My Highest-Conviction Trade for 2025
Believe it or not, I do like technology stocks...
You may be scratching your head right now. After all, I spend a lot of time dissing the sector in this letter.
Many of you will remember my warnings about chipmaker Nvidia (NVDA) – the most obvious bubble in the market (which got hammered earlier this week).
So let me make a clear distinction... I don't like the market-darling artificial-intelligence stocks or the absurd valuations in the venture-capital market.
However, I do love tech stocks that provide sometimes dull but always necessary products. I'm talking about the hardware and software that's essential for business and communication.
Subscribers to my paid publications know I'm a big fan of Cisco Systems (CSCO), for example.
The bulk of Cisco's business comes from "networking." Businesses, institutions, governments, Internet service providers, data centers, and tech companies all buy Cisco's equipment and software to set up in-house computer networks. This technology is a must in today's day and age.
Despite the fact that large parts of our everyday lives wouldn't be able to exist without Cisco's products, the company's income statements aren't going to wow most tech investors.
Cisco isn't racking up eye-popping growth like the hottest tech companies. It's not making headlines or spurring manic buying. But this is actually a good thing...
Because growth-obsessed investors aren't interested in Cisco, you don't see egregious valuations. This is a big reason why we recommended buying shares of Cisco in my income-focused newsletter Income Intelligence last July – a recommendation we're already up 23% on in just six months.
You see, Cisco is an example of what we call a "digital utility."
I coined the term in my Retirement Millionaire newsletter more than a decade ago.
Of course, traditional utilities are public companies that provide specific localities with daily necessities – things like water, gas, and electricity. Many utilities are highly regulated natural monopolies. The government allows these companies to set their rates... usually somewhere between 8% and 10% of return on capital.
Digital utilities are dominant technology companies that have near-monopoly control over a vital service or product. And just like traditional utilities, their businesses drive huge, stable revenue streams.
We love digital utilities... Cisco, Microsoft (MSFT), and Oracle (ORCL) are three such names that we've had our eyes on for several years.
Unfortunately, over the past decade or so, the market has caught on to the beauty of these businesses. After all, who doesn't love steady and reliable cash flows with little business competition?
As a result, many of these companies' valuations have been pushed higher. They're not in extreme territory like the market darlings' valuations are, but they're still fairly high.
Now, I'm part of the Stansberry Portfolio Solutions Investment Committee – the group in charge of making buy and sell recommendations for our exclusive publication The Total Portfolio. And I was tasked with picking my highest-conviction trade for 2025.
My senior analyst and I turned to a digital utility that we're betting will have a monster year.
Despite the high valuations most digital utilities sport, this particular company is trading near a decade-low valuation.
The world we know today wouldn't be possible without this company – and that's no exaggeration. Nearly everyone with a computer or smartphone uses its products every single day. It's a legal monopoly that enjoys some of the most impressive financials we've ever seen.
Folks who buy this stock in 2025 will be perfectly positioned for massive gains as the company moves back to fair value.
And this recommendation is just the tip of the iceberg. Whitney Tilson, Marc Chaikin, Eric Wade, Dan Ferris, and other top editors all shared their top-conviction trades for 2025 in a special report.
If you're already subscribed to The Total Portfolio, you can view that report here. And if you're interested in subscribing to see the full list, click here to learn more.
What We're Reading...
- For Income Intelligence subscribers, our recommendation of Cisco... I Can't Bite My Tongue Any Longer.
- Nvidia stock plummets and loses a record $589 billion as DeepSeek prompts questions over AI spending.
- Something different: RFK Jr., Dr. Oz, and weight-loss drugs: A high-price health clash may be looming.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
January 29, 2025