next big investment themes, The

In their recent "Investor's Guide 2000," the editors of Fortune magazine identified their top 7 areas for growth stocks and value plays over the coming decade. Below we'll use each of these themes as a starting point to discuss the trends in each area.

1. Government Will Get Out of the Way. As evidence continues to accumulate that open market competition produces better services at lower costs, governments around the world are deregulating various sectors of their economies. Deregulation in energy (oil, gas, electricity), transportation (airlines, trucking, railroads), financial services (banking, brokerage, insurance), telecommunications (including information technologies), even agriculture will mean great opportunities both domestically and internationally for those companies ready and able to step up to the challenges.

2. E-Business Outlays Will Boom. According to Internet Research Group and SRI Consulting, US companies spent $153 billion on E-commerce infrastructure in 1999. By 2003, they predict, those expenditures could rise to $348 billion. Deloitte Consulting says that 91% of US businesses will be conducting transactions on the Internet by the end of the next year, up from about 30% today.

3. Biotech Will Arrive. With the mapping of human genome, or DNA, nearly complete, the coming years are sure to be characterized by the application of genetic information to enhancements and discoveries in thousands of areas, most prominently, food and medicine. Sales of bioengineered seeds, for example, were over $1.5 billion last year. The molecular biology supply market is by itself $1.9 billion annually, growing at a 20% rate.

4. Net Connections Will Get Faster. Communications infrastructure for high-speed voice, text, data and video transmission for both the business and consumer markets is one of the fastest-growing industries of the coming decade. Last year alone corporate spending on technology grew 22% to $510 billion, accounting for more than 40% of all business investment. Great opportunities for network operators and next-generation network builders.

5. Bricks and Mortar Will Bounce Back. Even in the most optimistic of long-range forecasts, electronic commerce isn't expected to ever account for more than a single digit share of all retail sales. That would still represent billions of dollars, to be sure, but even so, the most successful retailers are likely to be the ones that most intelligently integrate online and offline operations.

6. Gadgets Will Get Even Cooler. By 2010, most American households will have several electronic devices and/or services they don't have now: flat-screen/digital/high definition TVs; digital video disk players; high-speed Internet connections through cable, wireless, digital subscriber line or satellite transmission; fancier and more versatile telephones; various and sundry information appliances dedicated to single functions. All of these gadgets are dependent on software, hardware, content and/or delivery, all of which represent multibillion dollar growth sectors.

7. Boomers Will Hit the Road. Spending on travel increases with age, income and education. The biggest travel spenders are those aged 55 to 64, a group that will grow dramatically in the first decades of the 21st century as aging baby boomers swell the ranks. Providers of travel and travel-related services - from online travel brokers to cruise lines to other suppliers of experiential travel - stand to benefit, although margins are low and competition is fierce.

Growth Strategies Implications: Identifying investment themes is one thing, picking stocks is another. Even in growth industries, not all companies are guaranteed success. Careful analysis of products, markets, management and other factors is still crucial. Some things we can say with certainty, however: 1. Volatility in the stock market will continue; and 2. Real value is going to be a requirement for future investment success substantive businesses providing needed products and services, not hype.

Copyright FutureScan Feb 14, 2000
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