Global Trader: Look Beyond Silicon Valley For ’90s Style Innovation

Call me contrarian: for years now I’ve watched aghast as mighty Apple (AAPL) swelled to what’s now a $2.85 trillion market capitalization. Sure, the company does great things, but how much bigger can it realistically get?

And a lot of its trillion-dollar counterparts aren’t much more attractive as long-term growth stories. Silicon Valley succeeded almost too well and now the stocks are simply too big, prisoners of their own past success.

To have any hope of repeating the miracle of the iPhone revolution, you now need to dig into the market for companies that aren’t even 1/1000 the size of AAPL today.

That often means going overseas. Innovation doesn’t stop at the U.S. border or even at the California state line.

Unfortunately, foreign tech companies just don’t have the active following as AAPL or AMZN at the beginning of their ramp to glory. The rewards may be higher in the long haul . . . but the effort involved in tracking them down and separating the winners from the rest is much higher as well.

Nobody ever said this was easy. If you’re looking for global tech companies, start with one fact in mind: add up every single foreign tech stock listed on Wall Street and they won’t add up to AAPL in terms of market weight.

That’s just how big Silicon Valley has gotten. And there are some impressive pure tech stocks based overseas riding that calculation . . . chip makers like Taiwan Semi (TSM) and ASML (ASM), IT consultants like Infosys (INFY) and Accenture (ACN).

These are the biggest foreign tech stocks available to U.S. investors. The four of them together barely even add up to Tesla (TSLA) . . . and let me tell you, they’re a lot more critical to the global economy than even the most brilliant master plan Elon Musk has hatched so far.

That’s part of the secret of global tech. The companies can be both incredibly dynamic and ubiquitous, but the stocks are not usually considered thrilling.

None of the stocks I just mentioned trades at a valuation more elevated than AAPL. In terms of revenue multiples, they’re practically bargain priced.

It’s not what you might expect in terms of the go-go “Silicon Valley experience.” But there’s an aspect of security here. Unlike truly inflated tech stocks, you aren’t paying so much that you need to worry about the Fed.

Low valuations aren’t as vulnerable to higher interest rates. There’s no froth in these stocks and very little operational risk. If any of these companies stumbles, we’re all going to have problems.

But with the exception of INFY, they’re all down 10% or more YTD. I suspect it’s because their frothier counterparts have had a contagious impact, forcing index fund managers to sell good stocks as well as bad ones.

That’s an opportunity. Buy the dip with confidence.

And if you’re looking for the long-term innovation experience, I have to say Shopify (SHOP) remains one of my favorite pure tech companies based outside the United States.

If you know the company, you’ve probably forgotten that they’re Canadian. I often call SHOP “the small business Amazon” because that’s what they do every day . . . help boutique retailers sell online.

This is Amazon for the rest of us. And while the stock is NOT cheap by any stretch of the imagination, valuation is a matter of perspective as well as tangible cash flow.

At $1,760 per share, SHOP was obscenely overpriced when you consider that it was likely to earn no more than $3 per share in the coming year. But that was last year.

The company is growing fast enough that the “E” side of the P/E calculation is coming up 50% in the coming 12 months. After that, growth should accelerate to nearly double that rate.

SHOP is still not cheap. But here at under $700, the math is a lot more reasonable for people willing to hold on as long as 24-36 months for validation.

There’s a reason Wall Street still swears up and down that this should be a $1,000 stock. I think it’s more likely that SHOP climbs 50% in the near term than AAPL will give us that kind of rally.

After all, AAPL needs to create $1.4 trillion in wealth as part of any hypothetical 50% ascent from its current lofty level. SHOP doesn’t have to break any historical records to get there.

The world is full of these companies. Yes, some are stolid like Ericsson (ERIC) and Nokia (NOK). Global tech revolves around manufacturing. It’s a hardware business.

But there are bright spots like SHOP and BlackBerry (BB) in Canada . . . MercadoLibre (MELI) and Nu Bank (NU) in Latin America . . . and a universe of true startups in Israel, few worth more than $2 billion today.

I bet you there’s enough innovation around the world to give the trillion-dollar names a run for their money. More likely, the giants will simply go on buying the start-ups to fuel their own growth.