Editor’s note: This article was first published in August 2013; the market forecasts it cites for e-cigarettes, LED lighting, natural gas engines and 3D printing, and the share of vehicles using natural gas, are 2013 figures and projections.
With share prices close to all-time highs, investors are starting to feel uneasy about short-term investments, all the more so given the doubts raised by such an inflated market and the likelihood that stocks are excessively expensive. It is at times like these that we should turn to industries that are just getting started and have a lot of growth potential. So in its latest letter, Goldman Sachs identified what it calls “killer industries”, because the rise of these businesses forces large listed companies to adapt or die along the way.
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The good thing about these industries, according to Goldman, is that they are poised to create addressable markets that offer growth insulated from the macroeconomic environment.
1. Electronic cigarettes
E-cigarettes claim to be the good side of traditional tobacco and 99% less harmful. For now, everything suggests that today’s tobacco companies could end up taking virtually all of this business. We are talking about a market of 10 billion in sales over the next five years, with the advantage that e-cigarettes could generate more profit for companies because they are not taxed as heavily as traditional cigarettes.
2. Cancer therapies
One in three people will have cancer in the next 20 years, and companies are striving to turn this disease into a chronic condition, like diabetes. For now, two therapies are much further along in doing away with chemotherapy: immunotherapy and targeted therapy. One way or another, cancer treatments will be one of the most profitable industries to invest in (much to our regret).
3. LEDs
LEDs have major advantages over conventional light sources, such as energy savings of up to 85% and a longer lifespan, and they are also easy to program, so at an industrial level this sector will see a high volume of business. Goldman expects this market to reach 11 billion in 2015, and it could see annual growth of 40% over the next five years in both the industrial and the commercial market.
4. Reinsurers
These are companies that insure insurers. If we look at Berkshire Hathaway’s share price, we can see how this type of company can boom in the market.
5. Compressed natural gas
Compressed natural gas and liquefied gas are increasingly used in industrial and commercial fleets. The good thing about this market is that, according to Goldman, only 3% of vehicles currently use it. According to its forecasts, gas engines will account for 10–15% of total truck sales, with a penetration rate of 20–30% in transport fleets by 2020.
6. 3D printers
3D printers are still running at half throttle and could be the future of manufacturing, because it is cheaper and more customisable. This market currently brings in 2.2 billion in sales, while forecasts point to annual growth of 23% until 2021. Some say this market could generate more than 30 billion.
In the report, Goldman does not mention renewables, but solar and wind power will probably be part of our future, although that is our personal opinion. So now we have the industries. Next comes analysing which companies will lead the sectors we have named.
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Featured image: Ivan Radic, CC BY 2.0, via Flickr.
