Nine for the '10s: Fast-Growing Industries for the Next Decade
Economist Paul Krugman has dubbed the last decade "The Big Zero," but it has been less than zero for the average investor. Still, if you dig under the surface a bit, you'll find that some industries grew rapidly during the past ten years. More importantly, many of those industries are expected to be among the fastest growers of the 2010s. If you dig a bit more, some of those fast-growing industries hold significant profit potential for investors -- and I can suggest three stocks that could snag a big share of that potential profit.Before getting into the opportunities, it is worth reviewing just how bad the zeros were. According to The New York Times, since the end of 1999, the S&P 500 has lost 23%, the Dow Jones Industrials fell 8.25%, and the NASDAQ is off 40%. In total, the decades' stock losses wiped out $2.5 trillion and these poor returns are making investors skeptical of stocks and have led them to keep some $3.2 trillion in money market funds, according to The Associated Press.%%DynaPub-Enhancement class="enhancement contentType-HTML Content fragmentId-1 payloadId-61603 alignment-right size-small"%% But don't despair. Many of the predicted fastest-growing industries of the '10s are in high-technology businesses whose leading companies trade on the NASDAQ. According to Internet Retailer, these are the nine industries that IBISWorld expects to grow most quickly between 2010 and 2019 (where available, I've included their 2000 to 2009 cumulative sales percentage change):
- Voice-over Internet protocol providers (VoIP) -- simply put, largely free voice communication over the Internet: predicted growth, 149.6%; past decade growth, 179,035.8% (first revenue was in 2002).
- Retirement & pension plans: predicted growth, 133.7%.
- E-commerce & online auctions: predicted growth, 124.7%; past decade growth, 468.9%.
- Environmental consulting: predicted growth, 120.3%.
- Video games: predicted growth, 112.9%.
- Trusts & estates: predicted growth, 105.7%.
- Search engines: predicted growth, 100.9%; past decade growth, 1,655.9%.
- Recycling facilities: predicted growth, 80.9%.
- Land development: predicted growth, 72.7%.
And VoIP is IBISWorld's pick for the fastest-growing industry for the next decade, but that does not mean it's going to be a profit winner. After all, companies that concentrate on VoIP, like Skype, charge nothing for many kinds of calls. And the biggest players in what Infonetics Research considers the $20.7 billion VoIP services market are large companies like Japan's NTT, France Telecom, and Comcast (CMCSA).
Since those major players get revenue from many sources beyond VoIP, they are poor places for investors to take advantage of VoIP's growth. For that, investors might keep an eye out for an IPO of eBay's (EBAY) Skype unit. According to Wired magazine's epicenter section, Skype generated $550 million in 2008 revenues; while Internet calls to other Skype users are free, Skype charges for calls out to the normal telephone system and others. Skype is expected to generate $1 billion in 2011 revenues, but more details are likely to emerge from a prospectus for its 2010 IPO.
Meanwhile, there are three profitable companies which are well positioned to take advantage of the expected rapid growth in e-commerce, search engines, and video games. Those companies are:
- Amazon (AMZN), an e-commerce leader which has quietly innovated its way to a record-high stock price in the decade while earning a 4.4% operating margin;
- Google (GOOG) which dominates Internet search advertising and boasts a 30.4% operating margin; and
- Activision Blizzard (ATVI), which analyst Colin Sebastian praises for its predictable revenues and high margins -- its operating margin is 16.6%.
Peter Cohan has no financial interest in the securities mentioned.
