As investors, business owners or entrepreneurs, it’s important to understand the shifting sands of the top industries for growth in today’s economy. Some discrepancies are obvious. For example, print media would be classified as a dying industry, while smartphones and tablets are regarded as a surging one. Others are less apparent but far more important – such as the decline of solar stocks and the rise of farm related commodities. What are the four top industries for long-term growth in the second decade of the 21st century?
The math is simple. Arable land in the world is decreasing and global demand, fueled by emerging and developed economies, is skyrocketing. The increasing demand for corn-based ethanol as a fuel will also exacerbate this problem. Farmers need to maximize the potential of their farmland to cash in on rapidly rising crop prices. Global warming is causing unpredictable adverse weather conditions which only worsen the situation. The businesses which will profit handsomely are fertilizer companies producing the three main components of fertilization – nitrogen, phosphorus and potassium. Nitrogen is essential for leaf growth and greener leaves, phosphorus is necessary for strong roots and fruit development and potassium (potash) is necessary to increase the strength, size and color of the plant. Genetically modified seeds, which increase the yield and pesticide resistance of crops, will also increase substantially in demand. Chemical manufacturers specializing in both will benefit the most from this long-term shift in supply and demand. Note that this does not include livestock producers – these should be avoided at all costs due to the increasing cost of grain-based feed.
The global battle for oil has raged for half a century now, with the amount of available oil fields decreasing every year. Smaller companies have even resorted to new technologies to siphon out the last remaining drops of oil from abandoned fields in order to make a profit. Despite the dip in prices due to the perceived slowdown of developed nations, the uptrend is intact. Emerging markets relying on dirtier, cheaper sources of energy will drive the demand for fossil fuels, while neglecting the more expensive, less powerful green choices of wind and solar power. Multinational oil companies such as ExxonMobil and Chevron will gradually climb as global demand outpaces supply, and supply and refinery producers such as Halliburton will also continue to profit. An increasing amount of cars manufactured in China and India will also drive the global demand for black gold.
As economic growth resumes, so will the demand for industrial and precious metals, for two very different reasons. Industrial metals – such as iron, aluminum and molybdenum, will be in high demand as construction projects shift into high gear in emerging economies. Precious metals – such as gold and silver – will be in high demand as a hedge against inflating currencies. Of these, silver is straddled across both – due to its uses in the tech industry as well as a hedge. The mining industry will benefit from heightened demand from India, China and Latin America, which will raise prices across the world. Cars, aircraft, trains and buildings all require massive amounts of industrial metal. In addition, the weakened U.S. dollar – in which metals are priced – will also drive up prices. However, both oil and metals are highly cyclical in the short term despite rising in the long term, so it takes a steady hand and an iron stomach to invest in these industries.
Chinese Internet Companies
This is definitely the riskiest of the four industries mentioned, but it can also be the most rewarding. China currently has three times the population of the United States and only a small percentage of its citizens are currently online. Combine that with a rapidly rising, highly wired middle class and you have fertile ground for all sorts of exciting, highly profitable business opportunities. The growth of Baidu, “The Google of China”, is one of the strongest cases for this industry. However, for every Baidu there are thousands of dead-on-arrival flops with poor balance sheets and shady accounting practices. Although this has led many American analysts to believe that China is headed towards its own dot-com bust, the strongest names in the key sectors of Internet search, advertising and e-commerce will survive and outpace their Western counterparts.
These are some of the most highly favored industries in today’s market climate. The only way to stay on top of these rapidly shifting trends is to keep reading and to stay updated regarding the latest market movements. Purchasing individual stocks, instead of mutual funds, will also force you to stay abreast of changing trends and macroeconomic currents in the international market. Trends can seemingly change overnight, so monitoring current signals is vital.