The world around us is in the midst of a digital transformation and also in the early stages of a fourth industrial revolution that are changing the way we work, live and relate to each other, and are also offering up abundant opportunities for investment.
What is digital transformation (DT)? It is the process of using digital technologies to create new – or modify existing – business processes, culture, and customer experiences to meet changing business and market requirements. It involves reimagining how we do business and engage with others. It leads to increasing revenues, improving operating and people productivity, and to better customer outcomes.
What is the Fourth Industrial Revolution (4IR)? It is a way of describing the blurring of the boundaries between the physical, digital, and biological worlds. It’s a fusion of advances in artificial intelligence (AI), robotics, the Internet of Things (IoT), 3D printing, genetic engineering, quantum computing and other technologies. It follows the first revolution in the 18th century in which advances such as the steam engine led to mechanization; the second revolution in the 19th century whereby electricity and related scientific advancements led to mass production; and the third revolution in the 20th century that saw the emergence of personal computers, information/communications technologies and the internet.
Like the revolutions before it, the Fourth Industrial Revolution brings disruption and change but also the potential to raise global income levels and improve the quality of life for populations around the world. The pace of innovation that is occurring is unprecedented.
According to IDC, a global provider of market intelligence for the technology world, global spending on digital transformation exceeded $1 trillion in 2018 and is expected to approach $2 trillion in 2022.
The Fourth Industrial Revolution builds on advances in digitalization, and brings opportunities to revolutionize businesses and improve human conditions. The underlying basis of 4IR lies in the advent of the smartphone and cloud computing, and in advances in communication and connectivity.
At Red Pine, we are introducing fourteen businesses that we believe have strong long-term business growth prospects based on attributes that provide them the opportunity to be leaders in their respective areas of interest related to DT and 4IR.
These businesses are large, mid-size and small in scale, and are in different stages of development and growth prospects as measured by revenue growth. The information we are providing in this report is not a recommendation of any of the businesses but rather a starting point to get to know them and what they’re doing. Our list of businesses may change at any time either via additions or deletions.
We have built this list using our selection criteria for what we deem to be exceptional businesses:
- great employee culture and a customer-first mindset;
- products/services with sustainable and growing competitive advantages;
- proven track record and above-average long-term growth prospects;
- high-integrity leaders with meaningful ownership and ability to reinvest cash flow wisely;
- and, a strong balance sheet and cash flow for self-funding the business
A note about these businesses: They are being driven more and more by digital technology over time and in the process becoming more software-based and less hardware-based businesses.
Healthcare Businesses
| Period ending 2/28/19 / Stock |  Price 1/15/19 | Incept Date | Total Return | Annual Return | Business Website |
|---|---|---|---|---|---|
| Stryker Corporation (SYK) | $162.14 | 5/2/79 | 262,915% | 21.85% | www.stryker.com/ |
| UnitedHealth Group (UNH) | $256.87 | 10/17/84 | 193,715% | 24.62% | www.unitedhealthgroup.com/ |
| Danaher Corporation (DHR) | $105.04 | 1/2/84 | 127,452% | 22.54% | www.danaher.com |
| Varian Medical Systems (VAR) | $124.68 | 3/31/99 | 3,520% | 19.64% | www.varian.com/ |
| Dexcom, Inc. (DXCM) | $147.05 | 4/14/05 | 1,086% | 19.50% | www.dexcom.com/ |
| Veeva Systems (VEEV) | $101.40 | 10/16/13 | 490% | 39.13% | www.veeva.com/ |
- SYK’s products/services are used in orthopedic implants (assisted by robotics and 3D printing), medical/surgical equipment, cranial, neurovascular and spine markets.
- UNH’s tech-enabled health services and health benefits programs are aimed at better care and lower costs.
- DHR’s products/services are used in life science, medical diagnostics, food and water applications.
- VAR is a leading global provider of systems and services for treating and diagnosing cancer.
- DXCM’s software-based continuous glucose monitors (CGM) are helping revolutionize diabetes care.
- VEEV’s cloud-based software helps life sciences businesses modernize their most critical functions.
Other Businesses
| Period ending 2/28/19 / Stock | Price 1/15/19 | Incept Date | Total Return | Annual Return | Business Website |
|---|---|---|---|---|---|
| Adobe, Inc. (ADBE) | $242.36 | 8/13/86 | 154,312% | 25.29% | www.adobe.com/ |
| Salesforce, Inc. (CRM) | $149.19 | 6/23/04 | 5,851% | 32.06% | www.salesforce.com/ |
| Accenture PLC (ACN) | $146.89 | 7/19/01 | 1,274% | 16.03% | www.accenture.com/ |
| Splunk, Inc. (SPLK) | $117.88 | 4/29/12 | 699% | 35.36% | www.splunk.com/ |
| Workday, Inc. (WDAY) | $164.47 | 10/12/12 | 607% | 35.05% | www.workday.com/ |
| Tableau Software (DATA) | $122.31 | 5/7/13 | 325% | 28.42% | www.tableau.com/ |
| New Relic, Inc. (NEWR) | $89.11 | 12/12/14 | 360% | 43.59% | www.newrelic.com/ |
| Nutanix, Inc. (NTNX) | $48.74 | 9/30/16 | 111% | 36.11% | www.nutanix.com/ |
- ADBE’s cloud-based software tools help organizations and people be more creative and productive.
- CRM’s cloud-based software drives applications for sales, service, marketing and commerce.
- ACN’S technology-enabled consulting services help organizations operate more effectively.
- SPLK’s operational intelligence software helps organizations bring utility to machine-generated big data.
- WDAY’s cloud-based software helps organizations optimize human, financial and business planning resources.
- DATA’s visual analytics software allows people and organizations to see and understand their data better.
- NEWR’s digital intelligence software helps organizations monitor and manage their digital systems.
- NTNX’s cloud-based software helps organizations cost-effectively manage and scale their IT infrastructures.
Red Pine perspective: Our experience in researching and investing in medical technology and information technology-based businesses spans over 46 years. When investing, we look for two attributes: (1) suitability for each client, and (2) a rational stock price when we invest.