Building Wealth Imagine walking the streets of New York City in the early 1900s.
If you looked up, you could barely see the skyline. But not because of tall buildings – the world's tallest was the Metropolitan Life Tower at only 50 stories tall. The reason: Tens of thousands of electrical wires lined the streets.
In the early days of electricity, small, unregulated power generators competed with each other for customers. Confusion reigned as demand grew for lighting and other luxuries electricity promised. In New York alone, the market churned constantly as hundreds of startup providers with redundant networks came and went. Consumers couldn't be sure who could provide the power from month to month or at what price. Decades later, monopolies (regulated by government) provide power to the majority of end-users.
A similar process has happened in the digital age. Little more than a decade ago, Internet users could choose from among 10 different search engines to surf the Web. Today, just a couple compete for that role. Fifteen years ago, consumers could work from multiple (and incompatible) word processing packages.
Today, you can find only a couple (and arguably only one). Consolidations and mergers have led to a handful of "Digital Utilities." Each company is a dominant player in its sector...
Traditional utilities have been a cornerstone of retirement investing. They are considered safe-to-buy businesses that supply electricity and natural gas to every household. And utilities throw off cash dividends that can supplement a retiree's income. I've owned a few utilities in my investment career, each of which supplemented my cash flows well.
But today we're looking at a new type of utility business – Digital Utilities.
These companies enjoy the same kind of monopoly position on a vital service as old-school power and water companies. But these new utilities are even better than conventional utilities. Old-fashioned utilities were limited by geography – for instance, a power company in Baltimore wasn't going to open a branch office in Toronto.
But nothing constrains these new Digital Utilities. They are international in scope. They can sell their vital services anywhere in the world. Even better, they're lightly regulated. Their pricing power is unlimited. So their growth potential (and their stocks' prospects for capital gains) is wide open... at the same time that they pay safe, reliable income – just like a utility.
And just like an old-school utility, these companies are vital to our way of life. In fact... Every time you turn on a computer, you're paying them...
Moreover, they sell their goods and services around the world, so local government regulators can't control them. Regulators can't limit their profits, prices, and return on capital the way they control traditional utilities.
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The information flow over the Internet and airwaves is the new electricity and gas of this century – it's the new world of Digital Utilities.
You've seen their names before... companies like Oracle, Qualcomm, and Intel. They have products we use every day. Every time you use the computer on your desk at home, the cell phone in your hand, or your favorite search engine... these businesses collect a little more money.
And, thanks to the current bull market, many Digital Utilities have seen their stocks skyrocket. That's made many of the companies expensive.
Longtime readers know I like finding deals... I want to invest in safe, shareholder-friendly companies without overpaying for them.
I recently wrote about one of my favorite Digital Utilities in my monthly advisory, Retirement Millionaire.
Just a few years ago, it looked like the end had come for this stalwart technology company. After a string of bad decisions and missed opportunities, it was obvious that this formerly innovative company had lost its way.
Today, this company is turning out to be that rarest of beasts – an old, legacy tech company that has rediscovered its roots as a creative force.
It's staging an improbable renaissance in Silicon Valley. It's not just growing and innovating... It's proving it's still one of the smartest technology companies in Silicon Valley.
Few investors realize that its stock is poised for growth... making now a great time to get in.
To find out more about the tech company that's coming back to life, click here. Current Retirement Millionaire subscribers can read all about it here. And if you'd like to learn how to become a lifetime subscriber to Retirement Millionaire so you never miss an opportunity like I'm seeing now, click here.
What We're Reading...
- What happened to these once popular search engines?
- Something different: Can you survive on just one food?
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Retirement Millionaire Daily Research Team
March 1, 2017