• Will 5G work indoors?

  • Where is the semiconductor sector headed?

  • How we’ll profit from warrants…

Dear Reader,

Where can investors find the biggest profits?

This is the question at the heart of all of my research services. And there’s a simple answer.

We have to watch where the crowd is going… and then go the opposite direction.

Many of my very best recommendations have been controversial… A breakthrough technology no one else wants to touch. Or a company that just had a bad earnings report or got slammed in the press. Even my decision to remove stop losses during last year’s market crash drew criticism and skepticism.

But when we move against the crowd and are proven right… the profits are spectacular.

We saw this back in 2015 when I first published research on a small cryptocurrency called bitcoin. At the time, it sold for around $240, and few people wanted to hear about it.

But bitcoin recently traded for over $63,000. If anyone listened instead of scoffing, they could have made over 26,000%.

Another example is NVIDIA. I presented at a conference in Nicaragua back in 2016 on this chipmaker. Most people laughed at the idea that NVIDIA – mostly known as a gaming company – could ever amount to much.

But anyone who followed my advice and invested back then… they’re up as much as 1,700%.

These were both great investments for the same reason. They were widely misunderstood by the crowd.

And the reason I’m sharing this now? We’ve got a similar situation brewing…

Recent government action has led to some scary headlines for one type of investment. Investors have panicked and sold, driving prices down.

But these fears are overblown. And they’re giving us a great entry point into one of the most interesting spaces I’ve seen.

That’s why I’m holding an Emergency Briefing on Wednesday, May 26, at 8 p.m. ET. At this presentation, I’ll share all about this opportunity… and how you can get into position.

In fact, I’ll tell you how you can learn several of my top recommendations in this space.

This opportunity is timely… and we don’t know how long the window will remain open.

So I encourage all my readers to go right here and reserve your spot to attend this event.

I promise it will be worth your while.

Now let’s turn to our mailbag questions… If you have a question you’d like answered next week, be sure you submit it right here.

5G will work inside your home…

Let’s begin with a question on indoor 5G:

Question for next week: Is 5G destined to make its way indoors? Seems like everything I read is about how it will speed up cell phones and be good for communicating with cars and how many towers are going to be needed – outdoors, of course.

When and how does 5G get to my desktop or laptop computer indoors? Maybe you’ve covered this already, but if you did, I missed it. May be time to repeat.

– James A

Hi there, James. Thanks for writing in with your question.

Just to get new readers up to speed, 5G is the next generation of wireless technology that is currently being rolled out around the world.

And this new network is up to 100 times faster than our current 4G networks. It will also offer near-zero latency, or delay.

And in simple terms, yes, 5G will make it indoors to our personal devices like our phones and laptops (as long as they are 5G-enabled).

There is some nuance here, however. 5G wireless technology is being deployed over several different frequency bands. And each radio frequency band has different characteristics that affect 5G wireless technology performance.

Most of what has been deployed around the U.S. to date has been over low bands, which results in 5G performance similar to 4G networks. Not very interesting, but it does provide wide coverage.

Verizon has been pioneering millimeter wave (mmWave)-band 5G wireless networks, which deliver the kinds of blazing fast, 1 Gbps+ speeds that 5G was designed to enable. 

These types of network deployments make the most sense in dense population areas, and users have to be within range of each mmWave base station. In rural areas, though, deploying mmWave won’t be common due to the costs associated with doing so.

Where things get interesting is with C-band frequencies that provide a great balance between 5G wireless speeds and latency, and larger coverage areas with respect to the location of the base station.

C-band deployments will be well-suited to provide high performance 5G wireless coverage in our homes.

And it will hopefully become a strong alternative for internet access instead of being held hostage by our CATV companies, which typically charge exorbitant prices for unimpressive internet service. 

For those of us who live within coverage areas of these kinds of networks, fixed 5G wireless broadband will become a service offering.

5G absolutely does work indoors. But it does require that the 5G wireless network is built out in a way to provide such coverage.

And in dense urban areas, that will even mean putting 5G base stations inside some buildings.

Ultimately, building penetration will be enabled by rolling out the small cell network architecture until signal levels inside of buildings enable connectivity.

And I’ve actually confirmed that this works myself. I was even able to connect to a 5G network from the inside of an old bank, right next to the vault.

You can watch my indoor speed test below.

So while there’s still a way to go as these networks expand their coverage, we will certainly be able to access 5G indoors.

And the infrastructure required to make 5G a reality is just one reason I think this is the biggest tech investment trend of the decade.

In fact, I’m convinced the opportunity here is actually five times bigger than I previously thought. As investors, we need to make sure we’re paying attention to 5G technology.

If you want to learn about my top 5G plays, go right here for all the details.

My outlook on semiconductors…

Next, a reader wants to know more about the semiconductor space:

Can you provide an outlook on the semiconductor sector? With the short supply and high demand, what is the short-term and long-term effect on this sector? What is your outlook on when manufacturing will improve to meet the demand and growth for 5G, artificial intelligence (AI), data centers, robotics, electric vehicles (EV), electronics, Internet of Things (IoT), etc.? Thank you.

– Mike H

Hi, Mike – thanks for sending in this question. The semiconductor sector is definitely getting a lot of attention these days, so I’m happy to provide an update.

As you noted, semiconductors are used in many technology trends. They are the “brains” of all electronics. And as technologies like artificial intelligence, robotics, and 5G become more prevalent and complex, the demand for semiconductors increases.

That’s why the recent supply shortage has been causing so much trouble.

One of the areas most impacted by the recent shortage has been automobiles… which means fewer new cars have been hitting the roads. Even rental agencies have struggled to find enough new vehicles.

And the rise of EVs is one of the main factors for the crunch in this space. Each EV requires as much as five times more semiconductors than a traditional internal combustion engine car.

I wouldn’t be surprised to see the number of EVs sold in 2030 jump well over 40 million – perhaps as high as 50 million. For this reason alone, we can predict the semiconductor market will continue to expand over the next several years.

And right now, the manufacturers of these chips are playing catch up.

Semiconductor foundries like Taiwan Semiconductor Manufacturing Company, Samsung, and even Intel are spending tens of billions of dollars to build new factories to keep up with this growing demand.

But it takes time to build these complex factories and get them prepared for mass production. Sometimes, this requires the construction of entirely new fabrication plants, which usually takes two or three years.

And sometimes manufacturers simply add another manufacturing “line” to an existing semiconductor plant. This can be done far more quickly, in less than a year.

So, there is some nuance in the answer. We will actually start to see relief from many of the shortages toward the end of this year.

But there are sectors of the semiconductor market that will see shortages well into 2022.

And the demand for bleeding-edge manufacturing processes – which by next year will be 3 nm semiconductors – will never slow down. Because the rate of technological change increases every month, the demand for more powerful and more efficient semiconductors will be always exist.

Following up on warrants…

Let’s conclude with a question about warrants:

Hello. I’m a recent Blank Check Speculator member, currently invested in three special purpose acquisition corporations (SPACs). I wanted to follow up on the “Boosting Our Investments with Warrants” answer in the recent Bleeding Edge email.

I will split my units into shares and warrants as recommended. (By the way, Merrill Lynch charges $30 to do so.) As I understand it, the warrants will allow me to purchase future shares for approximately the cost of the original unit, or close to it. (Please correct me if that is not right.)

I then hold those shares until they reach a value I deem an acceptable rate of return, and then I sell those shares as normal? The Virgin Galactic example showed initial shares at $10, but the warrants looked to be closer to the $1–$2 range. Do I monitor the warrant price and sell the warrant, or convert the warrants to shares and sell shares? A bit of clarification would be appreciated. Thank you.

– Michael S.

Hi, Michael. Thanks for being a subscriber and for sending in your question. I commend you for working to understand our strategy.

A warrant gives you the right – but not the obligation – to buy a share of the stock at a certain price within a certain time frame (usually five to seven years).

When you exercise a warrant, you’re buying another share of stock from the company for a predetermined price (often $11.50 a share for most SPACs).

Keep in mind, of course, that warrants can be a higher-risk play than simply buying shares. They work somewhat like long-term call options…

And like options, warrants can expire worthless. It is possible to lose 100% of your money if the price of the stock is below the $11.50 strike price when the warrants expire.

But time is on our side. Because warrant expiration is years away, it gives the underlying company time to execute its strategy and grow in valuation.

In this way, warrants can have lower risk than options that have a shorter time to expiration.

These factors will all figure into our strategy for profiting from our warrants.

In most cases, we’ll receive our warrants when the units split into shares and warrants, and then we’ll look for an opportune time to sell them when they run up in price.

That means that we don’t have any plans to exercise them. This is a good option, as warrants will often provide even greater profit potential than our shares. This is how investors could have achieved a spectacular 1,371% profit on Virgin Galactic.

However, it is possible we may choose to increase our position in a company by exercising warrants on occasion. This option is certainly valid if we simply wish to increase our position in the company our SPAC merges with.

Ultimately, our decision will come down to making the best choice to maximize our profits. And I will always notify subscribers any time I recommend selling either our shares or our warrants.

That’s all we have time for this week. If you have a question for a future mailbag, you can send it to me right here.

Have a good weekend.


Jeff Brown
Editor, The Bleeding Edge

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