Investors would be wise to keep an eye out for megatrend stocks.
Megatrends have a global impact and tend to play out over multiple business cycles.
Those shifts have important impacts on megatrend stocks and set up certain sectors to thrive over the long term. Those megatrends include artificial intelligence, digitization, climate change, aging populations and more.
The effects of those shifts are already evident in varying degrees. AI has dominated conversation and markets in 2023.
There’s a lot to digest but as always, investors should prepare themselves by anticipating how to take advantage of the changes.
Tesla (NASDAQ:TSLA) is one of the megatrend stocks that is set to continue to benefit from the EV megatrend sweeping transportation.
At the beginning of 2023, there were 6.8 million hybrid vehicles and 2 million electric cars on the roads in the U.S. By 2030, the total number is expected to rise to as high as 48 million vehicles. Globally, the number could reach 350 million.
2030 is not very far away. Tesla is leading the way currently and its vehicles accounted for 3 of the top 4 sales slots in the U.S. in 2022. In China, the largest and fastest growing EV market, Tesla vehicles are also top sellers.
The overarching macro factors are fairly clear: Tesla shares are set to grow for a long time as the EV megatrend evolves because of its strong market positioning.
Microsoft’s (NASDAQ:MSFT) current leadership is all about positioning the firm and stock for continued dominance. That makes it one of the megatrend stocks to buy and hold.
The article highlighted Microsoft’s recent closing of its Activision purchase. Microsoft has long been deeply involved in the video game business with its Xbox segment.
Gaming is one of many secular trends. It is currently well positioned to ride higher. The Activision purchase further confirm’s Nadella’s ability to get big things done for the firm.
The firm is the second largest cloud provider by revenue. Azure gives it another massive advantage in a growing sector that is only becoming more and more important as enterprises increasingly depend on external data centers for their computing needs.
That, of course, also touches on AI where Microsoft clearly excels. Its OpenAI investment gave it a first mover advantage that will pay dividends for a long time to come. That just scratches the surface of Microsoft’s long-term potential which is why no one should bet against it.
Intel (NASDAQ:INTC) has been a laggard in many regards over the last few yearsm but it’s one of the megatrend stocks with a comeback story.
It has been the most disappointing chip stock of the major semiconductor firms for years. AMD (NASDAQ:AMD) jumped ahead of Intel years ago and Intel has been playing catch-up ever since. Meanwhile, Nvidia (NASDAQ:NVDA) has leap-frogged both firms while Intel stagnates.
Frankly, any of those 3 firms, or all three, make fine choices as megatrend plays. All three are firmly entrenched in the battle for AI dominance. We all know who’s winning thus far but Intel is no slouch.
The firm has made strong marketing efforts to position its Gaudi 2 chips as realistic competitors to Nvidia’s H100 GPUs. Although Nvidia’s chips outperformed Intel’s in all 8 head-to-head tests, there are indications that it could outperform in future applications.
CEO Pat Gelsinger is also hyping up Intel in relation to the EV opportunity. Its Fab 52 and Fab 62 Arizona plants have recently broken ground.
Intel has invested heavily into reshoring efforts that benefit the intersection of EVs and chips. The stock arguably has the most upside among the 3 mentioned here because it has lagged behind thus far.
Cisco (NASDAQ:CSCO) is a leader in internet networking which makes the stock very intriguing for investors with a long-term perspective focused on big themes. The firm provides its services and products throughout the Americas, EMEA, and APAC regions. In other words, it’s a global force.
The connectivity opportunity is massive and varied and it’s difficult to encapsulate it into a single idea. However, in a nutshell, more people are demanding internet access.
By the end of 2022, only 57% of the global population had mobile internet access. The growth of 5G is another area that Cisco Systems will help to empower.
What’s especially positive about Cisco is the fact that the stock is highly predictable. It’s marked by low volatility and is a strong choice for capital preservation.
IN addition, CSCO shares include a dividend approaching 3% yields. There are few better low-risk, high-potential stocks by which to access secular tech growth trends that won’t cause stress for their shareholders.
Palantir (NYSE:PLTR) marries opportunities in a few very important megatrends that will pervade for a long time—AI, geopolitical tensio, and the potential for armed conflict between the U.S. and China.
PLTR shares have blasted higher in 2023 due to a few strong, overarching factors. AI took off in early 2023. That benefited the firm which provides software for the defense sector.
Further, Palantir showed profitability in 2023 for the first time. That was a welcome change that made a positive statement about its business.
Palantir marries AI and software that has a strong sales base in the defense sector. I can’t think of another firm that better takes advantage of the confluence of AI and the geopolitical situation between the U.S. and China.
The firm has made massive strides forward. First profitability and more recently again when it initiated its first share buyback plan worth $1 billion in August.
NextEra Energy (NEE)
I’ve been talking about NextEra Energy (NYSE:NEE) and its stock a lot lately.
Mostly, that has been in relation to its status as a utilities stock and the opportunity it presents because it’s become cheap due to historically high bond yields.
I still think that’s a great reason to invest in NEE shares at the moment: NEE shares have experienced a steady sell off since late September.
It has tapered off and NextEra Energy is still one of the strongest and best positioned firms there is in climate change. The firm is the world’s largest wind and solar energy producer.
Climate change concerns are here to stay and wind and solar generation are great opportunities. That said, NextEra Energy is anchored by Florida Power & Light, the world’s largest utilities firm.
It’s a unique hybrid that is set to rebound when factors including bond yields and renewable energy inevitably swing back in its favor. That’s the short-term catalyst to watch. This is definitly one of the megatrend stocks to keep in mind.
Global Water (GWRS)
Global Water (NASDAQ:GWRS) is an opportunity to invest in water. Water scarcity is an increasing threat globally and in the U.S. in the dry western states in particular.
Phoenix has boomed in recent years becoming a leading destination for relocation. Its sunny climate and relatively low costs compared to neighboring states have prompted the boom.
It’s also in the desert where water was already scarce. That’s why Global Water, a water utility located in Phoenix, is especially intriguing. The reason I highlight it is that it’s relatively lesser known overall.
There are plenty of larger firms to consider. However, Global Water remains inexpensively priced at under $10 with strong upside and a dividend yielding more than 3%.
The firm grew in Q2 and brought new infrastructure into service in July which should immediately provide greater returns in Q3. Global Water is a small water utility and is inherently risky for that reason.
It still makes sense overall but even if it isn’t your first choice among water stocks, it should at least help to establish the potential of the asset class in your mind moving forward.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.