When looking for longer term investments, I like to look for companies that are set to benefit from major growth opportunities created by disruptive products or fundamental shifts in the marketplace. This list is certainly not a fully comprehensive list and there are bound to be many more stocks and trends that emerge as we go forward. I have little doubt that there will be some big winners in these categories and therefore huge opportunities to make money if you are invested in the right stocks. This list is meant to be a starting point so make sure you do your own research and due diligence on these companies before investing in them. Also remember to have a risk management strategy in place and to know your time frame, because if the whole stock market gets hit, most of these individual stocks will get hit as well.
Trend #1 – Network Analytic’s
As more and more network connected devices get turned on throughout the world, corporations will have a need to analyze, manage, and control their networks in order to keep them running seamlessly and securely. Many of these names could be placed in the next category of Network Security as they also provide security solutions with their products.
Top Companies: Procera Networks (PKT), Allot Communications (ALLT), F5 Networks (FFIV)
Trend #2 – Cyber Security
As more of the world’s information goes digital and more corporations build an online presence, the threat of cyber terrorism continues to increase. Many experts are now predicting that the next wave of terrorist attacks won’t come by means of a suicide bombing or airplane hijacking, but rather through the use of cyber attacks. A report recently released by the Federal Emergency Management Agency made particular reference to how unprepared the United States is for a cyber attack. According to the same report, the number of reported cyber attacks in the U.S. has risen from 5,503 in 2006 to 41,776 in 2010, or a 650% increase. Many of these names are also potential buyout candidates for already established large technology companies who need to gain a stronger presence in the security space.
Top Companies: Sourcefire (FIRE), Fortinet (FTNT), Imperva (IMPV), Check Point Software Technologies (CHKP)
Trend #3 – Mobile Payments
Remember when you switched from carrying cash around everywhere to only carrying a credit or debit card? Well investors in MasterCard and Visa sure do, as they are still reaping the benefits of this fundamental shift in the form of huge stock price appreciation. Some would even argue that the shift from cash to plastic still has huge growth prospects ahead of it, especially in international markets. While these are positives for companies like MasterCard and Visa, there is a new trend emerging; mobile payments. We are still in the early stages of this trend, and therefore there are plenty of different mobile payment solutions currently being offered from companies such as PayPal (owned by eBay) and SQUARE. Nobody knows which companies are going to emerge as the clear winners five years down the line, but there is no doubt that there will be great opportunities to profit in this space if you can find the right stocks to own.
Top Companies: MasterCard (MA), Visa (V), eBay (EBAY), VeriFone Systems (PAY), NXP Semiconductors (NXPI)
Trend #4 – Specialty Brands
When you think of the top apparel brands in the athletic marketplace, there is no doubt that Nike is one of the first names to come to mind. How about in the women’s accessory marketplace? Undoubtedly, Coach, Inc. comes to mind. One thing about these specialty brands is that they all started small, built a loyal consumer base, and through effective marketing and positive word-of-mouth, have grown to be some of the most successful, well-known brands across the world. Since October 2000 when Coach went public (symbol: COH), the stock is up over 2,850%.
So the question is, which brands today have the potential to be the next Nike or Coach, Inc. and in return offer huge stock returns? I don’t think anyone could say with complete certainty, but I believe the list below offers a good starting point. All the below companies have been executing well, building brand loyalty, and have shown tremendous sales and revenue growth since becoming public.
Top Companies: Under Armour (UA), Lululemon Athletica (LULU), Michael Kors Holding (KORS), Steven Madden (SHOO), Francesca’s Holdings (FRAN)
Trend #5 – Social Media
With the Facebook IPO on the way, most investors have heard all they need to hear about social media stocks. I’m sure in some way we are all engaged with at least one company in the social media space, whether it is Facebook, LinkedIn, or Twitter. The good news is that we have begun to see leaders in the social media space emerge and that is where I want to focus my attention when it comes to investing. There is no doubt the valuations for many of these companies will scare away a lot of investors, but many long time leading stocks started at high valuations and continued with high valuations for years and years while also offering spectacular stock returns.
So don’t let valuations alone scare you, do your own research and find the stories with tremendous growth prospects that you truly believe in. However as with all new trends, there are bound to be plenty of losers along the way, or even companies that could be winners later on down the road but are not executing properly right now. That is why it is so important to have a risk management strategy in place to protect yourself from blowing up your investment account in case you’re early or wrong.
Top Companies: LinkedIn (LNKD), Facebook (FB), Zynga (ZNGA), Jive Software (JIVE), Yelp (YELP), Zillow (Z)
About the Author - Cameron Urdu is the founder and editor of How to Buy Stocks, an online resource created to educate beginners looking to invest in the stock market. (EconMatters author archive here)
The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.
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