Each one of us has our personal style and preferences when it comes to investing.
The Motley Fool co-founder David Gardner is an expert at picking high growth "rule breakers" – young, innovative companies that operate in emerging industries. In contrast, Warren Buffett prefers to buy stable, high-quality businesses in industries he understands.
Remarkably different investment styles but both investors have achieved remarkable results.
Companies operating in industries with favourable future trends can also provide market-beating investments but just investing in any old company won't do it. For a successful investment, it is important to pick high-quality companies with competitive advantages over their competition. Here are 5 to consider:
1. Healthcare
It's no secret: our population is getting older while our life expectancy continues to rise. The increasing demand for healthcare services will ensure this industry continues to grow into the future.
Cochlear Limited (ASX: COH) is a fantastic Australian company and pioneer of the bionic ear. Its broad range of hearing devices – including the cochlear implant and bone conduction implants – provide a higher quality of life for people young and old. Cochlear is much more than an ethical investment and has delivered an 11% average return to shareholders over the past ten years.
2. Digital Transformation
An old theme but still very relevant. For example, traditional print advertising was destroyed as Seek Limited (ASX: SEK), REA Group Limited (ASX: REA) and Car Sales.com Ltd (ASX: CAR) took it online. They now control the domestic market and their focus has turned to developing economies for future growth.
Seek's International business is gaining momentum and now delivers 38% of total group revenue making it my preferred choice in the group (although all three offer decent value at the moment).
3. Global Travel
Cheaper airfares and a growing middle class make international travel affordable to a larger percentage of the world, and global travel is forecast to grow for the foreseeable future.
With a huge network of stores around the world, a growing online presence and bucketloads of cash, Flight Centre Travel Group (ASX: FLT) has positioned itself to take advantage of this long-term trend.
4. Telecoms & Data
Data usage around the globe is increasing at a blistering pace and doesn't look like slowing down as more people and devices connect to the internet.
My preference in this sector are the companies that offer not only the services but also own the infrastructure. Vocus Communications Limited (ASX: VOC) is an example and is positioned well to capitalise on this megatrend.
5. Petcare
Last but not least, pets are now an important part of the typical Aussie home. An increasing number of pets now eat premium foods, receive professional grooming and have operations covered by pet insurance. Petcare is a growing industry with defensive qualities.
Greencross Limited (ASX: GXL) owns 210 retail stores and 140 veterinary clinics across Australia and New Zealand, which include the Petbarn, City Farmers, Animates and Greencross brands. The company provides a complete service – from food through to insurance – for pet lovers and is the best way to benefit from this trend.
Carefully selecting great companies in industries with favourable economic tailwinds can be an effective way to improve your long-term investing performance.
