It’s no secret that technology is woven into our lives – from how we communicate to how we receive medical care to how we purchase goods, technology is omnipresent.
It’s also no secret that, often, winners and losers are borne out of technological innovation. But, that’s no newsflash – automation sometimes results in the loss of jobs, but often creates just as many (if not more) in the process. Producing goods more cheaply supports overall demand and strengthens trade, which leads to net growth and the need for more jobs in other industries (like services, logistics, and others).
Technology has also emboldened the global consumer. In Africa, nearly all retail monetary transactions occur with a cell phone. Here in the U.S., ‘Cyber Monday’ sales have now surpassed $3 billion, which marks a 12% annualized growth rate over the last five years. That’s huge growth! The list goes on and keeps growing.
Products and software will continue to shape the way we live, and investment opportunities will emerge from the industries and sales that follow. Here are five products that could shift the consumer and investing landscape:
- Tesla – the electric car stands to make the gas-guzzler as obsolete as the VHS player, and it could happen sooner than you think. Tesla just released their Model 3, at the relatively affordable price of $35,000, and first week orders exceeded $7.5 billion (wildly surpassing expectations). The Model 3 also has an autopilot feature ready to activate and can run over 200 miles on a single charge. It, or one of its competitors that’s yet to emerge, could be your grandchild’s first car (related ticker: TSLA).
- Oculus Rift – virtual reality may still seem like a nerd’s fantasy playground, but Facebook’s $2 billion investment in the company signals that it sees potential well beyond that. One function easily overlooked: marketing. Companies like Marriot are already putting the technology to use by luring customers via short movies that provide a virtual escape to locations around the world. Tourism contributed nearly $8 trillion to global GDP in 2014 and, contrary to popular thought, Oculus Rift could buoy travel not replace it (related ticker: FB).
- Digital Payments – for better or worse, the advent of digital payment systems has made purchasing easier than ever. Soon, it’s almost certain that you won’t need any physical form of currency (card or cash). Payment methods are likely to move completely to your phone before another innovation takes over. In Africa, economic development is occurring so fast that Africans simply bypassed the need to ever carry a debit or credit card. Money is simply loaded onto a phone and nearly every retail need is paid for that way (related ticker: PYPL).
- Fitbit – wearables have become extremely popular in recent years as people grow more health conscious. The future of the industry is still evolving (demand has not yet achieved expectations), but the option of having a wearable that supports health-related care still appears to be a market with vast potential. Fitbit has a market capitalization of over $3 billion, but shares have been crushed since its initial public offering. Maybe the market is looking for a slightly different approach to the same concept (related ticker: FIT).
- Uber – Uber’s innovation is more service than product, but a plausible next step for the company would be to break into other urban transportation service markets. In San Francisco, Uber has already started food delivery services, and who’s to say laundry and grocery delivery won’t be next? Perhaps, Uber will help you move in the future as well.
Bottom Line for Investors
The information technology sector is likely to be one of the more notable contributors to earnings growth in 2016, as it has been throughout this expansion cycle. So, as an investor, keep your eye on technology as we are here at Zacks Investment Management. We expect to see some areas of this sector grow notably such as data processing, outsourcing services consulting, semiconductors and electronics; while other areas will likely be more challenged such as computer-office equipment and office electronics. At the end of the day, we’re seeing dynamic changes in this sector, meaning it is critical to stay abreast of these trends to optimize your investing approach.
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