For most countries in the world, there are exactly two types of computers: Mac and Windows. Apple (Nasdaq: AAPL) and Microsoft (Nasdaq: MSFT) manufacture the operating systems for 97% of personal computers. And there are good reasons for this hegemony.
Decades ago, the two companies were pioneers in taking the computer out of the IT department and into the hands of ordinary people like us.
However, staff computers are not what they used to be. Sales of desktops and laptops have been declining for years as more users and services migrate to the cloud. Instead of running programs on their own machines, users connect to cloud servers. And most of these servers don’t run on MacOS or Windows. Two-thirds run on an obscure but powerful operating system called Linux.
If you really want to invest in the future of computing, you have to play on Linux software.
What is Linux software?
You may have noticed that there is no stock symbol next to the Linux name. This important operating system is not manufactured by a public company … nor even by a company at all.
Linux software is Open source. In other words, it’s not a commercial product that anyone owns. Rather, it is free software that is developed and enhanced pro bono by the programmers who use it.
Because of this democratized development process, Linux is more customizable than a commercial operating system. Windows and MacOS both have proprietary designs with usage restrictions, but not with Linux.
This makes Linux software ideal for advanced programmers and IT professionals who make cloud computing possible. They often like to tinker with hardware and software in order to optimize them for their purposes.
Tinkering with Windows or MacOS code is risky and strongly discouraged by manufacturers. This may deactivate the product or void the warranty. But with Linux, it’s actually encouraged.
The growing importance of Linux software
As a reminder, cloud servers are the central supercomputers of the cloud. They power web services like email, social media, and file storage. When you sign in to a cloud-based app like Gmail, you are using your device to remotely control a server over the Internet.
While Microsoft and Apple still dominate the personal device operating system market, the same can’t be said for the cloud. According to a recent survey by W3Techs, around 66% of cloud servers use Linux. And that’s in large part thanks to the limitless, do-it-yourself nature of Linux software.
Another reason developers and cloud administrators favor Linux is security. Since Linux software is so customizable, users can fine tune it to do exactly what they need and nothing more. In contrast, commercial software tends to come with a lot of marketable but unnecessary features. These unused bells and whistles (or “bloatware”) can serve as entry points for hackers.
Additionally, most viruses are designed to infect Windows computers. It is the most popular operating system for regular PCs and one of the oldest. So Internet thieves tend to focus on this, leaving Linux with relatively few threats.
Another great recent development for Linux software comes from the world of personal computing. Five years ago, Alphabet (Nasdaq: GOOG) released the first Chromebooks. These lightweight computers cost as little as $ 100 – a fraction of the cost of a traditional PC.
Out of the box, Chromebooks are virtually useless without an internet connection. They can’t really run any software other than the Google Chrome web browser. But, with a few free downloads and a few lines of code, Chromebooks can be reprogrammed into fully functional Linux laptops. Unsurprisingly, Linux’s small share of the personal operating system market has increased since the advent of the Chromebook.
How to invest
It may seem contradictory that we are telling you to invest in a free product without an owner. And indeed, there is no direct stock on Linux. If Windows is gaining momentum, you can just buy Microsoft stock. But investing in Linux software requires a little more creative thinking.
The sophistication and obscurity of Linux software makes it difficult for a layman to use. There is a whole industry of Linux consultants and custom software vendors. And some of them are publicly traded.
Red Hat (NYSE: RHT) provides custom Linux software to corporate clients. It is the largest Linux-focused technology company in the world. Software giant Oracle (NYSE: ORCL) also offers consulting and custom development services for Linux. Both of their stocks have made consistent gains over the years.
Chances are you are reading this article on a personal computer or phone. And it probably runs on an operating system made by Microsoft, Apple, or Google. But at some point today, you’ll likely be checking your emails, watching a Facebook post, or streaming music or videos.
All of these services depend on cloud servers and the Linux software they contain. Your technology portfolio is not complete without an investment in this powerful open source operating system.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official position of professional analysts.