Investing in broad secular trends across the economy can be a lucrative strategy to achieve solid returns in the stock market. The thinking is that as certain industries experience rapid growth, the share prices of some of the leading companies in those arenas will perform extremely well.
With that being said, here are three top trends to invest $1,000 in right now.
Cloud computing
The first trend is cloud computing, which refers to on-demand tech services for businesses. The key benefits are lower costs and the ability to quickly ramp up a company's IT needs. According to Grand View Research, the global market for cloud infrastructure and platform services will be valued at $1.6 trillion by 2030, compared to $500 billion now. Therefore, the growth opportunity is massive. The advantages of shifting to the cloud are obvious, meaning it's a good place to look for investment ideas.
On that note, leading businesses in the space are Microsoft and its Azure service, Alphabet and its Google Cloud Platform, and Alibaba Cloud. All these companies' share prices are well off their highs, so now could be a good time to consider investing.
Digital advertising
The next trend is digital advertising, which is any advertising that occurs over the internet, like on websites, mobile applications, and streaming platforms. This contrasts with traditional forms of advertising, like magazines, TV commercials, and radio. Digital advertising benefits marketers because of its ability to better target customers and collect data in a cost-efficient way. According to Statista, the digital advertising market is worth $700 billion today, and it is projected to top $1 trillion in 2030.
The two top companies in the space are Alphabet and Meta Platforms. With a roughly 90% share of the global search industry, Google, unsurprisingly, dominates. In fact, Google Search generated 56% of Alphabet's total revenue in Q4 2022. And last year, Meta posted revenue of $116.6 billion, with 97% of it coming from advertising.
With both Alphabet and Meta trading at price-to-earnings multiples of 20, now might be as good a time as ever to buy their shares.
E-commerce
The final trend to invest in is e-commerce. While brick-and-mortar retail is clearly not dead yet, online shopping has continued to steal market share. Thanks to the coronavirus pandemic, e-commerce's share of total U.S. retail sales peaked at 16.4% in Q2 2020. The latest data shows this metric to be 14.7% in Q4 2022. This implies that there is still a huge opportunity for online commerce to penetrate the broader retail landscape
While many businesses that have relied on a physical footprint of stores have been investing in bolstering their omnichannel capabilities to better serve customers, there are ways to gain more direct exposure to this trend. Etsy, for example, is a popular online marketplace for unique and handcrafted goods. The company produces ample amounts of free cash flow, and its stock is down 60% off its all-time high.
A simpler approach
Instead of investing in numerous companies to gain exposure to these various secular trends, you can buy one business to satisfy all of them. I'm sure you'll have no problem easily guessing what it is.
Amazon (AMZN -1.64%) is the leader in e-commerce, commanding a 38% share of the U.S. market. It is the leader in cloud computing, with $81 billion in 2022 segment revenue. And it is a burgeoning player in the digital advertising industry, boosting sales 19% in Q4 2022 to $11.6 billion, in fourth place only behind Alphabet, Meta Platforms, and Alibaba globally.
It's rare to find companies that are benefiting from broad trends in multiple high-growth and massive industries, but Amazon is one. With the stock down 51% from its peak in July 2021, investors can scoop up shares right now at a compelling price-to-sales multiple of 1.8. Once macroeconomic headwinds become a thing of the past, it's not difficult to believe that Amazon will be thriving once again.
For those who aren't as comfortable putting all their eggs in the Amazon basket, a good idea might be to invest $1,000 equally among the other businesses mentioned above.
