3 Stocks to Own for the Economy of Tomorrow
Phillip is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
While it's relatively easy to have an idea of global trends, it's more difficult to make a connection between the economy of tomorrow and where to put your money today. Of course, the subtle signs can be read wrong, but if you're paying attention to what's happening in the news, you'll likely be right more times than not.
Where to put your money for the economy of tomorrow: the growing global middle class
The growing global middle class will likely give companies long established in the developed world a second wind. Many of these stocks have been relatively stagnant over the years, as they essentially realized their full market potential. But those respective markets have grown to include the world's surging middle class, which is already spending money on many of the same products those in the developed world have enjoyed over the years.
Aerospace and credit cards are two industries that stand out to me as having the most potential for growth. The next step is researching what companies stand to profit the most from these developments. Boeing (NYSE: BA) and MasterCard (NYSE: MA) have impressed me with their forward thinking abilities. While many companies are struggling to figure out how to make the most of the global village, these firms look to be leading the way.
Airline traffic about to take off: Boeing
With airline traffic expected to double in the next two decades, Boeing's profits are set to soar. China already boasts 1.3-billion people, and the middle class segment is hitting new heights. That means many will be taking to the sky on vacations or business trips. To accommodate the increasing need, on June 18 Boeing launched its 787-10 version of the company's Dreamliner aircraft. Already, 102 provisional orders are in, amounting to $30 billion.
The firm's commercial airplanes segment accounts for 58% of the company's earnings, with 40% from defense, space and security and 2% from investments. That means the company is well placed to take advantage of any surge in air traffic, as it has shown it is always able to handle a high volume of commercial orders. The firm earned over $1.2 billion from the commercial airline segment in the first quarter of this year.
MasterCard chips away at global expansion
MasterCard has identified China as a focus of expansion, and rightly so. About 300 million people in the nation are now part of the middle class, with the vast majority between 20 and 50 years old. That's a demographic keen on spending money, much of it on credit. If MasterCard can get a stranglehold on China, it will be far ahead major competitors Visa and American Express.
While Visa has made some moves in global expansion -- mostly by improving technology so that American vacationers and business people can more seamlessly use their cards cross-border -- it hasn't focused on servicing those from other countries. (American Express hasn't indicated much global expansion interest.) Visa and MasterCard are comparable in their efforts for worldwide expansion, but the latter has focused in on specific countries, rather than making sweeping changes to technology that better facilitates traveling Americans.
In fact, in addition to China, MasterCard has identified the Middle East and Africa as areas with major profit potential. The company is reportedly talking with Kenyan banks about facilitating the easy use of MasterCard in that country. About 80% of Africans currently don't bank, but that looks set to change.
Where to put your money for the economy of tomorrow: groundbreaking technology
The much-talked-about 3D Systems (NYSE: DDD) is a very speculative stock, but the company has continued to make moves that indicate 3-D printing is the real deal. 3D Systems recently acquired Phenix Systems, which manufactures metal 3-D printing devices. The technology uses fuse layers of metal powder to create solid objects. This expands the capabilities of 3D Systems, as it can now use metal to create its products. The expansion of capabilities is just one of the most recent additions 3D Systems has made to its offering, and tells me the company is ever-evolving. That's a preemptive to massive growth.
The firm is also ahead of competitors Stratasys and Exone, which have yet to make a device that is affordable for the average consumer. Most of their products go to industrial businesses. The key to making major profits in this sector is to cater to the general public, and cash in on mammoth sales.
The best way to get a grasp on whether the future does actually bode well for these companies is to look at indicators in the news. It's only logical that a growing middle class in the developing world would have the same desires as those who are already in the global middle class. In short, that means a lot of spending that MasterCard will be there to facilitate, whether the customer is buying an airline ticket, or a 3-D printer.
3D Systems is at the leading edge of a disruptive technological revolution, with the broadest portfolio of 3-D printers in the industry. However, despite years of earnings growth, 3D Systems' share price has risen even faster, and today the company sports a dizzying valuation. To help investors decide whether the future of additive manufacturing is bright enough to justify the lofty price tag on the company's shares, The Motley Fool has compiled a premium research report on whether 3D Systems is a buy right now. In The Fool's report, take a close look at 3D Systems' opportunities, risks, and critical factors for growth. You'll also find reasons to buy or sell the stock today. To start reading, simply click here now for instant access.
Phillip Woolgar owns shares of 3D Systems. The Motley Fool recommends 3D Systems and MasterCard. The Motley Fool owns shares of 3D Systems and MasterCard and has the following options: Short Jan 2014 $36 Calls on 3D Systems and Short Jan 2014 $20 Puts on 3D Systems. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!