At The Motley Fool, we are focused on long-term buy and hold investing, which necessitates identifying emerging and ongoing trends. This week we have been ably assisted by the release of a report by consultancy firm Deloitte. It has not only identified the six 'super sectors' that will grow faster than the rest of the global economy, but also stated that Australia has unique advantages in almost all of them. The sectors are tourism, gas, agriculture, health, international education and wealth management.
Essentially, the Deloitte report feeds into an investment strategy employed by some fund managers called the 'top down approach'. This starts with the big picture view of the economy (macroeconomic view) and then further analysis of sectors within that economy.
As an illustration, I shall look at the tourism sector. The Deloitte report highlights Australia's natural attractions and our reputation as a safe and democratic country and concludes that the growing number of Asian tourists will continue.
The managing director of the October 16 float of Sealink Travel Group (ASX: SLK) has witnessed the substantial jump in tourist numbers into Australia from China. Between 500 and 700 Chinese tourists are travelling each day on the transport services to Kangaroo Island in South Australia, which accounts for 54% of total company revenues.
At the risk of overreaching on the nautical analogy, professional investors prefer companies with a natural moat. No, not the waters around Kangaroo Island, but the protection afforded by a company having first-mover advantage, sufficient scale and monopolistic features that ward off potential competition. Six competitors have tried and failed to dethrone Sealink's services to the island since 1989.
Following the theme of increasing Asian visitors, stocks worthy of equal consideration are Sydney Airport (ASX: SYD) for strong international passenger growth, Ardent Leisure (ASX: AAD) for rising attendance at its premium leisure assets, Flight Centre (ASX: FLT) for airfares within Australia and Crown (ASX: CWN) for casino patronage in Melbourne, Perth and ultimately Sydney.
Foolish takeaway
Having identified a growing market sector, all five of the abovementioned companies have excellent prospects. As opposed to a sector such as retail, the margin for error is much greater in tourism should any hiccups occur in company strategy or management, as most boats may still rise with the incoming tide.
Caution should be taken with a blanket approach to all tourism-related stocks. As highlighted by Mike King in this week's Take Stock newsletter (sign up for a free subscription and a bonus free report here), one should avoid investing in Qantas (ASX: QAN) due to a nonexistent moat and all manner of external unknowns.
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Motley Fool contributor Mark Woodruff does not own shares in any of the companies mentioned in this article.