Widespread vaccine availability should help end the pandemic over the next year. That global success will supercharge a few depressed industries, like cruise lines, while others, like home improvement, are likely to cool off following a record 2020.
But truly game-changing investments ignore short-term swings in favor of expansion opportunities that compound cash for decades. With that bigger goal in mind, let’s look at three enduring growth trends to invest in today.
1. Home entertainment is here to stay
It’s a safe bet that after a year of social distancing, people will slow their consumption of digital entertainment in 2021. But zoom out and the clear trend is toward increased spending in this category. Netflix (NASDAQ:NFLX) is a great means of gaining exposure to that surge. Yes, the leading online subscription giant has already seen its stock soar in the decade since it began packing its servers with exclusive and original content. But there’s more room to grow in the next decade as Netflix attracts additional hours of average TV viewing time and raises monthly prices in concert with those increases.
It should break into positive cash flow in 2021, too, with many years of expanding profitability to follow. There are many other means of investing in the streaming trend, including Roku and Disney. But Netflix has remained the industry leader for years, and its massive scale should make that challenge easier, not harder, over time.
2. Multichannel retailing is the new norm
Fiscal 2020 proved that the multichannel retailing trend, which involves browsing and buying online before receiving purchases within hours, is a hit with consumers. Companies like Walmart and Home Depot have spent years building these flexible platforms, but that’s just the start. Both retailers recently announced new capital spending projects that will support their omnichannel capabilities well into the 2030s.
Target (NYSE:TGT) is an attractive stock to consider buying to capitalize on this growth trend. The retailer turned in a banner performance through the pandemic by adding $15 billion to its sales footprint — more than the business had gained in the prior 11 years combined. Most of that growth came from new market share, too, rather than simply an expanding industry.
Target’s rising profit margin is another area that separates it from peers like Walmart. Additional gains here, plus a steadily growing dividend, should pad investors’ returns through just about any selling environment.
3. Fast food has become a lucrative competitive space
It might not be the most exciting trend around, but fast food can be a lucrative competitive space for companies that have the right advantages. Domino’s (NYSE:DPZ) is a great example. The pizza delivery giant just wrapped up a record fiscal 2020 that saw its share of the U.S. pizza delivery industry rise to 63%, compared to 61% in the prior year and 56% back in 2015. That level of growth through a wide range of selling conditions suggests the company is doing many things right.
Among the most attractive characteristics of this business is its sky-high efficiency, with small-footprint stores requiring just modest sales to churn out profits. Domino’s has plenty of room to grow from here too, both by boosting sales at existing locations and by adding to its restaurant base in the U.S. and internationally. Management recently issued an outlook that envisions revenue rising by between 6% and 10% over the next several years following the 12.5% spike the chain managed in 2020.
Benefitting from powerful trends
If there’s one guarantee about profit-generating growth trends, it’s that they always attract stiff competition. But Netflix, Domino’s, and Target have proven that they can meet these challenges while rewarding shareholders with rising profit margins at the same time.
That’s a powerful formula for long-term returns that investors should jump on wherever they see it working.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
Need Your Help Today. Your $1 can change life.