Beat The Bear Market With Structural Growth
A potentially profitable way of approaching the current bear market is to identify sectors and leading players within those sectors that are benefiting from positive trends and structural growth.
Companies continuing to post strong results in a downturn are often strongly product-led with sales growth driven by new product cycles as well as a structural shift in patterns of consumer spending.
Just witness the mushrooming sales of tablet computers and smart phones and their applications. For example, Apple recently sold four million iPhone 4S handsets over an initial three-day launch, twice the number of iPhone 4 handsets sold over the corresponding period.
Despite the current downturn, therefore, there are areas of major technological change and structural growth, which will continue to offer investors substantial potential upside even in the most bearish market.
This is evident in many different sectors, such as mobile telephony, internet security, online marketing etc…
Markets and sectors can be ‘disrupted’ by breakthrough technology, which happens all the time irrespective of boom and bust.
Just witness the advent of the ‘paperless office’ over the last decade. Document management involves converting paper documents into electronic form, and then storing, retrieving and searching for pieces of information.
The potential cost savings and returns are huge in terms of storage costs and retrieval.
Here, there are regulatory drivers including the Sarbanes-Oxley Act in the US as well as freedom of information. Increasingly governments must make such information available via the Internet, which means that paper documents must first be scanned in electronically and the records then managed through imaging, archiving and indexation.
This whole document management phenomenon has implications for storage, which looks set to continue to grow as the amount of new digital information including emails, electronic files and images proliferate dramatically.
This creates growth for those in the data storage arena as well as service providers and integrators that support the storage networks.
With the Digital Age well and truly upon us data integrity and security is becoming more and more critical.
Online shopping and payment applications have mushroomed, which has spawned a small army of malicious hackers that must be guarded against. The continual fight against both cyber-crime and software viruses is providing boom markets for those companies that combat them.
The Internet is now all-pervasive. Voice over IP now enables telephone calls to be made using the Internet, which yields substantial cost savings compared with traditional circuit-switched telephone networks. Video over IP is behind the digitization of closed circuit TV (CCTV) increasingly used to combat crime on our streets.
Meanwhile, our seeming insatiable appetite for on-demand video services, such as movies, means that many telecommunications firms are set to benefit from the spread of IPTV – a technology which facilitates the broadcast of TV and video on demand over the existing copper wire telephone network.
Meanwhile, mobile phone penetration continues to soar worldwide and looks set to rival or even surpass computer-based Internet surfing.
The areas of mobile content that have been booming over recent years include ringtones, wallpaper for mobile phone screens, mobile games, mobile gambling, chat and dating applications, video clips (e.g. pop videos), music downloads etc…
And, on top of all these technological developments driving growth you can also throw geography into the mix.
For example, in the Far East, infrastructure data centre capacity currently lags the growth in Internet usage. This is creating good growth opportunities for the build-out of data centres in countries, such as India, Singapore and Malaysia.
India also has its own Hindi-language based film industry aptly named Bollywood located in Mumbai, which is currently booming. Meanwhile, online gaming is taking off in China.
Investors can target this growth by carefully selecting the shares of leading players within these industries.