Investors should always be on the lookout for top industry growth trends and the companies that lead them. If you look back at the best stocks of the past decades, they were leaders in products like PC, internet technology, streaming, and e-commerce. And the leaders of each industry ended up being massive growth stocks for investors.
Today, there are opportunities in new industries, and three stand out to me: video game technology, renewable energy and real estate.
1. Video game technology
Video games are big business, whether it’s on PC, consoles, or mobile devices. But the trend investors should be most excited about is the underlying video game technology, or game engine, that enables video games to be introduced into movies, real estate, and more.
The game engine is the software that is used to create games and even animations. Rather than creating code games directly, by using a game engine, developers can create games with relatively simple design tools.
One of the most popular game engines is Unit (NYSE: U). It is a common engine for creating virtual reality games and augmented reality experiences, but it is also popular for mobile and PC platforms. The company increased its revenue 39% in the last quarter to $ 220.3 million and could be one of the most consistent growth platforms in video games over the next decade.
To monetize its software, Unity charges users an annual or monthly fee. But your real advantage is in advertising and your asset store. These services offer benefits as developers use the Unity game engine.
Game engine technology is finding new use cases in industries, from architecture to film to medicine, and as these use cases grow, so will stocks like Unity.
2. Renewable energy
One of the most incredible energy changes of the last two decades has been the emergence of renewable energy as an economically viable source. Wind and solar projects are now winning contracts with utilities and corporations based on costing less than coal, nuclear power, and even natural gas worldwide. And that’s driving exponential growth for the industry.
Adding more fuel to the fire is the Biden administration’s policies toward renewables, which are more favorable than we’ve seen in the last four years. That will lead to friendlier regulation, and in addition, the multi-million dollar infrastructure bill that was proposed today includes money to modernize the grid and expand renewable energy production and energy storage.
To ride the wave, there are three renewable energy stocks that I think investors should consider. On the solar side Power of the sun (NASDAQ: SPWR) is a leading technology company in the deployment of solar energy on roofs for residential and commercial buildings. It has also expanded into energy storage, where it offers battery storage that is combined with solar power to make customers more energy efficient.
Regarding the deployment, Brookfield Renewable Partners (New York Stock Exchange: BEP) plays a crucial role in financing renewable energy projects. The company buys projects and then pays a dividend out of the cash flow generated by those projects. The stock has a 4.6% dividend yield today and should be able to grow as the renewable energy industry expands.
On a more speculative front, Flowering energy (NYSE: BE) is a hydrogen company that could play an important role in building the future of the grid. The company manufactures fuel cells, which provide backup power to the grid and commercial buildings, but the long-term vision is to create hydrogen with electricity from wind or solar power plants and water through electrolysis. Once that hydrogen is produced, it can be stored and transported and ultimately deployed using another fuel cell near the point of electricity demand. Hydrogen could be a key medium for long-term energy storage, and Bloom Energy is a leader in the space.
3. Real estate technology
The value of homes in the US stands at an incredible 36.2 trillion dollars, according to Zillow (NASDAQ: Z)And any company that can add value to the real estate market or disrupt decades of brokerage business could have a multi-million dollar business. The two that I have high hopes for are Zillow and Matterport, which is merging with the SPAC. Gores Participations VI (NASDAQ: GHVI).
Zillow’s business was based on providing data on the housing market to users and an advertising platform for real estate agents. And agents finance most of the company’s business today. But the future is to be a buyer and seller of real estate.
Zillow Offer will allow homeowners to sell their homes without any of the headaches typically associated with selling, such as displays, repairs, and an unknown closing date. The bargain business is still small today, with home sales of just 923 in the fourth quarter of 2020. But the business could be big and profitable. Last quarter, Zillow generated $ 29,547 in gross profit per home sold and generated $ 304 million in revenue. Over time, this could dominate Zillow’s business and open up hundreds of millions of dollars in income opportunities for the company, while making the home sale process easier for people around the world.
Matterport is a spatial data company that captures what space looks like within a home or business. The company’s technology allows anyone to take 360-degree images with a specialized camera or phone and create a “doll’s house” view of homes and businesses. This data can then be used for virtual tours in home sales, interior design, construction, building management, and much more. As data becomes more important in real estate sales and management, Matterport is creating the tools that businesses and homeowners will need. And that could make this a disruptive company in the real estate sector.
Riding the big trends
Video game technology, renewable energy, and real estate technology are booming businesses that will only grow in the next decade. If you’re looking for growth stocks, these are great places to find them, and investors can take advantage of the tailwinds of industry growth to make big profits.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are variegated! Questioning an investment thesis, even one of our own, helps all of us think critically about investing and make decisions that help us be smarter, happier, and wealthier.