The beauty of investing in technology companies is that being first with a unique idea brings in billions in revenue. The drawback is that quick riches brings imitators. As investors you have to not only find the companies that are growing profits rapidly but have a competitive advantage that is sustainable. Not just for a few years, something that really builds loyalty or is near monopolistic. The moat defending your business needs crocodiles and barbed wire.
In many areas of technology, the moats just aren’t that wide. Pandora’s music DNA is an interesting spin on a music subscription service but iTunes Radio has already captured a portion of Pandora’s subscriber base. This is within the first six months of iTunes Radio going live.
Think of how the Robber Barons made their money. The Carnegies and the Vanderbilts made their money in infrastructure. The Carnegie family was the main steel supplier to the growing United States and the Vanderbilts built railroads to enable transportation. Other businesses couldn’t function without the services that were provided by these families.
This is the perfect type of investment. Explosive growth, sustainable profit stream, defensible industry. Where can you look to find that type of company? You need to look up.
How often are you on your mobile phone? 10 times a day? 20 times? How about the internet? This has become an always on tool for business. But you cant use it when you are flying.
In order to connect jets in flight, you essentially need to build out a telecommunications company from scratch and that just isn’t done anymore. Companies like Verizon and AT&T are regulated to death by the FCC and don’t have the financial flexibility to make infrastructure investments for lower margin subscribers. Satellites offer an opportunity but it is so expensive to use this method that smaller planes would not be cost effective to connect. Only connecting half a fleet would not be an option for the air carriers who want all of their planes covered if they are going to make the investment in technology. Because of all of these complexities, there is only one company well positioned to capture the market: GOGO Inc.
GOGO started out as the company that provided calling access to land based phones via the Airphone that is embedded in the seat back above the tray tables. In order to build out the network to support calling, the company built a land based tower network that aims up at air travel. It was a huge expense that is now paying off as the need for internet access and mobile phone use has skyrocketed.
GOGO is the only game in town for airlines but airlines aren’t the only opportunity for GOGO. In fact, business jets are growing faster and are more profitable for the company. If you could afford to have your own jet, wouldn’t you want your mobile phone to ring? This is the market that is driving the growth and GOGO’s dominance in the US is helping it get a foothold in international traffic.
If you were looking to be a Robber Barron this is your chance, and my stock picking service is tracking stocks like this one with a view to entering at just the right time- always be careful not to buy too early.
Tracking the Jackpot,
Tom Anderson.
Note from Midas Legacy Editor: A former computer programmer, Tom attended NYU’s MBA program and then joined a hedge fund. Today, retired from Wall Street, he manages a small number of private accounts. He also runs our tech-stock recommendation service, Tech Stock Jackpot, available by invitation only.