6 actions on unstoppable trends that will make you richer in 2021 (and beyond)
It is generally accepted that the best way to generate wealth is to invest your hard-earned money in quality businesses and hold onto them for the long term. Investors may ignore the latest “get rich quick scheme” knowing that even those who get average returns will still easily exceed the derisory rates offered by a savings account or certificate of deposit.
That said, investors who are willing to do a little investigative work can do even better. Simply beating the larger market indices by a few percentage points each year can generate massive gains when measured over years or decades. A proven way to thrive is to recognize the biggest and most important megatrends, identify some of the key players involved, buy shares in those companies, and settle down to race.
Let’s take a look at three megatrends and six companies involved that have the potential to generate big returns in 2021 and beyond.
1. Video streaming
Cord cutting has reached epic proportions in recent years, and the trend is only accelerating. The largest pay-TV providers lost 4.9 million customers in 2019, the biggest single-year drop in cable TV history, according to a report by the Leichtman Research Group. These losses came after 2.87 million subscriber defections in 2018 and 1.51 million in 2017. Many of those customers who cut the wire have adopted streaming video for their viewing alternative.
As the number of viewing choices on the Internet continues to increase, Roku (NASDAQ: ROKU) remains one of the clearest ways to read the ongoing migration to video streaming. The company’s streaming devices are service independent, supporting both ad-supported and paid services. Roku hosts over 5,000 streaming channels on its platform, so there will certainly be some for all viewers.
This approach pays off. In the third quarter, Roku’s active accounts grew to 46 million, up 43% year-over-year. Engagement is also increasing, with streaming hours surging 54%. The company’s platforms segment, which accounts for the lion’s share of Roku’s revenue, climbed 78% in the last quarter.
Disney (NYSE: DIS) is another business that is expected to thrive in the age of streaming. When its flagship streaming service, Disney +, launched in late 2019, the House of Mouse said it expected between 60 and 90 million subscribers by 2024. Fast forward a year, and the company is counting. already 87 million paying subscribers worldwide and now awaits its list. to reach between 230 million and 260 million by 2024. Although its other Disney business segments were decimated by the pandemic, revenues from its direct-to-consumer segment increased by 81% during the year 2020.
2. Electronic commerce
The trend of online retailing was already well established, but now it’s a high-speed train rolling down the tracks. E-commerce as a percentage of retail trade in the United States has tripled over the past decade, accounting for 13.5% of total retail sales in the third quarter of 2020. While the adoption rate may decline in the near future. Following the pandemic, digital retail is here to stay.
Shopify (NYSE: SHOP) is particularly well placed to capture this tiger by the tail. The company offers a one-stop-shop for merchants who want to bring their business online, without having to worry about doing it themselves. Shopify not only offers the basics like website design and customization, but it also offers integration with all major shipping and payment processors. In addition, the service provides other essentials to the business, such as payroll processing, inventory management, and even working capital loans.
The pandemic has acted as a catalyst, causing Shopify’s year-over-year revenue growth to roughly double in each of the past two quarters, while gross merchandise volume has also increased to triple digits. The business is also profitable so far this year.
While it might not seem like an ecommerce game at first glance, Fiverr International (NYSE: FVRR) is well placed to benefit from human commerce, or rather from connecting concert workers with companies. The company’s digital platform allows freelancers to list their services, while attracting businesses looking for those services. The concert economy has only just begun, with Fiverr as a facilitator.
The company receives a flat 20% commission from the seller and its position as a matchmaker has been extremely lucrative. For the first nine months of 2020, revenue increased 72% year-over-year, accelerating in each of the last four quarters, and reached 88% in the strongest quarter. recent. The company is also getting closer to profitability.
As the world becomes more and more digital, the temptation for infamous gamers to line their pockets grows. Cyber security has never been more important, especially in the face of recent Solar winds To hack which targeted not only government agencies, but companies like Microsoft.
As hackers become more sophisticated, more companies will turn to cybersecurity vendors to protect their data. Wedbush analyst Daniel Ives suggests this could result in an additional $ 200 billion windfall in cloud security spending over the next five years. The focus will be on advanced threat detection, zero trust architecture, data security and identity security, according to Ives.
The ability to stop cybersecurity threats before they start is one of the hallmarks of CrowdStrike Holdings (NASDAQ: CRWD), which goes to the heart of the matter. The company specializes in protecting endpoints – servers, desktops, laptops, mobile devices, etc. Its Falcon platform uses information gathered from its customer network to identify and stop attacks.
By continuously authenticating, authorizing and validating users and their credentials, the cloud-based platform not only protects against known issues, but it also identifies evolving threats using intelligence. artificial. It should be noted that the hackers behind the SolarWinds attack attempted to gain access to CrowdStrike, but ultimately failed.
Industry-leading security is turning heads. In the first nine months of 2020, CrowdStrike’s revenue grew 85% year-over-year, while annual recurring revenue jumped 81%. More importantly, the net number of new subscribed customers increased by 88%, laying the groundwork for increased recurring revenue in the future. CrowdStrike is not yet profitable, but it is getting closer every day.
Another company offering cutting edge protection with zero trust is Zscaler (NASDAQ: ZS). The company operates in the cloud, to provide greater reach than can be achieved with traditional cybersecurity solutions. By providing secure connections between remote workers and their company’s cloud resources, Zscaler has revolutionized the age-old model of cybersecurity of building better walls and digging deeper ditches.
Business is booming. In its first fiscal quarter (ended October 31), Zscaler’s revenue grew 52% year-over-year, but even that doesn’t tell the whole story. The company has grown revenue at a compound annual growth rate (CAGR) of 64% since 2016. Like many high growth companies, Zscaler is not yet profitable, preferring to use its limited resources to focus on business. acquisition of new customers.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.