I get better gas mileage in my car with the wind at my back. I hit better golf shots with the wind at my back. I can run faster with the wind at my back. Other than flying a kite, everything is easy with the wind at my back.
Investing is no different. Achieving good results is much easier with the wind at your back.
Even if you are an expert at finding the very best companies to invest in, if you are constantly picking bad industries your results aren’t going to be very good.
For example, investing in the newspaper business has been a horror story since the internet began. Even the best performing newspaper businesses have struggled mightily.
As investors, what we should be striving for all of the time is to find both good companies but also great demand growth industries. That way we are investing in companies that have the wind at their back which will help them grow at very fast rates. Even maintaining market share in a growing industry results in revenue and profit growth.
Over time that growth is what will drive share price returns.
Today I submit for you what I think are the two best industries to invest in for the next fifteen years. Finding the right company to profit from these opportunities will be tricky, but I believe these are the two places to look.
#1 – Virtual Reality Or Smart Glasses
Early last year I laughed at a colleague who told me that the next big investing opportunity was in virtual reality or “smart” glasses. My opinion was that Google Glass was ridiculous as well as a failure at the consumer level.
But I wasn’t looking at the opportunity from the proper angle.
When I started doing some reading I realized what I had been missing. The big opportunity has nothing to do with a retail smart glass user like me or you. The opportunity is at the commercial level where these things have all kinds of applicability and allow for serious efficiency gains as well as cost savings.
Here is one example.
Imagine the cost that could be saved by a company having one expert sit in the office and guide ten much lower paid staff members out in the field. Without smart glasses that company would need 10 expert level employees physically on location at the field site. With smart glasses being worn by the lower level employees in the field one expert in the office could instruct these less expensive level employees (who are hands free) through the task required.
Smart glasses would allow that company to dramatically reduce its cost (10 lower level employees vs 10 expert level).
Research firm Digi-Capital has estimated that the AR smart-glasses global market will reach $150 billion by 2020 from just $5 billion in 2016. That is going to be a hyperbolic growth curve with some crazy annualized rates of revenue growth.
The coolest looking commercial smart glass product that I can find are Vuzix’s (NASDAQ:VUZI) Blade 3000 Smart Sunglasses which have been rolled out this year. I found them through articles in both Barron’s and Wired which were very positive suggesting that these glasses are currently the best offering available.
Given the $150 billion in revenue that is going to be available in this industry you can bet that there will be several rounds of technological leaps made in relatively short order so where the Blade 3000 glasses rank could change quickly.
#2 – Electric Cars And/Or Lithium Producers
Where the size of the commercial smart glasses market is going to go from 0 to 100 miles per hour in just a couple of years the growth in electric cars could be a much bigger long term opportunity. We are talking several decades of growth.
Just consider the incredible size of the global automobile fleet. If you include both commercial and passenger cars the global number is pushing 1.3 billion. If the electric car does get to the point where it is cost competitive and matches up with the functional capability of the combustion engine vehicle, over time almost all of those cars will roll over to electric.
The potential is mind-bogglingly large. The issue that I keep trying to deal with in my head is whether as an investor a person is best to try and profit from this by guessing which electric car manufacturer will be the big winner or whether playing this indirectly is a better option. By indirectly I mean that perhaps it would be smarter to own lithium (the commodity), a lithium producer or perhaps a basket of lithium producers.
I believe that finding an answer to that question would be well worth the effort involved in getting there. Depending on which study you read the rate of electric car growth differs, but they all point to that fact that the growth will be extremely fast. The last article I read pointed to the electric car count going from 462,000 in 2015 to 41 million in 2040.
That might seem like an incredible rate of growth but just remember that there are 1.3 billion combustion engine automobiles today. By 2040 there will likely be 2 billion automobiles globally and at 41 million, electric cars will still only have a fraction of the market.
