The Coming Data Explosion and Two Stocks to Exploit It
You don’t need to be the next Einstein to realize that we’re living in an age of increasingly vast digital information.
Businesses alone create and use enormous amounts of data.
Take retailing giant, Wal-Mart (NYSE: WMT), for instance, which now handles more than one million customer transactions every hour.
All that information gets fed into databases that store more than 2.5 petabytes of data – the equivalent of 167 times the number of books in the Library of Congress! And Wal-Mart is just one of thousands of companies handling such volume.
Consumers are data gluts, too. Every single minute we spend texting, snapping photos, or surfing the web on our mobile devices generates data.
Quite literally, data is everywhere. And of course, this proliferation of data isn’t expected to stop anytime soon. It’s estimated that the amount of data we create as a society will double every 18 months.
The explosion in business data is even more mind-boggling. By 2020, IDC expects business data to increase 44 times to 35 zettabytes (1 zettabyte = 1,000, 000,000,000,000,000,000 bytes).
With that in mind, is there any doubt that this qualifies as another “forever growth trend,” much like the exploding use of mobile devices? Not in my mind. And that means we can exploit the trend for profits.
Data, Data Everywhere and Not Enough Room to Store It
Given the hyperbolic ramp up in the amount of data being generated, it should be no surprise that demand for data storage outstrips supply. Or that Tier1 Research expects this imbalance to persist through at least 2014.
And that plays right into the hands of companies that provide data storage services. Including Denver, Colorado-based CoreSite Realty Corp. (NYSE: COR).
Structured as a real estate investment trust (REIT), the company operates a portfolio of 11 data centers. The centers are located in some of the largest and fastest-growing areas in terms of demand – Los Angeles, Chicago, New York City, San Francisco Bay and Northern Virginia.
Its business is remarkably simple. All the company does is rent out data center space – from an entire building down to a single cage or cabinet. And since CoreSite’s structured as a REIT, it’s required to pay out 90% of the profits generated to shareholders. At current prices, the stock sports a respectable 3.1% yield.
Not bad. But with another data center under construction, as the company’s footprint and profits grow, so should its dividend.
Ultimately, CoreSite represents a conservative way to play the exponential growth in data. If you’re after a more aggressive play, don’t fret. They exist, too.
The Data Supply Problem…
If we simply focus on the vast amounts of data we need to store, truth is, we ignore a significant part of the market. More than storing data, businesses need to access and analyze that data. Quickly.
That’s where a Salt Lake City, Utah-based company I just recommended to subscribers of The White Cap Report comes in…
Its products allow customers to get data to where it needs to be processed and analyzed, stat!
It does so by bringing just-in-time manufacturing – where the raw materials are located right next to the factory to ensure availability when demand hits – to the datacenter. Only in this case, instead of putting raw materials close to the factory to be processed, it puts critical data closer to servers to be processed.
The end result? Dramatic increases in performance and efficiency.
For instance, one customer was able to process almost 10 times more queries over a specific period of time. Another improved access speeds by roughly 66%. And yet another company reduced its datacenter energy consumption by more than 40%.
Out of fairness to paying subscribers, I can’t reveal the identity of the company here. But I can tell you it’s not the only one with exposure to this compelling growth opportunity.
Other companies you might want to consider include SanDisk Corp. (Nasdaq: SNDK), EMC Corp. (NYSE: EMC) and Micron Technology (Nasdaq: MU). They’ll also benefit from this forever growth trend in the coming years. Just not as much, in my opinion.
For those of you who are already members of The White Cap Nation, simply consult your November issue to find out my favorite (and most lucrative) way to play this boom.
Ahead of the tape,