Every investor dreams of spotting the next great disruption in markets or technology. Consequently, we often hear complaints like; “I wish I had bought Facebook / Google / Microsoft / Amazon, back in the day.” Or, “why didn’t I sell that stock back when it had a “little value?”
Obviously, nobody can predict the future. However, it is possible to spot trends that can disrupt or influence the market. Moreover, you can identify stocks that might benefit from those trends.
How to Spot the Next Hot Investing Trends?
Spotting trends is tough because the media hype machine distorts our picture of disruption.
For instance, companies with the best publicity campaigns will attract the most attention. In addition, journalists will focus on the sexiest or most appealing changes in order to attract attention.
Thus, the only effective means of identifying the real trends are to ignore the media. Unfortunately, that can be hard because journalists, publicists, and other promoters are experts at diverting at your attention.
However, those who learn to look behind the scenes can spot the real trends and profit from them.
The Top 10 Stock Market Investing Trends for the Next 5 Years
Here are the 10 trends that could dramatically transform markets in the next half-decade. Careful examination of these trends could point to stocks poised for growth and businesses that could collapse.
- Retail Apocalypse/E-Commerce
- Electric Vehicles
- Artificial Intelligence/Digital Robots
- Physical Robots
- Autonomous Vehicles
- Social Media (still)
- Solar Power
- Batteries & Energy Storage
- Virtual Reality (VR) & Augmented Reality (AR)
1. Retail Apocalypse/E-Commerce
E-commerce is driving a mass extinction of bricks and mortar stores; particularly in the United States. This retail apocalypse will disrupt many sectors beyond recognition.
UBS predicts 75,000 brick and mortar stores will close in the United States between 2019 and 2026. The obvious beneficiary from this process is Amazon (NASDAQ: AMZN); which added $35 billion in retail sales from the death of 7,700 stores in 2018, Business Insider claims.
However, retailers like Walmart (NYSE: WMT), Wayfair (NYSE: W), and Kroger (NYSE: KR) are in a good position to profit from e-commerce. Walmart; in particular, was able to grow its online sales by 43% in 2018, Digital Commerce 360 estimates. Meanwhile, Statista estimates the number of active Wayfair customers grew from 10.99 million in 2017 to 15.16 million in 2018.
Companies that could profit from Retail Apocalypse
The easy way to profit from this explosive growth is to identify publicly traded companies that sell goods and services to fast-growing internet retailers.
For example, Britain’s Ocado Group PLC (LON: OCDO) creates platforms that operate the massive fulfillment centers e-commerce companies rely on. Ocado’s platforms run swarms of robots that pick and pack delivery orders.
Meanwhile, Ford (NYSE: F) builds the vans online delivery services need. Plus, Ford is experimenting with walking robots to speed delivery orders. Another company to investigate is Boeing (NYSE: BA) which builds the cargo jets that move online orders.
Amazon is expanding its air fleet by ordering more jets from Boeing (NYSE: BA). Specifically, Amazon’s Prime Air Fleet could expand to 70 planes by 2021,The Puget Sound Business Journal speculates. Consequently, Boeing’s business could expand if retailers like Walmart start developing their own air fleets to compete with Amazon.
Plus, the real estate company ProLogis (NYSE: PLD) specializes in commercial properties for logistics. In fact, ProLogis will build and manage the whole fulfillment center for an e-tailer.
E-commerce companies will be in need of ProLogis’s properties as their business grows and they need more fulfillment centers. ProLogis’s business could grow because UBS projects the e commerce will account for 25% of American retail by 2026.
Finally, UBS predicts that up to 17% of US clothing stores will go out of business by 2026. Thus, investing in any brick and mortar that sells a lot of apparel is a very bad idea.
2. Electric Vehicles
Electrics are the fastest-growing segment of the automobile business. Specifically, US electric vehicle (EV) sales grew by 81% in 2018, Inside EVs estimates.
However, EV sales still only make up a little over 1% of US auto sales. Therefore, there is room for a lot of growth in the sector.
Established automakers like Ford will drive most of the growth in EVs. For instance, Ford plans to spend $850 million to reconfigure its Flat Rock Assembly Plant in Michigan for electric vehicle production.
Meanwhile, Tata Motors (NYSE: TTM) plans an electric version of its XJ sedan to compete with the Tesla (NASDAQ: TSLA), Green Car Reports claims. Plus, Tata has plans for an electric Range Rover.
Unfortunately, the electric vehicle market is too new for many investors to grasp. The best advice in electrics now is to buy stock in established automakers with serious electric plans.
It is too early, however, to tell which company is leading in the market. Ford, Tata, Volkswagen, General Motors (NYSE: GM), Toyota (NYSE: TM), and Honda Motors (NYSE: HMC) all have serious electrification plans. Therefore, electric cars are a trend for investors to watch rather than act upon.
[Related Article – Top Clean Energy Stocks]
3. Artificial Intelligence/Digital Robots
Artificial Intelligence; or A.I. is probably the most overused term in today’s digital world. Interestingly, almost all the constructs the media labels AI are actually digital robots.
Consequently, most artificial intelligence is actually very dumb. For instance, Dynamic Yield, an Israeli AI company, McDonald’s (NYSE: MCD) bought for $300 million actually uses machine learning to sort through customer data. Dynamic Yield could help McDonald’s personalize meal orders for customers because it can sort through orders and spot trends.
Thus, the best way for investors to capitalize on AI in the short-term is to discern which companies are making the best use of artificial intelligence. You probably do not think of Walmart (NYSE: WMT) as an AI company.
However, Walmart is testing AI that identifies customer behavior patterns and maintains stock levels at a store in Levittown, New York. Additionally, Walmart is testing JetBlack, an AI-powered concierge shopping service in New York City.
Since AI is dumb, smart investors will look for companies making the smartest use of AI. Walmart, for example, is making smart use of AI with Store No. 8, an “incubator” that tests new AI-powered businesses around New York City.
What Companies are Developing AI
An even better strategy for cashing in on AI is to invest in companies that manufacture the infrastructure artificial intelligence uses. The most interesting of these is NVIDIA (NASDAQ: NVIDIA).
NVIDIA develops, builds, and markets the graphics processor units, chips, and supercomputers AI runs on. For instance, the NVIDIA EGX Edge Computing Platform can connect AI to billions of sensors in factories, healthcare facilities, stores, and vehicles through the cloud. Plus, NVIDIA is developing technology for vehicles, robots, and virtual reality.
In conclusion, looking for companies willing to experiment with AI and adopt it early is a smart move. The companies with the most artificial intelligence experience will make the most money with the technology. Additionally, those companies willing to take risks with AI will be in a better position to capitalize upon it.
Plus, look for terms like machine learning and digital process automation in news articles and press releases. These terms are often euphemisms for AI.
4. Physical Robots
Robotics is not attracting as much attention as AI, but robot technology is advancing fast. Robots are performing a wide variety of jobs and spreading out into the workforce.
Walmart is testing hundreds of robot janitors and using robots to check inventory levels in some of its stores, for instance. Meanwhile, Ford and Agility Robotics have tested a walking and folding delivery robot that rides in vans.
Ocado Group PLC (LON: OCDO) builds platforms that operate swarms of hundreds of robots at fulfillment centers. Ocado robots are already picking and pulling and thousands of grocery orders at fulfillment centers in the United Kingdom.
Importantly, Ocado and Kroger plan to build 20 robotic fulfillment centers for grocery delivery orders across the United States. Notably, the first two Kroger/Ocado robot fulfillment centers are under construction in Ohio and Florida.
The best stocks to invest in for the robot revolution are providers of infrastructure for robots. Obvious investments in the field include Ocado; NVIDIA which builds the chips and GPUs that run the robots, and Amazon (NASDAQ: AMZN) which owns Ocado’s main competitor Kiva Robotics.
Another interesting strategy is to invest in companies taking advantage of robots. Businesses that stand out here include; Kroger; which owns 6% of Ocado, Ford, Amazon, and Walmart. Expect robots to be a growth industry for the foreseeable future. Plus, robots will severely disrupt many industries over the next decade, including retail, mining, and oil and gas.
5. Autonomous Vehicles
Autonomous vehicles; popularly known as self-driving vehicles are attracting a great deal of attention from the media and investors. That attention is warranted because autonomous vehicles are already on our streets.
First, NVIDIA; and the Volvo Group (OTCMKTS: VOLVF) are developing several trucks run by NVIDIA’s DRIVE AGX Pegasus platform. NVIDIA-operated Volvo vehicles include a dump truck, tractors, delivery trucks, and buses.
Significantly, Volvo illustrations show trucks with no cabs for drivers. Instead, the trucks are run by remote control or AI. Potential uses for autonomous trucks include industrial trucking, mining, logistics, fulfillment, railroads, farming, firefighting, the military, rescue, earth moving, excavation, and construction. An NVIDIA press release claims Volvo can tap a logistics and fulfillment market McKinsey values at $85 billion to $125 billion.
Additionally, Alphabet’s (NASDAQ: GOOG) Waymo subsidiary is testing a variety of autonomous vehicles in the Phoenix area. Waymo is experimenting with the Waymo One ride-sharing service, and working with several companies.
Current Waymo partners include Lyft (NYSE: LYFT), Fiat Chrysler Automobiles (NYSE: FCAU), and Tata Motors (NYSE: TTM).
The best companies to invest in for autonomous vehicles are automakers like Fiat Chrysler, Alphabet (NASDAQ: GOOGL), and NVIDIA. Most of Waymo’s autonomous vehicles are Chrysler Pacifica minivans, for example.
Currently, Waymo and NVIDIA are probably the leaders in autonomous vehicles. However, companies like Ford (NYSE: F), Apple (NASDAQ: AAPL), and General Motors (NYSE: GM) are making major investments in the technology. Ford claims it could have an autonomous vehicle on the road by 2021.
Thus, traditional automakers are probably the best investments for those trying to cash in on autonomous vehicles.
Strangely, one of the most disruptive new technologies; cryptocurrency, is being ignored or dismissed as a digital toy for geeks.
However, cryptocurrency could disrupt the global economy by making paper money obsolete. Additionally, cryptocurrency could spark a worldwide economic boom by bringing 1.7 billion unbanked people into the global financial system.
A cryptocurrency is an encrypted digital currency. Platforms like Facebook’s (NASDAQ: FB) Project Libra plan to use cryptocurrencies to make digital payment faster, easier, and more secure.
In particular, Facebook hopes that tens of millions of people in developing countries will use Libra payment apps built into its WhatsApp, Instagram Facebook Messenger, and Facebook Social Media solutions. In detail, Mark Zuckerberg’s hope is that tens of millions of people will send money the way they currently send photographs through Instagram and messages through WhatsApp.
Currently millions of people are spending billions of dollars through existing digital currently. Harvard Business School estimates M-Pesa the world’s most successful un-encrypted digital currency achieved revenues of $615 million in 2018, for instance. Interestingly, M-Pesa is only widely used in one region: East Africa.
Plus, CoinMarketCap estimates the world’s best-known cryptocurrency; Bitcoin (BTC) had a market capitalization of $184.071 billion, a 24-Hour Market Volume of $28.533 billion, and a Coin Price of $10,345.9 on 1 July 2019. Thus, people are already spending a lot of money on digital currencies.
Finally, people already send hundreds of billions of dollars in electronic payments every year. In fact, people sent $689 billion worth of remittances, direct payments to individuals in other countries in 2018, the World Bank estimates. Moreover, the global remittance volume grew from $633 billion in 2017 to $689 billion in 2018.
Companies that could process from cryptocurrency include NVIDIA; which makes the Graphics Processor Units cryptocurrency miners use, Facebook, and big banks. Interestingly, banks like Banco Santander (NYSE: SAN), and JPMorgan Chase (NYSE: JPM) are experimenting with cryptocurrencies.
Cryptocurrency is a technology to research because it could disrupt the entire financial system. Moreover, the digital infrastructure to bring cryptocurrency to tens of millions of people worldwide already exists in the form of social media.
7. Social Media
Social media is the most successful communications medium in human history, and it is likely to get more popular.
Incredibly, the 10 top social media platforms in the world had 11.057 million active accounts in April 2019, Statista estimates. Thus, social media usage exceeds the world population of 7.7 billion. There are more social media accounts than people because most people have more than one social media account.
Moreover, more and more businesses such as advertising and finance are moving onto Social Media. Facebook (NASDAQ: FB) ad revenue grew from $8.629 billion in 4th Quarter 2016 to $12.779 billion in 4th Quarter 2017 to $16.64 billion in 4th Quarter 2018, Martech calculates.
In addition, mobile payment volume in one country; the People’s Republic of China, grew to $41.51 trillion (277.4 trillion yen) in 2018, Caixin estimates. Moreover, the total volume of payments sent through Chinese social media platforms like WeChat pay surged to 60.53 billion 2018, the People’s Bank of China (PBOC) estimates. Significantly, Chinese only sent 1.67 billion mobile payments as recently as 2013, the PBOC; China’s central bank, estimates.
The mobile payments numbers from China explain why Mark Zuckerberg is anxious to launch a Facebook cryptocurrency through Project Libra. To explain, Zuckerberg thinks he can duplicate the success of WeChat Pay; which claims its payment volume grew by 500% in 2018, in many countries.
WeChat Pay is the payment solution associated with WeChat; the hugely popular Chinese social media app owned by Tencent Holdings (OTCMKTS: TCEHY). WeChat is the world’s fifth-largest social network with 1.098 billion users in April, Statista estimates.
Companies to Invest in for Social Media
Companies to invest in for social media including Facebook (NASDAQ: FB), and Tencent Holdings (HKG: 0700). Another company that could cash in on social media is PayPal Holdings (NASDAQ: PYPL).
Notably, PayPal owns the popular social media payment solution Venmo. Statista estimates Venmo’s payment volume grew from $6.8 billion in 1st Quarter 2017 to $12 billion in 1st Quarter 2018 to $21 billion in 1st Quarter 2019. Notably, PayPal is participating in Project Libra, Facebook’s cryptocurrency initiative.
Another way to invest in Social Media is to buy the stocks of cloud and data center infrastructure providers. Major players in this realm include; Amazon (NASDAQ: AMZN) which owns Amazon Web Services (AWS), Microsoft (NASDAQ: MSFT), Oracle (NYSE: ORC), and IBM (NYSE: IBM).
As social media grows it will use more and more cloud. Significantly both social media providers and apps that operate through social media use the cloud. Another strategy is to invest in smartphone manufacturers like Apple (NASDAQ: AAPL), Samsung (OTCMKTS: SSNLF), and Alphabet (NASDAQ: GOOGL).
People will need phones to access all that social media and phone makers will provide the phones.
8. Solar Power
Solar power has become of the fastest growing industries around. The United States Department of Energy estimates the amount of electricity generated by solar in the USA grew from 1.2 gigawatts in 2008 to 30 gigawatts (GW) in 2018. A gigawatt is one billion watts of electricity.
Moreover, solar power costs are dropping dramatically. The average cost of a photovoltaic (PV) solar electricity panel fell by 50% between 2008 and 2018, the U.S. Department of Energy calculates. Thus, solar panel prices in 2019 were half what they were a decade earlier.
Under those circumstances, solar electricity is economically competitive with other sources of electricity in several American states. In fact, there were 725 solar PV plants in California alone in July 2019, the State of California estimates. California’s solar PV plants now generate 441 megawatts (MW) or 441 million watts of electricity a year.
There is also a lot of room for growth in solar energy, the Solar Energy Industries Association (SEIA) estimates solar generates just 2% of America’s electricity. Yet, Americans invested $18 billion in solar energy infrastructure in 2018.
New solar plants capable of generating 25 gigawatts worth of solar energy were announced in 2018, the SEIA estimates. In addition, 12 gigawatts worth of solar power could come online in 2019. In fact, the SEIA expects America to have 100 gigawatts of solar electric generation by 2021.
Political changes in Washington could lead to even more solar constructions. Democratic politicians want to invest vast amounts of tax money in solar and other green power sources to fight global warming.
For instance, US Senator and Presidential candidate Elizabeth Warren (D-Massachusetts) is proposing a $2 trillion “clean energy plan,” The Washington Post reports. Thus, the election of a Democratic president in 2020 could open the floodgates to massive spending on solar power.
Companies to invest in for solar power include Tesla Motors (NASDAQ: TESLA), which owns solar power maker Tesla Energy, solar panel and battery maker Panasonic (OTCMKTS: PCRFY) and utilities. An interesting company to invest in for solar is Warren Buffett’s Berkshire Hathaway (NYSE: BRK.B). Berkshire Hathaway Energy is investing $6.5 billion in solar including two of the largest solar projects in America.
9. Batteries & Energy Storage
Solar power, electric cars, robots, artificial intelligence, and social media have one thing in common. These technologies all require electricity to operate, and much of that electricity comes from batteries. For instance, social media is useless if the battery in your phone is dead.
Consequently, many people; including Warren Buffett and Elon Musk, are investing in batteries. Berkshire Hathaway (NYSE: BRK.A) owns the battery maker Duracell. In addition, Tesla will spend $5 billion to build its Gigafactory 3 battery plant in China, Electrek reports.
The Gigafactories build lithium-ion batteries for electric vehicles and solar electric systems. In detail, each Gigafactory is supposed to produce enough batteries to hold a gigawatt or one billion watts of electricity every year.
Moreover, several disruptive new battery technologies could be coming. For instance, silicon batteries could hold as much electricity as lithium-ion batteries but be cheaper and safer, Solar Power World claims. To explain, silicon batteries will be cooler than lithium-ion and less likely to catch on fire.
Other advances we could see soon are razor-thin biodegradable paper-polymer batteries and saltwater batteries. Moreover, magnesium batteries could hold more energy than lithium-ion batteries.
Companies to invest in for batteries include Berkshire Hathaway, Tesla, Panasonic, and Energizer Holdings (NYSE: ENR). In addition, auto companies like Toyota Motors (NYSE: TM) are doing extensive research into battery technologies. In fact, Digital Trends claims, Toyota could introduce solid-state batteries for electric cars as early as 2020.
10. Virtual Reality (VR) & Augmented Reality (AR)
Many of us are skeptical of virtual reality; because promoters have claimed VR was the next big technology for the past 30 years. However, none of the VR claims came true.
That could be changing because practical VR devices are finally reaching a mass market. Notably, Facebook subsidiary Oculus’s Rift and Quest VR headsets are attracting favorable attention in the gaming community.
However, the market for VR is unproven but Mark Zuckerberg certainly believes in it. Oculus is developing a virtual reality gaming platform.
Beyond gaming, virtual reality could have applications in education, remote working, and even retail. Walmart’s Store No. 8 incubator is investing in a company called Spatial& for example. Spatial& is developing ways to apply VR to retail.
Demand for virtual reality could explode if VR is combined with autonomous vehicles, drones, and robots. To explain, human operators could use VR headsets to see what cameras on drones, robots, and autonomous vehicles see.
Consequently, a human operator could drive a truck or operate a vehicle like a bulldozer from hundreds or thousands of miles away. For example, a “driver” could operate a machine at a mine in Canada’s far north from his couch in England. Thus, the biggest demands for VR could be in industries like construction, trucking, excavation, and mining.
No examples of such VR operated vehicles have been announced but VR remote control is inevitable. One obvious use of VR will for human “drivers” to oversee the operation of autonomous trucks on the highways.
Companies to invest in for VR include Alphabet (NASDAQ: GOOG) which owns Waymo, Facebook, owner of Oculus, and video game makers like Electronic Arts (NASDAQ: EA). In addition, Tencent Holdings is making major investments in video game makers including Epic Games, the company behind the mega-hit game Fortnite.
Notably, the VR technology being developed for games could easily be applied to vehicle and equipment operation in the future. Thus, virtual reality is a technology to watch.
Investors need to be very careful because all the trends mentioned here are speculation and conjecture.
There is no guarantee that any of these trends or technologies will develop, or that anybody will make any money from them. Therefore, investors are advised to buy stocks in profitable companies that meet their investing criteria. We offer a complete stock market investing education to help.