There are usually winners and losers in the stock trading arena and, of course, the aim of everyone looking to profit from the markets is to pick the winners (or as many as possible). It’s easier said than done, but there are certain industries where your investment might be directed.
Research is key, and the old maxim “time spent on reconnaissance is seldom wasted” is never truer than gaining intelligence on stock trading options. The next key is to use effective research sources, such as this from IG Financial Trading.
What categories are worth researching and maybe investing in?
Health and medical
This sector has demonstrated steady growth over a period of time. New drugs appear on a regular basis, and companies in fields such as IVF (In Vitro Fertilisation) often perform well in the financial markets as the trend for couples to delay having children until later in life increases.
The threat to watch for is profitability possibly reducing if governments react to the annoyance over high drug prices and endeavour to rein them in.
This is perhaps a surprise in that many think of airlines as a cut throat business with slim margins and bankruptcies. It’s true the industry was in a parlous state a while ago – when airlines were obsessed with market share, fuel prices soared, and the 9/11 attack in New York saw the flight market evaporate.
Since then the industry has reinvented itself; airlines are focusing less on aggressive price wars and more on maximizing income per flight with the added bonus of lower fuel prices. The result? Good profits being posted by some major airlines.
Even in spite of this, airline stocks aren’t a popular investment choice despite their profit performance… so this could provide an opportunity.
Much would depend on whether interest rates rise. If they do, bank stocks would benefit as lenders profit from the difference in interest between what they borrow money for and what they lend it out at.
This difference is known as the ‘net interest margin’ and is compressed when rates are low but widens as they rise and increases profits for the banks.
Not surprisingly, tech stock generally represents an investment opportunity simply because technology is generally accelerating at rapid pace. That said, careful research and analysis is important to pick the winners.
There is ‘old’ and ‘new’ tech and one sector definitely outperforms the other. Companies such as Intel and IBM are considered ‘old’ tech as their core products – computer chips and computer hardware respectively – are generally seeing a decline as computer purchases drop worldwide.
Companies involved in the ‘new’ tech – even established names such as Apple, Google and Microsoft – are the ones to watch carefully. While Microsoft might be considered ‘old’ tech – and indeed its core business activities – have declined profit-wise, they are involved heavily in newer technologies such as the Cloud and virtual computing.
Be wary of younger technology companies – their turnover and growth figures can be spectacular but many are investing heavily in this growth and may not show profit for a while yet. Some software companies involved in the ‘Big Data’ sector are examples of this.
Research the industry
Getting a feel for an industry in general is not only a good idea but can prove interesting for its own sake. As shown above, simply thinking of technology as a ‘good opportunity’ is too broad; examining the different sectors is important to identify where the profitable sticks may exist.