Investing in broad secular trends across the economy can be a lucrative strategy for earning solid returns in the stock market. The reasoning is that if certain industries experience rapid growth, the stock prices of some of the leading companies in these areas will do extremely well.
With that in mind, here are three top trends to invest $1,000 in right now.
cloud computing
The first trend is cloud computing, which refers to on-demand tech services for businesses. The main advantages are lower costs and the ability to rapidly increase a company’s IT requirements. According to Grand View Research, the global market for cloud infrastructure and platform services is estimated at $1.6 trillion by 2030, compared to $500 billion today. Therefore, the growth opportunity is enormous. The benefits of moving to the cloud are obvious, which means it’s a good place to look for investment ideas.
In that sense, leaders in this space are Microsoft and its Azure service, Alphabet and its Google Cloud platform, and Alibaba Cloud. All of these companies’ share prices are a long way from their all-time highs, so now could be a good time to consider investing.
digital advertising
The next trend is digital advertising, which means any advertising that takes place over the internet, for example on websites, mobile applications and streaming platforms. This is in contrast to traditional forms of advertising such as magazines, television advertising and radio. Digital advertising benefits marketers because it can better target customers and collect data in a cost-effective manner. According to Statista, the digital advertising market is worth $700 billion today and is projected to surpass $1 trillion by 2030.
The two top companies in this space are Alphabet and Meta Platforms. With a roughly 90% share of the global search industry, Google unsurprisingly dominates. In fact, Google search generated 56% of Alphabet’s total revenue in the fourth quarter of 2022. And last year, Meta reported $116.6 billion in revenue, 97% of which came from advertising.
With both Alphabet and Meta trading at price-to-earnings multiples of 20, now could be as good a time as ever to buy their shares.
Ecommerce
The last trend to invest in is e-commerce. While brick-and-mortar retail is clearly not dead yet, online shopping has continued to steal market share. Thanks to the coronavirus pandemic, e-commerce’s share of total US retail sales peaked at 16.4% in the second quarter of 2020. The latest data shows that this metric was 14.7% in the fourth quarter of 2022, penetrating the broader retail landscape
While many companies that have relied on a physical store presence have invested in strengthening their omnichannel capabilities to better serve customers, there are ways to address this trend more head-on. Etsy, for example, is a popular online marketplace for unique and handmade goods. The company generates ample free cash flow, and its stock is down 60% from its all-time high.
A simpler approach
Rather than investing in numerous companies to partake in these various secular trends, you can buy one company to please everyone. I am sure you will have no problem easily guessing what it is.
Amazon (AMZN 3.01%) is the leader in e-commerce and has a 38% share of the US market. It’s the leader in cloud computing with segment revenue of $81 billion in 2022. And it’s a rising player in the digital advertising industry, which grew revenue by 19% to $11.6 billion in the fourth quarter of 2022 and thus ranks fourth worldwide only behind Alphabet, Meta Platforms and Alibaba.
It’s rare to find companies capitalizing on broad trends across multiple high-growth and massive industries, but Amazon is one of them. With the stock down 51% from its July 2021 peak, investors can now buy shares at a compelling price-to-sales ratio of 1.8. Once the macroeconomic headwinds are a thing of the past, it’s not hard to believe that Amazon will thrive again.
For those who aren’t too keen on putting all their eggs in the Amazon basket, it might be a good idea to invest $1,000 equally in the other companies mentioned above.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Neil Patel has positions at Alphabet, Amazon.com and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Amazon.com, Etsy, Meta Platforms, and Microsoft. The Motley Fool has a disclosure policy.
