Investors should always be on the lookout for important trends for the growth in the industry and the businesses they lead. Looking back at the best stocks of the past few decades, these have been leaders in products such as computers, internet technology, streaming and e-commerce. And finally, the leaders in every industry were massive growth stocks for investors.
There are opportunities in new industries today, and three stand out to me: video game technology, renewable energy, and real estate.
Image Source: Getty Images.
1. Video game technology
Video games are a big business, whether on computers, consoles or mobile devices. But the trend that investors should be most excited about is the underlying video game technology, or a game engine, that makes it possible to get video games into movies, real estate, and more.
The game engine is the software used to build games and even animations. Instead of building games directly with code, developers can build games with relatively simple design tools.
One of the most popular game engines is Unit (NYSE: U). It is a common engine for building virtual reality games and augmented reality experiences, but is also popular for mobile and computer platforms. The company rose 39% to $ 220.3 million last quarter and could be one of the most steady growth platforms in video games over the next decade.
To earn its software, Unity charges an annual or monthly fee to users. But the real benefit of it is in advertising and the asset store. These services are upside down as more developers use the Unity game engine.
Game engine technology is finding new uses in industries, from architecture to film to medicine, and as these uses grow, so will stocks like Unity.
2. Renewable energy
One of the most incredible changes in energy over the past two decades has been the rise of renewable energy as an economically viable resource. Wind and solar projects are now winning contracts with utilities and companies based on the cost of less than coal, nuclear power and even natural gas around the world. And it is driving exponential growth for the industry.
US solar power generation data by YCharts.
The Biden administration’s policy on renewable energy, which is more favorable than what we’ve seen over the past four years, has added fuel. This will lead to friendlier regulation, and the infrastructure bill proposed today also includes money to modernize the network and expand the production and storage of renewable energy.
There are three renewable energy stocks that I think investors should consider. On the sunny side, SunPower (NASDAQ: SPWR) is a leading technology company that uses solar power on the roof for residential and commercial buildings. It has also expanded to energy storage, where it offers battery storage that combines with solar power to make customers more energy efficient.
In terms of deployment, Brookfield Renewable Partners (NYSE: BEP) plays an important role in financing renewable energy projects. The company buys projects and then pays a dividend with the cash flow generated from the projects. The stock has a dividend yield of 4.6% today and should be able to grow as the renewable energy industry expands.
On a more speculative front, Bloom Energy (NYSE: BE) is a hydrogen company that can play a major role in building the future of the network. The company makes fuel cells, which provide backup power to the grid and commercial buildings, but the long-term vision is to create hydrogen with electricity from wind or solar power plants and water by electrolysis. Once the hydrogen is produced, it can be stored and transported and eventually used with another fuel cell close to the point of electricity demand. Hydrogen can be an important medium for long-term storage, and Bloom Energy is a leader in space.
3. Real Estate Technology
The value of homes in the US stands at an incredible $ 36.2 billion Zillow (NASDAQ: Z), and any company that can add value to the real estate market or disrupt the decades-old real estate business can have a business worth more than a million dollars. The two I have high hopes for are Zillow and Matterport, which merge with the SPAC Gores Holdings VI (NASDAQ: GHVI).
Zillow’s business was based on providing data about the housing market to users and an advertising platform for real estate agents. Agents finance the bulk of the business today. But the future is the buyer and seller of real estate.
With Zillow Offers, homeowners can sell their homes without any headaches usually associated with sales, such as exhibits, repairs, and an unknown closing date. The listing industry is still small today, and home sales in the fourth quarter of 2020 were just 923. But the business can be large and profitable. Last quarter, Zillow sold $ 29,547 in gross profit per home and generated $ 304 million in revenue. In time, it could dominate Zillow’s business and open up hundreds of millions of dollars in revenue for the company, while facilitating the process of selling a home to people around the world.
Matterport is a spatial data company that captures what space in a home or business looks like. The technology of the enterprise enables anyone to take 360-degree photos with a phone or a specialized camera and create a “dollhouse” view of homes and businesses. This data can then be used for virtual tours in home sales, interior design, construction, building management, and more. As data becomes more important in the sale and management of real estate, Matterport creates the tools businesses and homeowners need. And it can make a disruptive company in real estate.
The big trends are driving
Video game technology, renewable energy and real estate technology are growing businesses that will only grow in the next decade. If you are looking for growth stocks, this is a great place to find them, and investors can drive the upturn of industry growth to huge profits.
This article represents the opinion of the author, who may not be in agreement with the ‘official’ recommendation position of a Motley Fool premium advisory service. We are furry! When we question an investment thesis – even one of our own – it helps us all to think critically about investing and to make decisions that help us become smarter, happier and richer.