Online merchandising and cloud computing colossus Amazon.com Inc. (AMZN) is conquering new markets in large part through its massive investments in technology. As summarized by Barron's, a recent study by Evercore ISI finds that keeping pace in the digital arms race "equates to either being put out of business by Amazon, or surviving." Indeed, as Barron's quotes from the report itself, "the transition to digital has completely changed the competitive landscape in various industries."
In addition to Amazon, among the companies that Evercore ISI believes are likely to thrive in the new competitive environment shaped by the so-called "digital transformation" are these nine:
|Company||Ticker||Line of Business|
|Salesforce.com Inc.||CRM||enterprise software|
|Aptiv PLC||APTV||vehicle components|
|IQVIA Holdings Inc.||IQV||health care data analytics|
|JPMorgan Chase & Co.||JPM||money center bank and investment bank|
|Kering||KER.France||apparel: owns Gucci, Yves Saint Laurent|
|Lennar Corp.||LEN||home builder|
|American International Group Inc.||AIG||insurance|
|Schlumberger NV||SLB||oilfield services|
|Mastercard Inc.||MA||payments processor|
Digital Transformation Defined
As defined by the authors of the report, digital transformation has several facets to it:
- Collecting data in real time from digital devices, sensors and digital commerce
- Data analytics that drive business decision making
- Automation of business processes
- Investment in e-commerce capabilities to open up new revenue streams
They indicate that, based on their conversations with chief financial officers (CFOs), spending on technology is on an upswing, in a variety of industries. Moreover, they warn that "Having the best product is no longer good enough as consumer expectations are constantly changing based on new technologies and brands now have to be able to differentiate through 'experiences.'"
The analysts at Evercore ISI note that their full list of 12 potential digital winners has representatives from 12 different industries and includes both growth stocks and value stocks. In their opinion, this "helps illustrate that new 'winners' can come from non-tech industries as these companies implement new digital services and experiences." In addition to Amazon and the nine in the table above, they also named coffee shop operator Starbucks Corp. (SBUX) and semiconductor maker NVIDIA Corp. (NVDA).
Recipes for Digital Success
Salesforce.com and IQVIA actually are enablers of digital transformation at the companies that represent their respective clienteles. So is Amazon, through its provision of cloud computing infrastructure to a variety of business clients, and a digital sales platform to other merchants.
As pointed out by longtime bank analyst Dick Bove, banks in particular, and financial services firms in general, have a long history of being leaders in developing and implementing advanced technologies that are designed simultaneously to cut costs, support increased transactional volumes at increased speed and accuracy, while also improving the overall quality of client service.
In particular, Bove cites banks as leaders in the implementation of artificial intelligence, in areas such as the review of loan applications. JPMorgan Chase, Mastercard and AIG represent a broad spectrum of the financial services industry. (See also: 4 Reasons Bank Stocks Will Rise Longterm: Bove.)