Updated: Jan 22
5G networks are coming and they’ll change your life in lots of ways. Are you positioned to capitalize? Let's start this article with the history of the "G's.
Once every decade, wireless technology experiences a major paradigm shift.
1G 80's: The first generation wireless telecommunications. Those "Brick" cell phones you see in movies from the 80’s are from the 1G era. They weighed 2 pounds, offered just a half-hour of talk time before recharging, and they where sold for $3,995.
2G 90's: Second generation wireless was a digital standard, circuit-switched technology. 2G improved the quality of voice traffic but had limited data functionality.
3G 00's: Third generation wireless was a big breakthrough. When 3G Phones rolled out in 2008, it was twice as fast as previous, half the cost, had a built-in GPS, and unleashed the App Stores.
4G 10's: Fourth generation wireless services is the current standard. 4G is much faster than 3G, which allows us to use our phones to catch an Uber, stream movies on Netflix, post new photos to Facebook, and connect on FaceTime.
And now its time for 5G!
5G stands for fifth-generation mobile networks and whatever happens after the launch of 5G, consumers should see a quantum leap in speed and reliability. Aside from speeds ten times faster than your home WiFi or the 4G on your phone right now, 5G internet will make lots of new features possible. The way we watch, talk, and interact with our connected world will see some drastic changes.
5G wireless is a reality, and it's gearing up for broad adoption. So it should come as no surprise that we're examining this sector to find the best investment opportunities.
The easiest way to invest in 5G would be in ETF's. This is a basket of equities collected under one trading symbol and traded as a single entity. They have gained in popularity with investors in recent years because they offer instant diversification and give investors a simple way to gain immediate access to the broader market or specific investment themes.
The Defiance Next Gen Connectivity ETF (FIVG) — ticker symbol FIVG — launched earlier this year.
The investment seeks to track the total return performance, before fees and expenses, of the Bluestar 5G Communications Index. The fund uses a passive management approach to track the total return performance, before fees and expenses, of the index. The index consists of a tiered, modified market capitalization-weighted portfolio of the U.S.-listed equity securities, including of companies whose products or services are predominantly tied to the development of 5G networking and communication technologies. At least 80% of the fund's total assets will be invested in the component securities of the index. It is non-diversified.
Remember Nokia? A leader of cell phones before the smartphone pushed its phones aside. As a result, the company redefined itself over the last few years. Although it finally developed its own smartphone, Nokia has taken its place among 5G stocks mostly as an equipment provider, furnishing wireless carriers with the hardware necessary to provide 5G services to their customers.
With a list including the likes of O2, T-Mobile US, Verizon, Vodafone Italy and Zain Saudi, the team is not unveiling how many base stations it has actually shipped, though it does appear it is keeping momentum with rivals. Nokia is claiming to have signed commercial 5G contracts with 63 customers. The team is also suggesting it has put together a hording of more than 2000 5G patents and has contributed technology to 18 live networks across the world.
Nokia (NOK) trades more than 80% below its 2007 high. If it gains more prestige among 5G stocks, it could return to its old highs within a few years, or perhaps beyond.
Cisco Systems Inc.
Another big component of the 5G revolution is security against data seepage and connections. Many 5G installers may look to Cisco Systems Inc. (CSCO) for hardware and software designed to protect connections and networks worldwide.
Cisco says it expects rapid future development of 5G mobile technology will be a boon for industrial IoT use cases. The company wants to transform networks end-to-end, making Cisco equipment a critical component in delivering 5G faster. This technology is designed to encompass every aspect of 5G into a seamless network, providing security and enhancing video optimization.
Cisco paid its first dividend in 2011, and it has increased these payouts every year since. Today, CSCO stock pays an annual dividend which yields about 3%. Hence, Cisco stock offers a reasonable P/E and an above-average dividend yield that will probably rise on a yearly basis. With 5G revenues funding its profits, CSCO stock should hold investors in good stead for years to come.
Ericsson is a Swedish multinational networking and telecommunications company headquartered in Stockholm. The company offers services, software and infrastructure in information and communications technology for telecommunications operators, traditional telecommunications and Internet Protocol (IP) networking equipment, mobile and fixed broadband, operations and business support services, cable television, IPTV, video systems, and an extensive services operation.
Ericsson will be one of the companies on the front lines for the 5G rollout as it supplies telecom companies with network upgrades, radio network hardware and software. Also, the fact that Ericsson is a direct competitor with Chinese-based Huawei doesn’t hurt either.
Ericsson is also planning to partner with TDC and Telenor to launch the first 5G network in Denmark and Norway, which could serve as a test case for other 5G networks across the globe. It is also working with the Kingdom of Saudi Arabia to upgrade government and private sectors to 5G capability.
Disclaimer: This is not a buy or sell recommendation. The author of this article does not own shares in any of the assets mentioned above. However I do have them on my watchlist and I might take a position.