Emerging Sectors: Building a Healthy Portfolio in our Ever-Changing World.

Jordan Kimmel |

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I have often been amused by the naysayers and constant worriers who spend their time looking for “the top”. They are always afraid to invest in great individual companies, even as they watch wealth created by the leaders in their industries. Some folks are simply predisposed to worry about the next “all-important non-farms payroll report” and try to anticipate what interest rates will do next. By the way, what percentage of Americans work on a farm anyway? As you may know, I would much rather try to observe and look into the companies when new technologies, and even new industries, emerge.

Often times, the leaders in these industries turn out to be great investments. I use Magnet® Stock Selection Process to try to find those companies early in their high growth phase. I asked a group of rising juniors from Lafayette College in Easton, PA to do some research for us. I asked them to study the recent evolution of technology in the medical, cultural, and the business fields resulting from new global trends, and to find some potential investment opportunities. What follows is the excellent work of Dillon Confalone.

Rapidly Growing Sectors in the 21st Century

The 20th century marked significant economic and technological advances, and as we progress into the 21st century, the world continues to rapidly evolve. Technology, education, and medicine…everything and anything in life seems to be changing in some way. The United States still maintains its leading economic and military dominance, but do we really consider the changing markets and the demand for new sectors? As our world evolves and demands change, the rise of emerging markets is causing one of the most significant shifts in global economic and geopolitical structure in that it is altering the way in which we view the world, consume, produce, and invest in goods.

Furthermore, new industries and services emerge not only as a result of technological advances and entrepreneurial ideas, but also as a result of addressing new needs such as climate change, energy, and public welfare. This shift is generating new business opportunities that deserve some attention.

    Here are 5 such Emerging Industries:

  • Eco-Industries – cleaner technology, products and services
  • Cultural and Creative Industries – creative goods and services (printing, film, etc.)
  • Mobility Industries – connecting different means of transport
  • Mobile Service Industries – telecommunication, information, entertainment
  • New Health Industries – medical/surgical equipment and information

So the question now becomes, which sectors are poised for growth? Solar energy, one of the many emerging industries. It seems that the sun will continue to shine on this sector and begin to have more and more of an impact in the future. Solar deployment is not only expanding but the pace at which it is growing is accelerating. Some notable solar energy stocks include: NextEra Energy (NEE) , Renewable Energy Group (REGI) , SunPower (SPWR) , Tesla Motors (TSLA) , and First Solar (FSLR).

Next is the defense industry. This is an area that definitely needs to be highlighted. Consider the recent police shootings such as the Michael Brown and Walter Scott incidents. These events have led to local outrage and riots, and have certainly sparked the debate over police brutality. So, what will emerge out of this? It’s reasonable to assume that there could be a higher demand of police officers along with protective ballistic armor, taser guns, and more video monitoring devices. It almost seems that the next officer may very well resemble that of RoboCop.

One notable stock regarding to highlight in this sector is Taser (TASR) . Taser International is an American developer, manufacturer and distributor of conducted electrical weapons and body worn cameras. Another aspect of the defense sector that should be considered is cybersecurity. With recent cybersecurity scares and hacks, there’s a reason why cybersecurity stocks are highly rated. Some notable stocks include Fortinet Inc. (FTNT) , FireEye Inc. (FEYE) , Palo Alto Networks Inc. (PANW) , and Check Point Software Technologies (CHKP) . Fortinet is a network security provider that serves businesses and governments worldwide and has a strong balance sheet. Its network security platform called FortiGate is what makes this company stand out.

Pharmaceutical and Biotechnology are two major sectors that need to be observed closely, as there is constant research being conducted regarding specialty drugs and biotechnology to manufacture new and improved drugs. Some notable Biotech stocks include Amgen Inc. (AMGN) , Gilead (GILD) , INSYS Therapeutics Inc. (INSY) , Thermo Fisher Scientific (TMO) , while pharmaceutical stocks include Aveo Pharmaceuticals (AVEO) and AcelRX Pharmaceuticals (ACRX) .

Around the Globe…   

Voice Over Internet protocol, also known as communications, technologies, and transmission techniques over the Internet is another emerging worldwide sector. With the continuing spread of 4G networks, broadband Internet access, and television, it is creating endless opportunities for jobs and ways of communication. According to “IBISWorld’s VolP” report, the US market alone has increased 16.7% annually over the last five years, generating $15 billion in revenue each year. (Such technologies include Google Inc. (GOOG) video chat and Viber.)

E-Commence is another emerging sector that is slowly outperforming most retail sectors. Customers worldwide are becoming accustomed to purchasing products online. Notable companies include Amazon (AMZN) and Netflix (NFLX) .

Up for Grabs…A Sector with Big Potential?

3D Printing – Last year 3D printing stocks were a trend. 3D printing was supposed to change the way in which products were manufactured and people believed that 3D printers would be found in many households. Although 3D printing stocks appear to be down, this doesn’t mean that they are down for the count. 3D printing has the ability to revolutionize the manufacturing industry through increased efficiency. One example is through car companies, as they will be able to produce parts quickly and on demand instead of only prototypes, ultimately saving time.

Specifically, BMW ($BMW) has saved 58% in costs and 92% in time by manufacturing its parts with Stratasys (SSYS) , one of the world’s largest 3D printer manufacturers. 3D printing also has the ability to drastically improve the biomedical field. A company like Organovo (ONVO) is developing methods of printing arteries and organs that will be custom fit to individual’s bodies, therefore lowering the risk associated with surgery. It may seem that 3D printing is starting off slow, but its path to the future seems to be a promising one.

The research on the individual companies and ideas come from Dillon Confalone, a rising junior from Lafayette College.

Note: I use my own Magnet® Stock Selection Process to assess companies. I am not an analyst, nor do I make buy or sell recommendations. I always suggest investors do their own research.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
ONVO Organovo Holdings Inc. 2.94 0.05 1.73 998,955
PANW Palo Alto Networks Inc. 126.66 -2.96 -2.28 2,605,154
AVEO AVEO Pharmaceuticals Inc. 0.62 0.01 1.64 264,496
TSLA Tesla Motors Inc. 181.47 -0.41 -0.23 4,040,269
REGI Renewable Energy Group Inc. 9.80 -0.10 -1.01 360,266
TASR TASER International Inc. 27.92 0.20 0.72 560,896
SSYS Stratasys Ltd. 17.83 0.30 1.71 632,955
GILD Gilead Sciences Inc. 72.42 -0.42 -0.58 9,225,374
AMZN Amazon.com Inc. 740.34 -3.31 -0.45 3,557,573
ACRX AcelRx Pharmaceuticals Inc. 2.75 -0.10 -3.51 198,653
FEYE FireEye Inc. 12.56 0.18 1.45 2,732,213
GOOG Alphabet Inc. 750.50 2.58 0.34 1,452,187
TMO Thermo Fisher Scientific Inc 141.91 2.28 1.63 3,161,097
SPWR SunPower Corporation 6.64 0.12 1.84 2,344,272
FTNT Fortinet Inc. 29.57 0.52 1.79 2,171,609
AMGN Amgen Inc. 144.01 1.62 1.14 3,517,223
NEE NextEra Energy Inc. 114.41 1.46 1.29 2,115,737
INSY Insys Therapeutics Inc. 11.02 -0.11 -0.99 564,738
FSLR First Solar Inc. 30.15 0.01 0.03 2,310,828
NFLX Netflix Inc. 120.81 3.59 3.06 8,937,549
CHKP Check Point Software Technologies Ltd. 81.89 0.58 0.71 1,043,270

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