Investing gets easier if you skate -- as the old hockey adage goes -- to where the puck is going instead of where it's at on the ice. A good way to fill your portfolio with potential winners is to size up emerging trends that have the potential to grow in popularity in the coming years. I don't mind sharing my crystal ball here, and I'll also discuss at least one stock idea for each of the five trends that I feel are unstoppable at this point.
I see suburbanization, the legalization of gambling and cannabis, telehealth, and the humanization of pets as five trends that will continue to gain momentum. Let's take a closer look as well with ways to invest in these evolutionary if not revolutionary movements.
Image source: Getty Images.
Suburbanization
One thing that became clear during the early days of the pandemic is that companies were about to relax their in-office requirements for jobs that could be done remotely. Folks fled from costly rentals in major cities to suburban markets where they could get more real estate for their buck. I wrote about the suburbanization trend 15 months ago, offering up 18 investing ideas in the niche. A lot of folks have started to move back to metropolitan digs, but more flexible company policies mean that the suburbanization trend is here to stay.
We've seen homebuilders, single-home rental aggregators, and even furniture makers thrive in this climate. Two off-the-beaten path stocks that are thriving in this trend are Trex (TREX -0.57%) and Tractor Supply (TSCO 2.20%). Trex is the leading maker of wood-alternative decking materials. Trex decks last longer than traditional wood decks with a lot less maintenance. As folks move to homes with actual yards, extending their outdoor living space becomes an easy home improvement consideration.
Tractor Supply is a play on recreational farming. A lot of people moving from the city to the country are finding themselves with a lot of land that they can use to raise animals or grow their own food. Tractor Supply is a titan in this market with nearly 2,000 stores catering to rural lifestyles. Last year was strong, but it's doing a great job of building on that momentum. The 13.1% increase in comps that it posted in its most recent quarter comes on top of a 26.8% surge from the same period a year earlier.
Legalization of gambling
Whether it's a matter of states hungry for more tax revenue or just better safeguards in place to catch someone when betting becomes dangerously addictive, gambling is no longer limited to one-armed bandits in Las Vegas. It's never been easier to raise the stakes when watching live sporting events, and one stock I really like here is DraftKings (DKNG -2.31%).
DraftKings started off as a fantasy sports specialist, with folks pitting their ability to guess on-field performances of individual players. It has evolved to a full-fledges sportsbook operator. Pete Rose must be shaking his head as he sees DraftKings partnering up with teams and leagues for in-game marketing deals. Revenue has soared 72% over the past year, and analysts see top-lien growth of nearly 50% for next year. Don't bet against DraftKings, even if the stock is down sharply from its earlier highs.
Cannabis
Something that may seem even more surprising than the proliferation of gambling in recent years is the widespread acceptance of cannabis products. As more states legalize marijuana and other jurisdictions start to embrace the benefits of cannabis you're seeing a lot of publicly traded companies start to light up.
A more conservative play in this field is Innovative Industrial Properties (IIPR 0.37%). It acquires and manages regulated cannabis facilities that it leases out to state-licensed operators, offering more than 6 million rentable square feet of specialized industrial and greenhouse buildings. It's a way to play the growing popularity of cannabis, hitching on to the country's best performers.
The upside may be limited to the rent it collects, but its early success has made it a savvy acquirer of smaller specialists to help it scale. Innovative Industrial Properties is structured as a real estate investment trust (REIT), passing on most of its earnings to its shareholders. That translates to a relatively low yield of 2.5% right now, but the hikes have been substantial every year.
Telehealth
Another pandemic trend that isn't going away anytime soon is telemedicine. Teladoc (TDOC -1.52%) is a company that surged higher through the first few months of the COVID-19 crisis, when it became clear that folks weren't going for in-office consultations with doctors outside of emergency situations. Teladoc has corrected sharply this year as medical buildings are open again, but this doesn't mean that telehealth is fading away. The 3.9 million visits it logged in its latest quarter is 37% more than its serviced a year earlier.
No one like shuttling off to a crowded waiting room to see a doctor, and now that we know that telehealth can be done remotely for many basic visits. Teladoc's ability to deliver one-to-one virtual care for primary and mental care -- along with last year's Livongo Health acquisition that makes it a leader in chronic condition management makes it an oversold stock with a bright future.
Humanization of pets
We adopted a lot of pets last year when the pandemic made it clear that we would have a lot time to care for them at home, and these dogs and cats are going to be around for a long time. Two stocks I like here are Freshpet (FRPT 0.82%) -- a provider of fresh pet food -- and online retailer Chewy (CHWY 0.19%).
Freshpet stands out with its fleet of branded fridges that you will find at many leading supermarkets and most of the top mass market retailers. Chewy has been able to carve out a niche in e-tail with its strong customer service and attractive subscription discounts. Pet stocks have retreated in 2021, but our furry friends are only getting larger and hungrier.
