If you have $30,000 to invest and are looking to strike it big in a decade or so, then it's a good idea to look at some companies exposed to megatrends in the economy. I think industrial software company PTC(NASDAQ: PTC), infrastructure software company Bentley Systems(NASDAQ: BSY), and machine vision specialist Cognex(NASDAQ: CGNX) fit the bill. They are all established companies with technology that's highly likely to be widely adopted in a decade. If so, their revenue and earnings will expand dramatically. Here's why all three will suit speculative investors with risk tolerance.
An exceptional growth stock benefiting from digitization
It's easy to visualize the changes in the consumer world from the increasing use of digital technology through internet-enabled devices. They are a ubiquitous part of our everyday life. However, the most significant impact of the Internet of Things (IoT) may well come in the industrial sector.
That's where PTC comes in. The company's computer-aided design, or CAD, software is used to design physical products, while its product lifecycle management or PLM (PTC is the market leader in this category) manages the physical asset from inception to production and through to disposal via the creation of a mass of data. There's more. PTC's Internet of Things, or IoT, connects the physical asset to the digital world, enabling a "digital twin" to be created, simulated, and modeled using real-time data to predict the physical asset's behavior better. Finally, PTC's augmented reality, or AR, solutions help users digitally overlay complex information onto a physical asset.
While I appreciate this is hard to visualize off the bat, consider wind turbine company Vestas, a PTC client. CAD software designs turbines and equipment, while PLM helps Vestas control engineering/manufacturing and customize solutions for customers. IoT connects the turbines and gathers a mass of real-time data to better model turbine performance, so Vestas can better design, modify, and service them.
That's just one real-life example, but as manufacturers increasingly see the benefits of digitalization, then PTC is likely to experience strong growth over the next decade.
An infrastructure stock for your portfolio
Staying on the theme of digitalization, Bentley is another company whose software solutions look set to experience strong growth in the coming decade. Bentley is a leader in infrastructure engineering software, and its key growth kicker is the increasing adoption of digital technology in the infrastructural sector.
Traditionally, engineers design infrastructure projects (roads, bridges, transportation, utilities, power/water/electricity networks, and many other things lumped under "civil and structural engineering") using 2D drawings. However, this is slowly migrating toward using 3D models with the increasing use of technology and software. That trend will continue, and alongside it, so will the adoption of simulation as well as digital twin technology.
With Bentley's software, infrastructure can be designed, and digital twins of, say, a bridge, a hydroelectric plant, or an electrical network can be created. In addition, the mass of data created (most of which is generated for decades after the project is finished) by scans (sometimes using drones) and IoT-enabled sensors can then be used to observe changes and predict future performance. It's a significant development in the infrastructure world, where previously, projects were designed and acted upon by multiple agents on a contractual basis -- the data and information on the project ended up being fragmented and held in disparate files.
With the excitement around the $1 trillion infrastructure bill and the need to "go digital" to maximize the productivity of the investment over the long term, Bentley has plenty of growth tailwinds behind it.
The machine vision market will grow
The machine vision leader has enjoyed strong but sporadic growth over the last decade. Its traditional core market is in the automotive sector (which can always be relied upon to be an early adopter of automated technology for car production lines).
Data by YCharts
However, in the last 10 years, Cognex has developed Apple as a significant customer (helping control the positioning of screens on mobile phones, for example) in its consumer electronics end market. In addition, it will surprise only a few people if Cognex's significant, as yet unnamed, customer in logistics turns out to be Amazon.com.
Consequently, Cognex is establishing its technology with top-tier players -- auguring well for future adoption by lower-tier players.
Its growth is lumpy, and 2022 wasn't a vintage year for the company. Automotive production expectations were scaled back through the year, as were mobile phone sales estimates. In addition, Amazon and others reduced expansion plans in the face of a consumer spending slowdown, causing a cooling of torrid growth rates on e-commerce warehousing. There was even a fire at a contractor site to contend with.
Still, growth investors buy growth stocks for the long-term outlook. If you hold Cognex for a decade, the current weak period will likely be forgotten, particularly if Cognex hits management's target for 15% annualized growth over the long term.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon.com, Apple, and Cognex. The Motley Fool recommends PTC and recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
