Where To Invest: Industries To Back Now

There are many industries that are worth investing in right now. Here are some of the best ones:

- Information Technology (IT): This sector includes computer software and hardware, information services, semiconductors, and related products. Well-known companies in this industry include Apple, Microsoft, and Alphabet.

- Healthcare: Pharmaceutical, biotechnology, and life science companies make up this sector. Notable companies include Pfizer, Gilead Sciences, and Johnson & Johnson.

- Consumer Discretionary: This sector consists of a variety of businesses such as consumer durables, apparel, automobiles and parts, consumer services, and retail. Examples include Amazon, Tesla, McDonald's, and Starbucks.

- Food and Beverage: This industry is essential for human life and is therefore considered a safe investment. Companies include Coca-Cola, Walmart, and Procter & Gamble.

- Communication Services: This sector includes telecommunications, media, social media, and wireless services companies like Netflix, Verizon, and Twitter.

- Energy: This sector covers energy equipment and services, oil and gas companies, and other businesses involved in energy commodity extraction. Major companies in this sector include ExxonMobil, Chevron, and Halliburton.

- Artificial Intelligence (AI): AI has become a major driver of innovation and has the potential to revolutionize various sectors.

- Real Estate: Companies in this sector include real estate management and development firms, as well as real estate investment trusts. Examples are American Tower and Crown Castle.

Artificial Intelligence

AI is the simulation of human intelligence by machines. This is achieved through software that attempts to replicate human processes. AI can be used to gain a competitive advantage in fast-moving markets, but it is also used widely in finance and investing because of its ability to process and analyse information from large data sets. AI can be used to choose stocks, make predictions on market movement, optimise portfolios, manage risk, obtain personalised investment advice, and automatically build a portfolio that meets specific investor criteria.

• Algorithmic trading: AI algorithms are used to analyse large datasets and trade at high speeds, making trades based on market trends and patterns. This gives computers an advantage over humans in high-frequency trading.
• Sentiment analysis: AI programs can help traders assess market sentiment by collecting news articles, social media posts, and other online activity to measure market sentiment and predict movements.
• Portfolio optimisation: AI can help investors identify a portfolio that fits their specific needs relative to risk tolerance and time horizon. AI can also be used in conjunction with modern portfolio theory to craft a portfolio of stocks that increases returns relative to risk.
• Data interpretation and predictions: AI algorithms can be used to make predictions about where a stock or security will go for the purpose of making a profit. While not all models are correct, they can be used to identify cycles in the market.
• Risk management: AI can be used to reduce over-exposure to individual stocks in a portfolio or to establish automated options strategies to assist with risk management.

When considering investing in AI, it is important to remember that it is not a "silver bullet". While it can be a powerful tool, it is only as good as the quality of the application and the ability of the user. Additionally, faulty algorithms and the potential for moves related to large numbers of investors using the same AI-generated information are risks to be aware of.

Some AI stocks that have emerged as early winners in the AI boom include GPU maker Nvidia (NASDAQ: NVDA) and AI server provider Super Micro Computer (NASDAQ: SMCI).

Biotechnology

Some scientists believe we are in a golden age of biotechnology, with scientific advances creating new ways to treat and prevent diseases. The COVID-19 pandemic has also created massive opportunities for biotechnology companies that are developing treatments and vaccines for the virus.

• To reduce investment risk, focus on financially robust biotech firms with commercially available drugs and promising pipelines.
• The least risky biotech companies have drugs already on the market, deeming them more likely to be profitable.
• Look for biotech companies with strong financial positions.
• Invest in biotech companies with strong drug candidate pipelines and market-winning drugs.
• Understand the different phases of drug development and the associated risks.
• Be aware of the regulations biotech firms must follow, such as those from the Food and Drug Administration (FDA).
• Keep in mind that biotech stocks come with the risk of products never making it to market.
• Due to the complexity of biotechnology, it can be challenging to determine a product's effectiveness without a medical background.
• Consider investing in industry-specific mutual funds, ETFs, and index funds to diversify your portfolio.
• Axsome Therapeutics (NASDAQ: AXSM)
• Exelixis (NASDAQ: EXEL)
• Intellia Therapeutics (NASDAQ: NTLA)
• Regeneron Pharmaceuticals (NASDAQ: REGN)
• Vertex Pharmaceuticals (NASDAQ: VRTX)
• Twist Bioscience (NASDAQ: TWST)
• IQVIA Holdings Inc. (IQV)
• Charles River Laboratories International Inc. (CRL)
• Bio-Techne Corp. (TECH)
• United Therapeutics Corp. (UTHR)

Healthcare and Pharmaceuticals

The healthcare sector includes companies that develop and manufacture pharmaceuticals, design and produce medical devices and equipment, provide medical services and operate hospitals, and offer health insurance plans.

The healthcare sector is a good investment option because it provides steady, consistent, and defensive returns that are uncorrelated with the overall stock market. People will always need healthcare, and the industry is growing due to technological advances, an aging global population, and improved treatments for chronic diseases and conditions.

The U.S. healthcare sector is expected to grow at an average annual rate of 5.4% through 2028, reaching $6.2 trillion and 19.7% of the country's GDP. This growth is reflected in the strong numbers of some of the biggest companies in the sector, such as Johnson & Johnson, Pfizer, and UnitedHealth Group.

However, there are risks associated with investing in the healthcare sector. The rising costs of healthcare in the U.S. are causing increasing calls for regulatory changes, and there is a constant threat of disruption by new players, such as tech companies like Amazon, and nimble biotech startups.

Within the healthcare sector, there are several subsectors to consider:

• Drug stocks: These include companies that develop and manufacture pharmaceuticals, such as Eli Lilly and Co, and Novo Nordisk.
• Medical devices stocks: Companies in this subsector design and manufacture medical devices, equipment, and tests, such as Thermo Fisher Scientific Inc.
• Health insurance stocks: This subsector includes companies that offer health insurance plans, like UnitedHealth Group, as well as pharmacy benefits managers (PBMs).
• Medical services provider stocks: This subsector includes hospital operators, home health companies, and managed care facility operators, such as Universal Health Services.

When investing in the healthcare sector, it is important to do your due diligence and consider purchasing exchange-traded funds (ETFs) or index funds that track diversified indexes, as these provide more stability and solid long-term growth.

Some notable recent developments in the healthcare sector include the use of AI to improve drug discovery and development, with companies like Sanofi, AstraZeneca, and Pfizer leveraging AI to accelerate research and identify drug targets.

Electric Vehicles

There are several advantages to investing in electric vehicle stocks. Firstly, the industry is expected to create over 1 million jobs. Secondly, if US-made electricity is included in the clean energy industry, this could further benefit electric vehicle companies. There are also potential tax credits available for consumers, which could encourage sales.

When considering which stocks to invest in, it's important to look beyond the automobile manufacturers themselves and also seek out the stocks of companies that produce electronic safety equipment, connector systems, batteries, and other components of electric vehicles. Some examples of these include:

• Niu Technologies (NIU): Niu designs and manufactures electric scooters, motorcycles, and bikes for urban travel, as well as offering spare parts, accessories, and maintenance services.
• Proterra Inc. (PTRA): Proterra provides electric vehicle infrastructure and produces electric vehicle drivetrains, batteries, and charging technology.
• BYD Co. Ltd. (BYDDY): BYD develops and manufactures electric vehicles and similar products, including lithium-ion and nickel batteries for phones, power tools, and electric vehicles. They also produce rail transit equipment.
• Indie Semiconductor Inc. (INDI): Indie supplies semiconductors for electric vehicle applications such as autonomous driving and advanced driver assistance.
• Li Auto Inc.: Li Auto is a Chinese developer and manufacturer of smart electric vehicles, with their main product being the Li ONE electric sport utility vehicle (SUV). They also sell charging stalls and internet connection services for vehicles.

Additionally, investors can consider exchange-traded funds (ETFs) that invest in a range of electric vehicle stocks, such as the iShares Self-Driving EV and Tech ETF (IDRV) and the Global X Autonomous & Electric Vehicles ETF (DRIV). These funds can help to minimise risk and provide exposure to a fast-growing sector.

Renewable Energy

• Addressing Climate Change: The global shift towards renewables is driven by the urgent need to address climate change. The decarbonization of the global economy will require massive investments, estimated at over $150 trillion over the next three decades.
• Rising Demand and Government Support: Renewable energy sources, such as wind, solar, and hydroelectric power, currently supply over 20% of the electricity generated by the US power sector, and this demand is expected to increase with government initiatives like the Inflation Reduction Act, which will drive $369 billion in energy security and climate change investments.
• Falling Costs of Technology: The costs of solar panels, wind turbines, and batteries for energy storage have been decreasing, making renewable energy more economical and attractive for investments.
• High Growth Potential: The renewable energy industry has been growing rapidly, quadrupling its electricity-generating capacity over the past decade. This growth is expected to continue, with wind and solar power projected to rise to nearly 45% of generation by 2032.

How to Invest in Renewable Energy:

• Identify Top Renewable Energy Companies: Look for companies with a strong track record of creating shareholder value and investing in renewable energy. Examples include NextEra Energy, Brookfield Renewable, Clearway Energy, First Solar, and SolarEdge Technologies.
• Consider Renewable Energy ETFs: Exchange-traded funds (ETFs) offer a diversified investment in the renewable energy sector. Some of the largest renewable energy ETFs by assets under management (AUM) include the Invesco Solar ETF, First Trust NASDAQ Clean Edge Energy Index Fund, and Invesco WilderHill Clean Energy ETF.
• Evaluate Company Fundamentals: When investing in individual companies, look for those with strong balance sheets and a solar energy-focused growth profile, as these factors can enhance their ability to generate higher returns.
• Understand the Risks: While renewable energy offers attractive opportunities, it's important to remember that it's a relatively new and rapidly changing industry. Regulatory changes, technological advancements, and market competition can impact the performance of investments in this sector.

Frequently asked questions