What's the Market's Next Big Thing? Part 2

In the first part of this roundtable, a panel of Fools pondered which industry would be the market's next big thing -- this coming decade's equivalent of the '90s dot-com boom. Today, we're back with even more great ideas. As always, please consider their selections as candidates for further research, not ironclad recommendations.

Let's fire up our Foolish flux capacitator (you did remember to feed Mr. Fusion, right?) and see what the future might hold.

All aboard!
Chuck Saletta, Fool contributor
The next big thing may turn out to be something very old, indeed: railroads. Among them, Union Pacific (NYSE: UNP  ) could become the biggest winner, thanks to its western U.S. network and America's insatiable appetite for low-cost Asian imports. Here are a few reasons for my optimism on the industry:

  • Trucking companies are downsizing their long-haul fleets in favor of regional ones. The reduced completion gives railroads an even stronger pricing advantage. In fact, much of that long-haul traffic is moving to intermodal service, which relies heavily on the railroads.
  • Because they use less fuel per ton-mile traveled, railroads are generally considered greener transportation than trucks. As gigantic retailers aim to burnish their eco-friendly image, that could give railroads a substantial advantage.
  • Since railroads don't use public roads, they don't pay federal taxes on highway diesel. If fuel taxes rise to pay for repairs of crumbling infrastructure, railroad pricing will get even more competitive compared to trucks.
  • Warren Buffett's Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) recently made a huge investment in the industry, buying Burlington Northern. Who am I to argue against Buffett?

We ain't getting any younger
Anders Bylund, Fool contributor
It's certainly possible to find The Next Big Thing before it happens. Our Foolish founders have a pretty good track record of doing exactly that. But it requires nerves of steel and a good eye for trends so big that they break the mold.

However, you can increase your chances of finding that elusive Mother of All Investments by breaking the market down into smaller parts. For example, nobody would call beverages a hyper-growth industry. But zoom in on the energy-drinks category, and you'll find some truly inspiring investment opportunities.

On that note, I'd like to point out that the boomer generation ain't getting any younger, giving the entire health-care sector a bit of a lift. Within that envelope, I see a rising demand for modern, less intrusive surgical instruments -- the kind that Intuitive Surgical (Nasdaq: ISRG  ) could build hotels on, Monopoly style. There are other new-age treatment providers on the market, too, but I've picked Intuitive Surgical to live in my portfolio for the long haul.

The answer's in your genes
Brian Orelli, Fool contributor
It cost about $2.7 billion to sequence the first human genome. Since then, the price has come down substantially, with retail cost now less than $1,000 in some instances. As prices fall further, getting your DNA sequenced will become a routine test ordered by your doctor.

At the moment, Illumina (Nasdaq: ILMN  ) is the best pure play on DNA sequencing. Life Technologies (Nasdaq: LIFE  ) and Roche (OTC BB: RHHBY.PK) also sell machines to sequence DNA, but it's a smaller part of their overall business. There are also a couple of privately held companies -- Pacific Biosciences in particular -- developing newer sequencing technologies that are worth keeping an eye on in case they go public, and to make sure they don't leapfrog over Illumina.

The bigger problem with investing in DNA sequencing is that where there's a boom, there's a chance for a bust. In the case of DNA sequencing, patients generally only need their DNA sequenced once; one-and-done isn't a particularly sustaining business model, even if the initial market is huge. As we get farther into the DNA-sequencing boom, look for companies that are able to adapt to whatever comes after sequencing.

You've got questions, we've got answers!
Thanks to @m_recruiters from The Motley Fool's Twitter feed, whose query inspired this roundtable. If you've got questions about investing or personal finance, we'd love to help. Tweet them to us @TheMotleyFool, or leave a comment in the box below!

Prepare for disclosure in 3 ... 2 ... 1: Illumina and Berkshire Hathaway are Motley Fool Stock Advisor picks. Berkshire's also a Motley Fool Inside Value selection. Intuitive Surgical got the nod from Motley Fool Rule Breakers. The Fool owns shares of Berkshire. Try any of our Foolish newsletter services free for 30 days.

Fool online editor Nathan Alderman owns shares of Intuitive Surgical, but holds no financial position in any other companies mentioned. Roads? Where we're going, the Fool's disclosure policy doesn't need roads!


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  • Report this Comment On August 10, 2010, at 7:07 PM, cwestfield wrote:

    Great article! Although, I think that there's more to DNA sequencing than single pass sequence per person. Recently, there have been many phase three clinical failures. These are extremely expensive. I recently heard that there's a new mantra brewing- "fail early and fail fast". Drug makers want to drugs to fail inexpensively at phase one. The only way to do this is to use high throughput real-time PCR to validate drugs. This would literally save billions for Pharma. New demand from Pharam is going to create an amazing market for next gen PCR platforms. My pick is Wafergen's Smartchip platform. It combines high-throughput with real-time PCR on a single platform. They just released the platform commercially. As Wafergen (WGBS) picks up momentum, I think they'll be a great acquisition target, specifically because they're so attractive to drug makers!

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