Here are a few prosperous industries to keep an eye on

Here are a few prosperous industries to keep an eye on

One of the amazing things about business is that when one industry prospers, outsiders often find a way to tap into that success. A growing industry can attract new suppliers, distributors or back-office service providers, indeed a whole new world can develop that didn’t exist just yesterday and afford opportunities that allows a range of businesses to benefit, particularly those placed at the head of the pack with market leading positions.

If the sector is doing well and growing strongly, this can have a major impact on a stock’s performance, profitability and ultimately the share price. Conversely if the industry is stagnate (not growing) or worse in decline, this to can have a significant impact given those in the industry jostle fiercely (usually by price wars) just to maintain market share.

A number of sectors have been in decline in Australia recently and a good example of this is the capital expenditure being spent with the mining industry to expand production. As commodity prices have fallen, many projects have been cancelled and it really didn’t matter what listed engineering company you held, they all fell as the market for their services shrank and continues to do so.

On the flip side, businesses exposed to growing themes have performed well in aggregate as these industries are growing, and in some cases strongly. This brings us back to our previous point that if the sector has tailwinds (is growing) then the businesses that service that market should generally do well – assuming of course they are run by capable and shareholder orientated management.

A few of the top industries for growth in 2015 include health care, which is projected to grow by 19.5 per cent between now and 2020. Accounting is projected to grow 17 per cent as it benefits from the recent rise in financial regulation, keeping auditors busier than ever. Semiconductors and circuits is another given demand for “advanced wireless consumer electronics, such as smartphones,” including new chip technology that can integrate existing WiFi and mobile networks. This industry will generate 16 per cent growth by 2020, with electrical engineers in especially high demand. And finally is software development. The job market for software engineers, developers, and programmers has been rosy for years, but a recent Ibis study projects that demand for smartphone app developers in particular will soar at an annual rate of 37.6 per cent.

With growth tailwinds, businesses operating within these industries are likely to be attractive places to park your investment dollars. All you now need to do is position your portfolio in those who are likely to benefit and whose earnings are likely to march higher in the years ahead.

Russell Muldoon is the Portfolio Manager of The Montgomery [Private] Fund. To invest with Montgomery, find out more.