3 Big Trends You Can’t Overlook
Matthew is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
We tend to hear more about what’s wrong with our world than what’s going in the right direction. If you look closely you can spot a few real bright spots that really shouldn’t be overlooked. These big trends can bring equally large rewards for investors who have a long term view.
Natural Gas will Power our New Economy
While the price of natural gas isn’t yielding the windfall profits that drillers are hoping for, it is setting us up for some long term benefits that might not be so obvious. Extracting gas from shale really has changed the dynamic of our economy. Both midstream and downstream companies are investing billions of dollars in new projects to transport and consume our low cost resources. These projects will create thousands of jobs, which you might have heard is a big deal these days.
How many jobs will be created? Well, according to this report, for every billion dollars we spend in new infrastructure investment it creates 18,000 jobs (these are direct, indirect and induced jobs). That means that when a company like Enterprise Products (NYSE: EPD) talks about a pipeline filled with more than $7.5 billion worth of, well umm, pipeline projects, we’re talking about more than 100,000 jobs. That's just a small sampling of what's coming; just looking at the Marcellus shale for example shows an estimated $20 billion worth of new midstream infrastructure investment is needed over the next few years.
Those pipelines will be delivering gas and liquids to our growing domestic petrochemical industry, enabling companies like Dow (NYSE: DOW) to make multi-billion dollar investments in plants that will use cheap propane and ethane feed stocks. These plants will produce some of the basic building blocks of chemical and material manufacturing, and by being located in the US near these resources they'll enjoy an enormous cost advantage. This translates to more money being invested, creating more jobs and fueling a revival in both domestic manufacturing and our national economy.
Innovation Will Save the Environment and the Economy
Cheap natural gas isn’t just a cheap feedstock for manufacturing; it has the ability to reduce costs within our transportation sector, making it a true game changer. While an engine developed by Westport Innovation (NASDAQ: WPRT) will cost an extra $30,000 for a garbage truck, the refuse company can save more than $27,000 per year in fuel costs. That’s a phenomenal return for the customer and one that’s still generating a 20% adjusted EBITDA margin for Westport. As their business continues to scale and technology improves, more income will drop to their bottom line.
Natural gas isn’t the only innovation attempting to reduce harmful emissions into our environment while lowing costs for commuters. AeroVironment’s (NASDAQ: AVAV) Electronic Vehicle Solutions business is giving the electric car a recharge. They’ve already deployed nearly 10,000 recharging stations throughout North America, which complement their home charging station. While EV Solutions currently represents just 14% of their revenue, the sky is the limit for future growth.
Mobile is the New Economy
Maybe you already heard the news, but there are now 1 billion active smartphone users. Of course, the driving force behind this rapid adoption is Apple’s (NASDAQ: AAPL) iPhone. In total, Apple’s sold around two hundred million iPhones, and these devices are changing the way we live our daily lives. It’s also changed the lives of many an Apple shareholder over the past decade, as shares are up a staggering eight thousand percent. While there might not be another Apple for a long time, there is still plenty of innovation left in our new mobile economy. As true innovation begins to take form, investors who spot those trends early enough will do very well.
I’m watching both motion sensors and near-field communication to see if either application begins to find more than a niche place in the new mobile economy. The concept of a mobile wallet has the potential to be revolutionary, and we’ve seen Apple make investments that seem to hint that this is a direction they’re pursuing. Going from concept to reality could still take a while, which is why I'm still watching from the sidelines at the moment.
To some these trends might be obvious, but sometimes it’s the most obvious of investments we tend to miss. I’d be willing to bet that you have an Apple story where you either sold too soon or have been waiting for a pullback for the past half-decade. The great thing about big obvious trends is that you can still create wealth building returns even if you didn’t get in on the ground floor.
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latimerburned owns shares of Enterprise Products Partners L.P., AeroVironment, Westport Innovations, and Apple and has the following options: Apple. The Motley Fool owns shares of Apple and Westport Innovations. Motley Fool newsletter services recommend AeroVironment, Apple, Enterprise Products Partners L.P., and Westport Innovations. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
