The old saying goes, “If it was easy, everyone would do it.” This cliché rings true when it comes to big trend – or “thematic” – investing. It’s not easy, but that’s why the rewards for doing it well can be so large.
There’s no stock screen you can run that will produce a list of big business or technology trends with huge profit potential. There’s no simple mechanical “step by step” process for uncovering the next big thing.
Even in today’s high-tech world, finding business and technology ideas with extreme wealth creation potential is still very much a “low-tech” process. So much of it comes down to old-fashioned detective work. It takes a heck of a lot of time, but it’s worth it to get to the big stories before everyone else.
And as I’m sure you’ve guessed, it’s one of the things I love to do. I’m always digging deep to uncover the next big trends to invest in, and today I want to share three that are worth considering for your portfolio.
1. Consumer Lending in China
This trend is all about two broader themes – the continued expansion of the middle class in China and the beginning of a shift in people becoming more comfortable with the idea of borrowing money. In the past, it was more common to save and only spend what extra money you had, but today the country is moving more toward Western-style living.
LexinFintech Holdings (LX) is in the perfect spot to benefit from this shift as it is the leading online consumer finance platform for young adults in China.
The stock has felt the brunt of the Chinese trade war that has led to a bear market in Chinese stocks recently, but this isn’t surprising since it tends to be the high growth, high volatility names that get hit the hardest when fears increase. The good news is that LX appears to have put in a bottom and begun a new uptrend, so the recent weakness should be considered a great buying opportunity.
There is no question that the healthcare sector is changing for the better, and one of the trends that’s leading the way is telehealth. In lieu of spending an entire day sitting in the waiting room of a doctor’s office when all you have is a cold, you can now check in with a medical professional from the comfort of your own home.
That’s where Teladoc (TDOC) comes in. Founded in 2002, the company has grown into the leading provider of telehealth visits in the country. It prides itself on being able to connect you with a licensed doctor in under 10 minutes – whether it’s via the phone, internet or mobile app.
TDOC recently released its second-quarter earnings, with a loss of $0.40 a share missing estimates by $0.03. However, revenue came in better than expected at $94.54 billion. For the full year, management expects to lose between $1.52 and $1.48 a share as they continue to focus on growth, but it’s worth keeping in mind that this is typical of early-stage companies.
There’s no question that the healthcare sector is well overdue for a transformational change and TDOC is the clear leader in making that happen as it continues to grow both organically and through acquisitions.
3. Internet Banking
Banking without having to visit a physical branch location is becoming more prevalent, and one of the pioneers of the movement is BofI (BOFI). BofI is a holding company for the Bank of the Internet, which was the first FDIC-insured internet bank and has now been around for 15 years.
The stock recently fell after postponing its quarterly earnings report. This is typically negative news, but in this case the postponement was due to a potential material acquisition. It was then announced that BOFI had purchased $3 billion in assets from Nationwide Bank, which is a big move as it will add to the $9.5 billion in assets BOFI already has.
The company’s fiscal fourth-quarter earnings were released on August 7 and the stock fell the following day after missing on both the top and bottom lines. Earnings of $0.58 a share were up from $0.49 a share last year but fell short of the consensus at $0.61 a share. Revenue was also up year-over-year from $92.06 million to $104.02 million, but again the figure missed estimates at $107.8 million. For the full fiscal year, BOFI brought in earnings of $2.36 a share on revenue of $439.4 million.
Looking ahead to 2019, analysts are estimating 31% earnings growth to $3.10 a share. This upside potential makes the stock attractive from a fundamental view over the long term.
I continue to like the underlying story here as BOFI’s combination of low overhead costs, the ability to leverage its banking services around the country and the ongoing movement to online banking put it in a strong position within the industry. And when you add in the fact that interest rates should continue to increase in the years ahead, BOFI should see its profits keep rising.