As retailer investors pile into the stock market, which industries are looking strong?
2021 has been a year unlike any other for the stock market. In the first few months, news headlines were dominated by the short squeeze placed on major hedge funds by a bunch of retail investors that congregated in a subreddit focused on day trading. Many everyday people managed to profit from the rising prices of shares in GameStop, AMC, and a handful of other underperforming companies.
As the excitement from this faded away and the news cycle began to focus on other events, these day-traders began focusing their attention elsewhere. First, they tried silver and other precious metals and then moved onto cryptocurrencies. While Bitcoin is by far the best-known, a token called Dogecoin has become the darling of the community, especially as Elon Musk weighed in.
But for anyone not interested in following the hype of Reddit, there are plenty of industries that may look appealing.
The gaming industry keeps going from strength to strength and does show any signs of slowing down. Existing gamers are spending ever-increasing sums on microtransactions and new players continue to pour into the market thanks to a much more diverse offering.
Almost every major publicly traded gaming company set higher quarterly earnings in the final three months of 2020 than in the same period the year before. Ubisoft, in particular, reported record earnings in its most recent filings and Sony’s revenue was buoyed by the launch of the PlayStation 5.
In the United States, more states continue to legalize online betting, opening up opportunities for more Americans to play real money casino online than ever before. More states are expected to follow suit in the coming years, with some experts predicting as many as 40 could do so before the end of the decade.
Gaming has gone from a large niche, filled mostly with men under 30, to a fun activity that is enjoyed by all. As a result, the companies in this market continue to reap the rewards of this expansion.
There is a lot of consolidation taking place in the market too, with huge numbers of mergers and acquisitions taking place in the second half of 2020. Chinese gaming company Tencent has been the biggest spender, purchasing six companies. Microsoft, Electronic Arts, and many other big names have also been getting in on the act.
In the latter half of 2020, eight M&As over $1 billion were transacted, with several more in the first few months of 2021.
Tesla, the electric cars company, has been another darling of the retail investors in the last couple of years. When adjusted for 2020 the stock split, the company’s share price rose from $88.60 in January 2020 to $880.02 a year later. It has since declined somewhat in the following months, trading at just over $600 in early May 2021.
However, Tesla is just one of many players in an industry that is set to grow exponentially in the coming decades as more and more countries mandate that the sale of new petrol and diesel cars are to be banned.
Companies like Royal Mail, Amazon, and DPD are all investing in electric vehicles for their fleets, allowing them to reduce their emissions and cut the running costs of deliveries.
As charging infrastructure and battery technologies improve, more consumers are also going to be buying electric cars.
With this in mind, companies like Nio, Aptiv, and Kanda Technologies may be attractive options for investors that are looking to expose their portfolios to the electric vehicle industry. Alternatively, established car manufacturers like General Motors could be a good bet since they too are investing heavily in new all-electric and hybrid vehicles.
Over the last 12 months, GM’s share price has shot up from around $20 in May 2020 to just under $60 in May 2021 as investors show their confidence in the company’s long-term prospects.
Construction is an industry that has been around much longer than most. It’s needed to build the homes we live in, the universities we’re educated in, the hospitals we go to when we’re sick, the offices we work in, and the hotels we stay in while on holiday.
With a shortage of affordable homes in almost every corner of the globe, construction is going to remain in high demand for the foreseeable future, making it a potentially attractive investment. Governments are plowing huge sums into the industry to help fund the construction of new houses and apartments. For example, the British Government announced in April 2021 that it would make £150 million available under its “Help to Build” scheme.
In the US, the policy think tank Center on Budget and Policy Priorities has been advocating for increased spending on infrastructure for several years. Meanwhile, the World Bank has reported that investment in Sub-Saharan Africa’s infrastructure needs to double to help the region thrive.
With so much money being spent around the world, construction companies are positioned to benefit from this. It’s not just the contractors that will be carrying out the work either. There is a huge industry built around manufacturing and supplying specialist equipment for construction. This includes commonly used tools like jackhammers and steamrollers, to bespoke machinery like tunnel boring machines that are used to excavate and line tunnels used for railways and roads.
Mining and logging companies that supply the raw materials used in cement, steel, and timber are also likely to do well. Already, we’re seeing the global price of timber rising steeply.
European production was down by around 15% in 2020, while demand in the US and China has boomed in the first few months of 2021. This has led to price rises of as much as 150%.
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