Getting in early on a growing company in a burgeoning market can turn $1,000 into $1 million, as some investors have experienced with Apple or Amazon. For those who might have missed out on the start of those two companies, the good news is that we're in the early stages right now in the 5G, cannabis, and metaverse markets.
The long-term potential for three companies in particular is enormous. While they operate in different sectors, Marvell Technology Group (MRVL 1.55%), Green Thumb Industries (GTBIF 2.46%), and Nvidia (NVDA -3.33%) share something that makes them excellent additions to any portfolio: For them, the future is now.
1. Marvell
As 5G technology penetrates its way into businesses and the lives of consumers, Marvell is establishing itself as an early leader specializing in data infrastructure networking and storage. Its networking products include application-specific integrated circuits, ethernet solutions, and processors, and it offers storage products such as fiber channels and storage processors. All of these products support growing demand in data centers, the automotive sector, and enterprise markets.
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In June, U.S. News & World Report highlighted Marvell, along with big-name competitors Broadcom and Qualcomm, as top 5G stocks to own in 2021. Leading research company Gartner (NYSE: IT) says the worldwide 5G network infrastructure market is on pace to grow 39% in 2021 on a year-over-year basis.
According to Bank of America, companies focused on wireless infrastructure are experiencing the early stages of a cycle that is expected to last for 10 years. This coincides with market growth projections by Grand View Research, which said that the global 5G services market, valued at $41 billion in 2020, will erupt at a compound annual growth rate of 46% through 2028. And the infrastructure market, valued at only $2.6 billion in 2020, is projected to outpace the overall services market with a 50% CAGR over the same time frame.
Marvell has had a busy 2021 thus far, with big announcements in each quarter. In March, it teamed up with Samsung to unveil a new system on a chip. The collaboration will support 4G and 5G networks simultaneously while enhancing 5G performance and cutting power consumption by up to 70% compared to previous solutions. The system will be used in Samsung's larger multiple-input-multiple-output (MIMO) radios for improved wireless communications.
A month later, the company completed its acquisition of Inphi, adding a high-speed electro-optics portfolio to improve connectivity for data centers and carrier networks. The company expects Inphi to expand its addressable market to $23 billion, while accelerating its CAGR to 12% on a year over year basis. Its previous five-year annual growth rate was just 1.72%.
Before the end of the second quarter, it announced a quarterly dividend of $0.06 per share to shareholders of record as of July 9, a yield of 0.5% -- unchanged since the fourth quarter of 2020. By comparison, the S&P 500's average yield is at less than 2%.
The dividend announcement was followed by another acquisition, that of Innovium, adding a portfolio of "cloud-optimized switches" that help expand its ethernet offerings. Innovium is expected to add $150 million in revenue in fiscal 2023.
All signs point to go for Marvell as it makes moves to be a leader in 5G technology now and in the future. It's feeding off record revenue of $1.07 billion in the second quarter, a 48% increase year over year and a 29% sequential improvement over the first quarter of this year. Record revenue was driven by strong sales in the data center market, where growth is expected to continue into the third quarter and beyond.
2. Green Thumb Industries
As we experience the 5G technology revolution, there is another industry that has its eyes on a future prize. The cannabis market has been growing exponentially throughout the U.S. over the past few years. Legal cannabis sales in the U.S. were up by 46% just from 2019 to 2020, hitting $17.5 billion in total.
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Leading the way in these state-governed markets is California, with $3.8 billion in 2020 sales, followed by Colorado at $2.2 billion and Illinois (the home state of Green Thumb) at just over $1 billion.
Green Thumb has been a strong contributor to these sales totals, benefiting from growing demand in Illinois and Pennsylvania in particular. As a multi-state operator that's vertically integrated, Green Thumb manages a full supply chain. It processes and distributes its products in 14 U.S. markets through 16 production facilities and 62 dispensaries, with licenses for an additional 49 retail locations.
Its second-quarter earnings report showed revenue growth of 87% for the six months ended June 30 on a year-over-year basis versus 2020, bringing its six-month revenue total to $416 million. The company also registered a fourth consecutive quarter of positive GAAP income, at $0.10 per basic and diluted share.
As of July, 19 states and the District of Columbia allow recreational-use marijuana. As more states adopt similar laws, there is a growing belief that ultimately it will be legalized at the federal level. If that happens, there might be a large group of investors wishing they had bought shares of this future leader.
3. Nvidia
It's extremely likely that you've used Nvidia's products, whether you know it or not. As a leader in artificial intelligence and graphics processing units, the company boasts a powerful line of products for several industries including gaming, engineering, supercomputing, and robotics. Its products are found in self-driving vehicles, data centers, hospitals, augmented and virtual reality devices, and predictive analytics, to name a few.
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What you might not be familiar with is the metaverse -- a term used for the future of Internet collaboration -- and Nvidia's role in creating a realistic interactive and collaborative collection of virtual 3D worlds. Supported by its RTX technology, Nvidia Omniverse provides a shared platform on which live collaboration takes place between users and applications with real-time speed and simulated reality. Examples might include interaction of users within video games, or perhaps attending a business meeting as a hologram.
The metaverse is expected to be the future of work and play, and an increasingly common aspect of our daily lives. Other companies with early involvement include Facebook, Roblox, Unity Software, and Microsoft. All of these except for Facebook are currently listed in the top 10 holdings of the Roundhill Ball Metaverse ETF (NYSEMKT: META), with Nvidia leading the way in asset weight at 8.7%, a full 3% asset weight higher than the second-ranked holding.
Nvidia stock has been on a tear lately, supported by second-quarter record revenue of $3 billion and a 4-for-1 stock split on July 20. But even after a year-to-date share price surge of 71%, it likely still has plenty of room to grow. The average analyst target is slightly above the current price of $223, but the high is $328, representing a potential 47% increase.
That might seem high after such big gains of late, but according to research firm Strategy Analytics, the global metaverse market is expected to reach $280 billion by 2025 -- six times its $46 billion value in 2020.
The future is now
Of these three companies, I'd consider Marvell and Nvidia no-brainer opportunities to make a lot of money in these burgeoning markets. As for Green Thumb, its footprint is expanding in a cannabis market that shows great promise, but it might be a bit riskier than Nvidia and Marvell. No one really knows if or when recreational-use marijuana will be legal federally. So the risk may be a bit greater in the marijuana stock, but the potential reward is outstanding, and the company has proved it can make money as a multi-state operator regardless of federal cannabis laws.