Profit From the News

Jewelry enthusiasts have probably already heard, but perhaps you haven't: Gold has been hitting record high levels recently. Those who want to sell some of their baubles and bangles may be rejoicing, while those eager to buy some bling are surely troubled. But what of us investors?

Well, when I hear people talking excitedly about the price of gold, I like to point out that over the long haul, gold usually hasn't been the best performer for investors. Yes, it's done well over the past decade, but that doesn't mean the big gains will continue. Check out these historical compound average annual returns:

The Freakonomics blog recently reminded me of another angle to this story: If we don't want to rush into gold as an investment, there are other ways to profit from its high price. For example, if we assume that thieves will seek out gold jewelry more frequently, we might want to invest in home security companies. If ADT, the world's largest alarm and monitoring company, comes to mind, then investing in its parent, Tyco International (NYSE: TYC), makes sense. You might also look into Brinks (NYSE: BCO), which transports valuables such as gold. Or you might consider that those without alarm systems might be considering additional insurance, perhaps from Allstate (NYSE: ALL).

Look around and think creatively
Gold isn't the only path to profits that people are talking about. Jim Cramer recently penned a piece in New York magazine exploring the current corn boom in America. With demand spiking for corn-based ethanol, he sees farmers becoming wildcatters and agriculture surging. Therefore, it's not a stretch to imagine that companies such as farm-equipment maker Deere (NYSE: DE), seed specialist Monsanto (NYSE: MON), and fertilizer giant Potash (NYSE: POT) may see their stocks do well in the coming years, as supply races to meet demand.

A related trend, given the escalating cost of gas, is alternative energy, such as solar power. There are a wide range of companies to explore, including some that focus solely on solar, and others, such as General Electric (NYSE: GE), that include solar power as part of their portfolios. (GE sells solar photovoltaics, which grab sunlight and turn it into electricity.) To learn about a lot of companies involved in producing solar energy, read Fool Toby Shute's article on solar energy.

So if you'd like to invest in some relatively fast-growers, look out for trends and societal developments occurring in the world. See which companies stand to benefit from them, and investigate. Remember that you don't have to buy gold to profit from gold's surge.