While uncertainty looms large, long-term investors have an opportunity within some high-growth sectors in the stock market. The headlines are dominated by the impact of inflation and interest rates, which will likely cause some volatility in the near term. But zooming out further, there are plenty of opportunities for growth. In some cases, outsized growth.
These top growth sectors for investment are markets that have the potential to deliver double-digit growth in the years ahead, and some are only in their infancy. Unsurprisingly, most of the high-growth areas of the future come with some element of technology. That’s because efficiency will be the name of the game moving forward. A sputtering economy and more expensive debt mean everyone is going to be looking to do more with less, and technology is a key way to do that.
But growth doesn’t necessarily mean investing in hot new tech stocks. A growing sector tends to have plenty of entrants at first— many of which will be hot new startups. But the number of players will shrink over time, leaving only a handful of successful companies behind. How do you choose these companies from the start? There’s an element of luck, but investors looking for buy-and-hold stocks in a high-growth industry should be looking for financially sound companies with proven experience of success. Those with a strong balance sheet and a solid foothold in the market will have the capacity to acquire their smaller rivals, putting them in a strong position to capitalize on market growth well into the future.
High-Growth Sectors in the Stock Market: AI
It would be impossible to talk about top growth sectors for investment without including the sector that everyone’s talking about— AI. The chatbot revolution has brought the potential power that AI holds to the fore, and if you’re not already, you should be thinking about the investment opportunities that exist within the AI market.
Many people see AI through the lens of the chatbots that have sparked mainstream popularity. These are great examples of how machine learning can create powerful tools that streamline our day-to-day tasks. But it’s just the tip of the iceberg. It’s already being used to do things like filter the spam from your email and offer suggestions for what to watch next. But its application for things like detecting and treating diseases and driving cars could be the next big frontier.
There are a few ways to play this trend as an investor— either investing in the technology itself or investing in companies leveraging this technology to leapfrog the competition. There are several options in-between as well. Take Microsoft (NASDAQ:MSFT), for example. The group has huge AI growth potential as it develops AI services like ChatGPT. But for now, that’s a mere drop in its massive bucket, with a well-diversified business keeping things ticking over in the background.
Many people question the shift away from fossil fuel as a so-called “woke” fad, but in reality, it could be one of the high-growth sectors in the stock market to watch. This isn’t the first time we’ve shifted our energy use— from wood-burning fires to coal to oil and natural gas— we’ve upended our energy markets several times before. And given the generous support packages both in the U.S. and abroad, there’s sure to be a great deal of growth ahead.
Where things get sticky is determining exactly where the sustainable energy will come from. The answer, at least at first, is several places. Renewables like wind and solar will make up a slice of the overall energy mix and offer investors a great investment option. From battery makers to those who make the technology that converts the sun’s rays into usable energy, there are plenty of components to choose from. Then there are the utility companies that sell and distribute this energy, some of which are totally shifting their operations to focus on sustainable energy.
But most agree renewables won’t be our sole source of energy. That opens the door for investment in spaces like hydrogen and nuclear, both of which will grow their share of the energy pie to meet demand.
The healthcare space doesn’t have the same shine as the other hot new sectors on this list, but it’s not to be overlooked as one of the high-growth sectors in the stock market. In 2021 healthcare was responsible for almost 18% of the U.S. GDP, and that’s only going to continue to expand as the population ages.
It’s important to note that healthcare as a sector spans a huge range of companies, and there are opportunities to be found in most pockets. But with most major economies looking for ways to cut down on healthcare costs, there are a few key things to look out for.
Specializing in rare diseases is worth considering among drugmakers because it means patent protection is stronger. The markets for these drugs are smaller, so generic competition is somewhat less likely. For device makers, it’s relationship-based, at least for now. These companies tend to get in with decision-makers and create lasting relationships.
On the date of publication, Marie Brodbeck did not hold (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.