- People are migrating to connected TV, and media companies are chasing audiences, providing a golden opportunity for this company enabling the shift.
- The shift toward environmentally friendly products is easier when businesses can also turn a profit, and that's exactly what's driving this company.
- More people own a cellphone than have a bank account, making mobile-native fintech stocks like this one a safe bet for the next decade.
Despite the unprecedented strain on the economy from the coronavirus, the S&P 500 is up 12% year to date, defying predictions across the board. With so many stock winners this year, investors understandably want to know what hot stocks to buy as we close 2020 and head into 2021.
Tapping the brakes, 2020 has clearly demonstrated it's extremely challenging to predict stock prices in the short term -- and yes, I consider one year to be short term. But the longer you extend your time frame, the easier predictions become. Envisioning how business trends can play out over a decade is easier than nailing down how the market will react to developments day by day.
So rather than ask what to buy for 2021, how about you extend your horizon over the next decade? If you're up for the challenge, here are three long-term trends worth betting on and the companies poised to benefit from them between now and 2030.
Bet on connected TV
Have you noticed how many streaming-video services there are these days? There's a reason for this. Media companies know there's been a clear shift among viewers. They're leaving traditional TV sources like cable and switching to on-demand streaming through smart TVs and over-the-top hardware providers. Most of these media companies generate revenue from advertising, so they must follow viewers by launching their own streaming services on connected TVs. Powering the entire revolution is Roku (NASDAQ:ROKU).
There are already 46 million active accounts on Roku, growing at a rate of 43% year over year. Not only did a recent survey show Roku is the market-share leader in the space and has the highest satisfaction rating among users, but also one in three new smart TVs in the U.S. is powered by Roku. These factors mean Roku has the users now and will likely continue to be the streaming-video operating system of choice.
According to Fortune Business Insights, the streaming-video market is expected to grow at a 12% compound annual growth rate to $843 billion between now and 2027. That's a blustery tailwind to propel Roku to amazing gains over the next decade.
Bet on sustainability
When it comes to caring for the planet, sustainability is a big issue. There's constant debate among legislators on how to regulate the best path forward. But without weighing in on the legislative debate, I believe the adoption of sustainable solutions is unstoppable when it also makes good economic sense. Companies that can do good for the natural environment and make money in the process are good growth candidates over the next 10 years. And composite-decking material company Trex (NYSE:TREX) is a good example of this.
Trex makes its wood substitute from things like plastic bags and waste wood -- 95% comes from recycled materials. These composite-decking materials are engineered to last 20 years or more but eventually do need replacing. Even here, the company has thought ahead. It doesn't use harmful chemicals in manufacturing so the boards aren't environmentally destructive at the end of their usefulness.
Trex management frequently discusses the need to get its prices closer to that of traditional pressure-treated lumber, which currently dominates the decking market due to its affordability. Trex is moving to get new factories running to drive its costs down. The company's revenue is up 150% over the past 10 years, but once price is less of an issue, sales can really soar as consumers replace maintenance-intensive wood decks with simple (and green) composite decks.
Bet on digital finances
Saying technology has completely disrupted some industries is an understatement. But I believe we are in the early innings for financial technology (known as fintech) turning the world of finance on its head. And Square (NYSE:SQ) is becoming a well-rounded player in the space.
You might know the company for its credit card swiping hardware, or perhaps for its popular Cash App. But Square has a vision to provide a plethora of financial solutions. It already functions as a stock brokerage, peer-to-peer transfer facilitator, cryptocurrency wallet, small-business software provider, pseudo-bank account with direct deposit and debit card services, and could soon originate loans. Furthermore, there are rumors it even wants to prepare your taxes. All of this it does either through a smartphone app or simple-to-use software.
According to research from GSMA Intelligence, cellphone users surpassed 5 billion people worldwide back in 2017. In 2018, only 3.8 billion people had a bank account, according to the World Bank. In other words, the cellphone has greater adoption than banks, which suggests mobile-native fintech companies like Square will increasingly be a preferred financial instrument. The stock may be up 200% year to date, but this digital-finances trend can definitely propel it to new highs over the next decade.
To conclude, don't let fear of the next month or year keep you on the sidelines altogether -- selectively pick great companies and hold for a long time. I believe Roku, Trex, and Square will grow substantially over the next decade and are worth buying today, even if I'm unsure about what will happen to their stock prices in the coming weeks.