The stock market has been very volatile the last few years. While volatility brings risk, but it also brings opportunities for large gains if you are able to spot the right trends early. Here are some of the most profitable investing trends right now. (Growing a small sum poses big challenges. Find out why and learn what you can do about it. Check out Start Investing With Only $1000.)
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1. Cloud Computing
A big trend in computing is offloading your local computing and data storage needs into the cloud. Ultimately, the cloud computing movement sees individual computers becoming primarily web terminals used to connect to powerful servers hosting our personal and business data, as well as web-based applications.
There are very few good pure-play companies in cloud computing. Amongst publicly-traded names, one of the leaders in cloud computing is Amazon (AMZN) with its EC2 virtual computing environments. Google (GOOG) is also a major player in the field with its web-based Google Docs service, as well as its Google Apps for Business line. Microsoft (MSFT) is also in the game with its Business Productivity Suite and its Office 365 offering.
2. Tablet PCs
Almost every major computer maker is debuting new tablet computers this year. The tablet segment is expected to grow quickly over the next few years, with one research firm projecting a growth from approximately 4 million units sold in 2010 to 57 million units being sold in 2015. A clear leader in the field is Apple (AAPL), with over 75% of the worldwide market share. In addition, Apple's Ipad 2 is expected to start shipping soon.
Another perspective is that Google's Android-based systems may be where the real growth is. In the fourth quarter of 2010, Android-based systems went from 2.3% market share to nearly 21.6%. Unfortunately there is not a good pure-play on Android tablets, since major computer makers sell a wide variety of systems. Investors may want to look into the profit-boosting potential of Dell's (DELL) new tablet or HP's (HPQ) TouchSmart series of tablets. Another idea would be to look into Intel (INTC) which makes the processors powering most non-Apple tablets.
3. Solar/Alternative Energy
Alternative sources of energy are gaining in popularity, but as an investor, you have to be careful where you put your money. For example, the Market Vectors Global Alternative Energy ETF (GEX) has delivered a negative-50% return since its inception in 2007. The alternative energy sector includes a lot of yet-unproven technologies and small early-stage firms, which presents a high risk for investors. You may want to be more selective and pick out some of the better individual firms. First Solar, Inc. (FSLR) is one of the biggest names, with a $13 billion market cap; it is up nearly 5000% since 2007. (Setting goals is the first step in determining which investment vehicles are right for you. See Investing With A Purpose.)
4. Streaming Movies
Watching streaming movies and television shows on demand is quickly catching on as a preferred method of media delivery. The old style physical rental chains, like Blockbuster, are fast disappearing from the competitive landscape.
The leader in streaming movies is Netflix (NFLX), which is up approximately 700% over the past five years. New investors may wish to exercise caution, however, since Netflix is currently trading at relatively high valuation levels, and several major companies seem to be eyeing an entrance into the market. The most interesting new entrant to the space is Amazon. Amazon launched its new streaming video service on February 22, 2011 which makes approximately 5,000 titles available on demand for free to Amazon Prime members.
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Commodities as an asset class have seen a tremendous run-up in price over the last several years. One of the more compelling long-term commodity stories is lithium, where increased demand is expected for the metal for use in batteries. Lithium batteries are used in electric cars, so if plug-in electric vehicles catch on, that may be a very large new source of demand.
If you are looking for a broad exposure to lithium, you may be interested in the Global X Lithium ETF (LIT) which is up 30% since its inception in 2010. One of the major individual names in lithium is the Chemical and Mining Company of Chile (SQM) which is up about 350% over the last five years.
The Bottom Line
These investing trends have been very profitable for investors who got in early. If you are considering investing now, conduct careful research to make sure you aren't buying in at overvalued levels. Another approach would be to analyze these trends, identify common themes, and try to spot a new trend in the early stages. (Benjamin Graham pioneered cutting edge concepts that propelled other top investors to fame. Check out The 3 Most Timeless Investment Principles.)