inc. (Nasdaq: GOOG, GOOGL) make up more than 24% of the ETF's holdings. That right there gives us two major wearable plays. Other major players include Intel, Microsoft, and Garmin.

"With its lineup of top tech names - and a concentration in tech's fastest-growing sector - this is a great long-term play," Robinson said. "Vanguard Info Tech is an investment that captures the quick profit potential in wearables while still helping you build a solid investing foundation."

Since our recommendation in October, VGT stock is up nearly 16%. The Dow has gained just 11% in that same time.

This next sector is something that debuted at SXSW Interactive for the first time in 2015...

SXSW 2015 Tech Sector Star No. 2: Medical Tech Growth

SXSW's newest feature this year was the "SX Health and MedTech Expo."

More than 60 exhibiting companies attended the two-day event. There were also more than 40 panel discussions on everything from 3D bioprinting, to the future of cannabis in the market, to Big Data in healthcare.

This was the first year SXSW Interactive offered this health-focused event, underscoring just how much the biotech and health-tech industries have grown.

That's why in October 2014, we recommended the First Trust NYSE Arca Biotech ETF ( FBT ).

FBT tracks the NYSE Arca Biotechnology Index, and has 30 holdings in its portfolio. The holdings are weighted relatively evenly, with the largest holding at just 5.5% of the fund's assets.

"The stocks in the First Trust fund have a median market cap of about $8.4 billion," Money Morning 's Robinson said. "That's large enough to offer stability but small enough to deliver plenty of upside."

Here are just a few of those 30 holdings and the ground-breaking industries in which they operate:

  • Novavax Inc. (Nasdaq: NVAX) develops recombinant vaccines from virus-like particles that treat influenza and respiratory viruses. NVAX has jumped 88%
  • Amgen Inc. (Nasdaq: AMGN) discovers and develops human therapeutics used in oncology, inflammation, and bone disease. It's up 33% in the last year.
  • Bio-Techne Corp. (Nasdaq: TECH) makes clinical diagnostic controls like proteins, antibodies, and diagnostic kits for companies around the world. TECH stock has climbed 14% in the last year.

More than 94% of FBT's holdings are U.S. companies. Of those, nearly 75% are medium, large, or giant cap firms. Risk is also limited - with micro-caps comprising just 2.8%.

Since our recommendation, FBT has climbed 40%.

SXSW 2015 Tech Sector Star No. 3: Cybersecurity

On Feb. 19, we told readers that cybersecurity stocks got two major "Buy" signals in 2015. One was the $14 billion President Obama budgeted for cyber defense and the second was the President's first-ever White House Summit on Cybersecurity.

Here's a third...

There were nearly 40 panel discussions on cybersecurity alone during the five-day SXSW Interactive festival. Topics included surveillance, Big Data collection, malware, and innovative security techniques.

Executives from Dell, Microsoft, and dozens of other tech firms were in Texas to talk about the severity of cyber threats. Several U.S. Congressmen and employees from both DARPA and the NSA spoke as well.

Their concern is reflected in the billions of dollars pouring into cybersecurity measures right now...

More than $95 billion will be spent on cyber defense in 2015 alone. By 2019, that will reach $155.74 billion. That's a 63% growth rate. IBM Corp. ( IBM ) claims its client companies are attacked 16,856 times per year on average.

HACK gives investors a piece of 30 sector leaders at once.

The best way to start investing in cybersecurity stocks in 2015 is to take a balanced approach with the PureFunds ISE Cyber Security ETF ( HACK ).

"One of the things I really like about HACK is its industry-specific diversity," Money Morning 's Small-Cap Investing Specialist Sid Riggs said. "HACK is most heavily invested in the systems software industry, which will prove to be a great stabilizing force for the fund. That's the sphere of the IT sector that's been growing most reliably since 2010, with the consulting firm Gartner Inc. already forecasting enterprise software to grow by 7.3% in 2015."

The average market cap of HACK's holdings is $8.1 billion. The ETF weighs its holdings equally.

"The average weighting of each of the companies in HACK is 3.22%, which means the fund shouldn't get dragged down by the stumbles of any one investment," Riggs continued.

The fund began trading Nov. 12. Since then, it's up 8.2%. That compares to a gain of just 0.8% for the Dow over the same period.

The Bottom Line: The SXSW Interactive festival in Austin, Texas, reiterated three of our biggest profit plays of 2015: Wearables, biotech, and cybersecurity. This is the best time to buy as these industries will continue to grow. Play those markets today with VGT, FBT, and HACK.

Make More Money This Year, No Matter What the Market Does...You can make 2015 your wealthiest year in a few simple moves.You just need to know the three common investing habits to dump immediately, the single most effective strategy for your portfolio, and five stocks to get you started to a wealthier you.Get all of that right now in this exclusive guide...

To get full access to all Money Morning content including our latest Premium Report, "How to Make 2015 Your Wealthiest Year Ever," click here

About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience - for free . Our experts - who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV - deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.

Disclaimer: © 2015 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

VGT FBT IBM HACK

Other Topics

Investing

Latest Markets Videos