Focusing on an industry that is primed for growth can be a useful way of finding hot stocks. Known as the top-down approach, this method of screening can help investors narrow their selection criteria by simply zooming in on the current mega trends.
With that in mind, here are two mega trends that top-down investors can take a look at.
Software-as-a-service (SaaS) is a software licensing and distribution model where a third party provider makes the software available through the internet. For instance, Google Drive or Google Docs are examples of SaaS. Previously, people had to download or buy a program and install it on their computer. However, with SaaS, users can simply log onto the Internet and access online programs.
So what’s the big deal about SaaS? First and foremost, it provides huge savings for the end user by eliminating the cost of purchase and ongoing maintenance. Users can simply pay a monthly subscription fee or opt for a pay-as-you-go model. SaaS models also save time for businesses, as using SaaS applications can be as simple as logging in over the Internet. It also shifts the maintenance responsibility away from in-house IT departments to the service provider.
SaaS also provides flexibility, options and scalability, which is good for businesses that are in their expansion phase or whose requirements are continually changing.
Some other examples of SaaS include Netflix, Salesforce, Paycom, Amazon’s cloud services and DocuSign.
E-commerce is certainly not a new development. As of 2018, e-commerce already represents about 10% of all U.S retail sales, with e-commerce continuing to grow around 15% annually.
According to a report by Absolunet, the US B2B e-commerce market could reach US$1.1 trillion and account for 12.1% of all B2B sales by 2020. Worldwide, the B2B e-commerce market is expected to hit over US$6 trillion.
Closer to home, a study by online savings platform Flipit showed that three in five Singaporeans shop online, with market revenue per user hitting S$1,022 in 2017. Singapore’s e-commerce market is expected to expand 11.2% per year until 2021. The South East Asia internet economy is continuing to grow at pace and is expected to exceed S$200 billion in 2025.
There are numerous ways that investors can participate in the e-commerce mega trend. Most obviously, investors can simply invest directly into e-commerce players. But there are also other companies and industries that can benefit from this trend.
E-payment facilitators such as PayPal, Visa and Mastercard stand to gain from the larger number of online transactions. Companies that fulfil deliveries also benefit from the growing e-commerce market. These include companies such as Singapore Post Limited (SGX: S08), United Parcel Services and FedEx.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has a recommendation on Paycom, Amazon, SalesForce, DocuSign, Visa and Mastercard. Motley Fool Singapore contributor Jeremy Chia owns shares in Alphabet C Shares and Visa.