But that was then, and there’s nothing quite as dismal as buying at the end of a trend. Just ask the folks who bought biotechs in 1982 (after they doubled, but just before they fell 68 percent) or emerging markets in 1994 (up 73 percent in 1993; down 30 percent in the next four years). So, with a new millennium upon us, Wall Street is looking way ahead. What mood will we all be in next year and in five years? What are the next decade’s big social trends, and, more to the point, which stocks will ride them?
Profit-hunting strategists are looking at everything from fingerprinting companies (we’ll all be focusing on risk) to companies that make personal defibrillators. (We’ll still be health obsessed–but older.) Here are the trends and companion stock picks that some experts think will be big in the next decade.
Teen Power: American teens are already spending $141 billion a year; that’s been growing 6 percent annually and will continue to expand as they swell to 34 million strong by 2010 (more teens than at any other time in U.S. history), says Michael Wood of Teenage Research Unlimited, a Northbrook, Ill., market-research firm.
The good news is that you don’t have to be cool to understand where that money is going. Bet on clothes, music, entertainment and more clothes, and look for the companies that are nimble marketers, such as Abercrombie & Fitch or the Gap. Claire’s Stores is in every mall selling earrings to fit all those new piercings, and Funco Inc. sells more videogames than teens should have time to play.
New Schools: Our country spends more than $600 billion annually on education, generating intense interest from the private sector. With classes swelling to baby-boomer proportions and those baby-boomer parents demanding the best for their offspring, companies that provide, support or compete with public education are one of the hottest growth areas around, according to Futurist Magazine. There’s money on the table for new and different types of schools (think part-time classrooms supplemented by Internet instruction), private tutors, educational software and books. There may even be an opportunity in little plaid uniforms, which may be required by nearly 25 percent of schools within two years. Uniforms are made by Lands’ End, and others, like Kettmanns and Ibiley, that aren’t household names, but could be if demand keeps up.
Companies like Lucas Learning (educational software), Sylvan Learning Systems (tutoring), The Washington Post Company’s–which also owns NEWSWEEK–Kaplan Educational Centers (tutoring), Zany Brainy (educational toys and books) and MaMaMedia (Internet learning) will all profit as they try to make kids smarter and smarter.
Fear Itself: The country is full of worriers and the next decade will make people more and more risk averse. Consumers looking to make sure their food, kids, computers and schools are safe in the 2000s will present a major investment theme, says David Wanetick, author of “Hot Sector Investing” (352 pages. Dearborn. $24). He says fingerprinting companies like Identix and Digital Biometrix will profit from the fact that everyone from gaming casinos to child-care centers are fingerprinting their workers. Companies like Neogen and Molecular Chemistry could clean up with toxin and bacteria test kits as consumers seek purer foods. And don’t forget companies like Texas Instruments and Ultratrak, which make surveillance cameras to detect traffic violators or other threats.
Health Care: What’s the one sector that raises prices every year with abandon, even though its biggest growth years remain ahead of it? Health care. Drug companies will profit from two very different trends, notes Standard & Poor’s Sam Stovall. Within the next 15 years, the number of Americans over 45 will surge. Those are the folks most likely to take regular medication for chronic conditions, such as high blood pressure. At the same time, busy younger consumers are gulping PowerBars and pushing for more medicine in their food: nutriceuticals like Benecol, that cholesterol-lowering margarine. To capitalize on the contracting out and the drug trends at once, consider third-party drugmakers like Ligand Pharmaceutical or Pharmacopeia, says Legg Mason’s Richard Cripps.
Expect personal-health devices to get more popular, too. The price of automated external defibrillators has dropped below $3,000 and they’re joining fire extinguishers in gyms and airports. Manufacturers like Hewlett-Packard and Medtronic are reporting sales of new, smaller units to nervous but well-heeled people who worry about cardiac arrest. Personal emergency-response systems, worn on necklaces or watches, will also thrive as more of us age and worry, says Wanetick. He points to Lifeline Systems, American Medical Alert and Response USA.
Different Tech: Most market strategists agree with Merrill Lynch’s Charles Clough when he says tech stocks are more than a 10-year wonder; they’re the new industrial revolution. But there’s tech and there’s tech. “Computer stocks and data processing are cooked,” says Clough, who sees the most promising growth in telecommunications as consumers look for faster Internet access and wireless ways to send data, sound and video to their friends and colleagues. Nortel Networks Corp., Bell Atlantic and Teligent are all industry leaders, says Merrill. If that sounds familiar, it’s because every once in a millennium, last year’s trend is the next big thing.
