The Next Hot Sector

I don't care what the economic environment, somebody has to do well. During the Internet, it was just so easy to pick Internet, everybody was right.


But what I'm wondering is, can anybody tell me what he thinks the best-performing sector, earnings-surprise-wise, will be in the next 5 years? Any answer will basically tell a lot about what you think about the economy.


But what's more bothering me is this suspicion that the next "hot" sector will be something so totally out-of-the-blue that I can't possibly think of it myself.


So, I'm asking for your help.


Maybe, somebody who visits this site will be just stupid enough to come up with the right one. I'm just hoping to get a few odd candidates to think about.


Airlines?


Thanks!


eLROY

Dildonics

It comes and goes and demands picking winners and losers...but clearly the sector that has the best potential is biotech and drug manufacturing. People are living far longer than the law of nature really intended them too. The law of nature though is catching up and longer lives will only come because of biotech. Three things will provide riches, provided they are discovered. Cures or partial cures for heart disease, cancer, and HIV/AIDS will make some companies and their owners ridiculously and I mean RIDICULOUSLY rich! With the human genome mapped and with cloning-type experimentation being perfected, it shouldn't be too long before some incredible cures are discovered. It takes a long time for them to get through the pipeline, but imagine the payoff. If someone created a way to simply rejuvenate or regenerate diseased heart cells or brain cells, their profits could make them the next Microsoft.

So far, we've caught biotech (wildbill), biotech (desire) and shipping (zeno). (So far as dildonics, I suspect Sklansky has made the common beginner's error of confusing "anecdotal evidence" in his personal life with a meaningful "statistical sample.")


Using Richard Dreyfus' method from "Let It Ride," I'm instantly skeptical of biotech. But I am inclined to bite on Zeno's WTO/Internet/trade/growth shipping argument. It makes sense that more trade opportunities will be discovered at a rising rate. And Tom Haley could be wrong in assuming that there are enough "competitors" with truly global reach.


So, what's wrong with shipping?


eLROY

Shipping is a commodity Leroy, that is the problem. There is very little loyalty to shipping, after all there are hundreds of postal services out there that compete and can move into the overnight markets should they choose. Most significant customers will change their shippers in an instant if it means price savings. Besides shipping is very cyclical and heavily dependent on huge upfront capital outlays that means debt that the market focuses on for a long time. Lastly its a commodity as I say. Whether Fedex or USPS deliver your package on time, do you really care who did it?


Most of the hot sectors are intellectually based because that prevents competition. Internet was one of those things where people saw "killer aps" and bid up stock prices. All the hot IPOs were for a technology or business model that was different than others. Simply put, if a company can't temporarily monopolize or dominate a particular niche, its too exposed to competition and erosion of profits. The only way you can have a commodity that you dominate is if you make it impossible to do the business elsewhere. This is what makes E-Bay compelling. Other auctions exist and anyone can start up an auction site, but if you don't have a market built-in, forget it. E-Bay has that built in market.


Something I think might make some hay is PayPal or something like it. There are a lot of competitors now, but if one could become super-sized, so to speak, they might leave the others in the dust. The current shake-up and going under of some of the offshore betting world could be a good catalyst. I have long suggested what was needed isn't a payment system, but a bankroll system. In other words instead of having to deposit $1000 here and there just to be able to bet into certain sites, why not have $3000 as a bankroll with one site and have that be portable. If you go into casino A, you buy-in $200 to play poker today and they take it out of your account. That same day you can shop the offshore sports books and put in $500 in action, each time having your bet amount deducted from your account. If this system was big enough, they could force a lot of books to take your action. Right now books don't want you to do this because its competitors getting your action and they lose the float. If a couple of reliable and financially solid companies took this role, they could make a vast amount of money and it would be among my growth industries because they would earn a ton of float and could charge a small fee to each book or casino for each transaction. Further it could act as an end-around to all the silly legislation being proposed this year. So add online-payments as another potential growth sector and PayPal is kicking it off.

Hi eLROY,


Put me in the biotech camp as well. One other is fuel cells, but not for a while (2+? years)


I also am watching superconductivity. When you think of all the miles of power plant that has to be upgraded, replaced this makes lots of sense. Add in what must happen in Russia & China the 'old' ways won't cut it.


The next growth curve will be based on the improvement of infrastructure, I think. There is even talk of a tunnel from Alaska to Russia. Got the web addy somewhere if any want to look at it. Something like this would open up the entire Northwest of N. America and Eastern Asia.


The breakthrough for today's tech stuff came in the move from tubes to transistors. That was a quantum leap forward.


So you are most likely correct, we don't know where the next move will come from.


SteveB

"With the human genome mapped and with cloning-type experimentation being perfected, it shouldn't be too long before some incredible cures are discovered."


Last month's issue of Harper's Magazine has a terrific article detailing why this is probably not the case. As soon as it's available online I'll post a link. Basically the article discusses how, as we've gained a greater understanding of the genome, we are discovering that the traditional Watson-Crick model of chromosome replication is seriously lacking. As a result, simply mapping the human genome is just the beginning of a much longer and more complicated process to truely being able to practice gene therapy or genetic engineering.

I believe the next "hot" sector will be For-Profit education, charter schools, home schooling supplies, etc. You might want to read "The Secret Code of the Super Investor". There is a chapter on sectors of the next generation.

None of this stuff is special. Once again, I will say the hot sectors aren't commodities, which is essentially what home schooling and its spin-off industries are. Just like home building is at all time highs right now, but no one is getting rich buying their stocks. To answer this question you need to be looking at proprietary items that can give a company a significant edge, whether it be through patent protection or just superior thinking in products that can't be easily replaced or replicated. The best candidates are for something tech related, something medicinal, or something very specialized in services. If its a sector with 20 competitors and all offer essentially the same product or service, you won't hit home runs. Granted there might be some nice profits for all involved, nice steady profits, but it won't be a home run sector.

There is the age old story of the investor who bought a thinly traded stock. The price of the stock would go up, the investor would be rewarded, and the investor would buy more.


This went on for some time until the stock was at a very high price. So he asked his broker to sell the stock at an enormous profit. But the broker

said, "who to? -- you're the only one buying the stock."

I predict that the next market bubble will be ..............


ALTERNATIVE ENERGY !!!


Petro-independence will become such a big political issue here that the politicians will devote all their hot air to inflating a bubble of epic proportions.


One positive side effect is that will probably see Marajuana legalized to allow bio-mass to fuel conversion which will probably generate it's own little boomlet too.

I can see electricty transmission capacity doing well, or possibly storage.


But there is more oil down there than it would take to drown Jesus, and more nuclear power than it would take to fry his pop up above.


Seems to me the best way to store electricity is to convert it to mass, and closet it away in the intranuclear topology of very-heavy elements.


eLROY

Its insanely expensive and I don't think there are many safe ways to do it. Electricity is so ridiculously cheap and reliable now, I never understood this big movement to deregulation. The savings that competition was supposed to bring in CA for consumers was a joke, most economists figured a $35 bill would become a $25-30 bill. So for maybe $10/month now look at how on the hook most consumers in the state are! Electricity as it is just faces the challenges of environmentalists, but for the most part their complaints just come off like a crying child. Renewable resources cause all kinds of problems they never acknowledge. Some Europeans have taken to offshore windmills, great idea in theory but its seriously wrecked their extremely important fishing industries. Windfarms are nice, but there is no way they could EVER be a major source of electrical supply for a country due to lack of enough wind and their intermittent quality (ie days the wind isn't blowing no power is created). Solar energy is way too inefficient, at least for now. Problem is no one has created a way to take the sun's power and turn that directly into energy. All they have done is transferred its heat into power, a terribly inefficient process. Hydropower is much like windpower and its losing its status due to its effect on fish. So where are the great ideas at? Not one of these could ever do more than supplement our power supply. We still need gas and coal. Enviromentalists are so against these ideas its a shame. The more they oppose them, the more they take the incentive away from doing research on them that can reduce their impact on the environment. A modern coal-burning facility can produce energy with about 80% less pollution than an older facility. Problem is they won't allow many of these. If you let them in, they could crowd out and obsolete old coal energy sources and greatly improve the environment. Why don't the tree huggers ever understand this principle??? I think in all these are lousy invesments. We should make modest investments in researching these, but still never look past the fact that none are practical as major sources of energy in the near future.

Ever notice they 'want' everything, such as SUV's, TV's, computers, big houses, schools ect, ect. but donot want to provide for the use of them? They have a one word slogon: "DON"T"


It's much easier to be an environmentalist when the lights are on.

Just like taxes Steve. I used to live in CA, actually was there most of my life. That is the most messed up joke of a state you have ever seen. Tons of white supremacist types that spout off about immigrants, yet eat Chinese on Monday, Mexican on Tuesday, Thai on Wednesday, Taco Bell on Thursday...you get the point. Tons of environmentalists just like you say, want a mini-van for their kids, have three computers in their house, work about 50 miles from home polluting and causing traffic...yet they talk about how we need to save the earth. Latest funny is the whole energy thing that I have talked about at length. "We need more renewable resources" they cry. Where you gonna put them? The windfarms can't be built because your suburbs are everywhere taking up the good potential spots outside LA and SF, solar won't work well because the three major cities have low clouds half the day, electric cars won't work because they commute so damn far in so much traffic. Just shows what happens to people when they make too much money and don't really know what to do with it. They get the "half-way" guilty feeling. They don't really feel guilty, they just pretend that if they act concerned and claim to be for causes that they never really would sacrifice for they will get salvation somehow. Now they are going to re-elect Gray Davis because he is straight out of the Bill Clinton school of never really being for anything other than appearing to be "compassionate" and following those polls whichever way they blow.

All good points. Last numbers I saw on wind power showed a contribution of less that 1/2 of 1%. Coal is most likely the best short term answer. (that ought to upset a whole bunch of folks).


As for CA you really think that Gov. Davis will be re-elected? If true, just shows how much more I have to learn about the left coast.


Coffee got to 5780, pulled back to 5550 area today. Still feel it should come down to the 5050 area. But what do I know. I only drink it.

Unfortunately he will because like a bunch of numbnuts, Republicans assured him a win. As much as its good to stick to your guns and your morals, Simon is about as unelectable a candidate as you can find. These Republican idiots haven't figured out how to organize and get a win there like they did with "W". You have to pick a guy that has a good reputation, has a built in base of important voters, can draw some voters from the other party or at least a lot of independent types, and most of all don't be someone that sounds like a Baptist priest. On all those counts Simon fails and fails miserably. You don't necessarily have to be pro-choice, but you can't come off sounding like the Pope on the issue. You can be pro-business, but you can't sound like Milton Friedman either. Simon has no base, I mean his voting base is near nothing unless you count far-flung suburban white men. Riordan was a mayor of a heavily Democrat city, he got support from a modest number of minorities, just like Bush was able to do from some latinos. Riordan is pro-choice which is a huge key when you have such a huge urban population. Davis is so beatable, but he suffered because those registered Republicans would rather lose the election to a guy they hate with someone they love instead of winning that same election with someone they can tolerate. I can't imagine how much longer the Republicans will insist on being Christian conservatives before they finally give it up and take a more pragmatic approach. In most of the world to win an election you have to compromise and accept less than hard core policies and platforms, but this party refuses to do it even in a state where its clear that its a necessity.

I'll let my pal do the talking:


http://www.jewishworldreview.com/cols/sowell030402.asp


eLROY

Hmmmm, maybe, just maybe Simon can pull it off.


Wouldn't that be a wake up call.