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3 Growth Sectors I’m Optimistic About in 2019 and Beyond

The Singapore stock market benchmark, the Straits Times Index (SGX: ^STI), has been on a volatile ride this year. As of the time of writing, it is down some 9% since the beginning of this year.

The volatility could continue into next year.

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Long-term investors, however, shouldn’t be afraid of the potential ups-and-downs in the stock market in 2019. The instability would allow them to pick up shares that are cheaper than before.

What are some of the growth sectors that long-term investors should keep in mind to pick up potential bargains in? Here are three of them.

Explosion of data

From a new article such as this to online documents created by big corporations, we are constantly creating data. Seagate predicts worldwide data creation will grow to an enormous 163 zettabytes by 2025, which is ten times the amount of data produced in 2017.

The explosion of data is sprouting up many new industries and growth within those industries. Seagate’s chief executive, Steve Luczo, said in a presentation by his company on big data:

“While we can see from this new research that the era of Big Data is upon us, the value of data is really not in the ‘known,’ but in the ‘unknown’ where we are vastly underestimating the potentials today. What is really exciting are the analytics, the new businesses, the new thinking and new ecosystems from industries like robotics and machine-to-machine learning, and their profound social and economic impact on our society.”

Industries such as data centres, cloud computing, cybersecurity, and data analytics using artificial intelligence and machine learning technologies, are benefitting from the data boom.

In Singapore, listed companies that are involved in the data growth are Keppel DC REIT (SGX: AJBU) with its data centres, and StarHub Ltd (SGX: CC3) and Singapore Technologies Engineering Ltd (SGX: S63) with their cybersecurity offerings.

In particular, there’s potential for Keppel DC REIT to grow further in the years ahead. In its 2017 fourth-quarter earnings release, the REIT mentioned the following:

“Data from 451 Research indicates that the data centre demand drivers remain positive in many key data centre hubs, including cities such as Singapore, Sydney, and Amsterdam where Keppel DC REIT is invested in. Demand for data centre capacity is underpinned by the sustained growth of cloud service providers, as well as increased data storage and processing requirements due to end user adoption of new technologies, and data sovereignty regulations.”

Singapore is a critical data centre hub in this region due to its reliable connectivity, status as a financial hub, concentration of multinational corporations, robust government support, political stability, and attractiveness as an investment location. New demand here is expected to grow at 23.6% per year between 2014 and 2021. The sustained demand should bode well for Keppel DC REIT in the long-term.

A unique sport

Enter eSports (or electronic sports) – a sport that doesn’t involve a ball, stadium or grass pitch.

eSports is the name given to competitive gaming among professional players. In this sport, competitors play video games, while being watched by a live audience or by online means. The popular games are mainly team-based multi-player games from the first-person shooter or multiplayer online battle arena genre.

eSports fans watch on YouTube’s gaming channel or Twitch, a dedicated gaming channel on the web. Some of the most popular games to watch are Dota 2, League of Legends, and Counter Strike: Global Offensive. By 2021, global eSports viewing is expected to blow past 9 billion hours.

With a large following, it’s not surprising that businesses are cashing in on the sport. Revenue from eSports consists of sponsorships (the biggest contributor), advertising, media rights, game publisher fees, and ticket and merchandise sales. The eSports industry is poised to be a US$1.2 billion industry by 2019 and continue its growth to bring in US$1.7 billion in worldwide revenue in 2021.

eSports is poised to get bigger prominence worldwide – it will be a medal event in the 2022 Asian Games, and this could pave the way for full Olympic status.

The Asia Pacific region is the world’s fastest-growing in the world in terms of eSports audience. Our local telco, Singapore Telecommunications Limited (SGX: Z74), has a slice of the pie with its eSports initiative. In October this year, it launched the PVP Esports Championship, a multi-title and regional league with a prize pool of US$300,000. eSports may not move the needle for Singtel’s overall business, but it will be interesting to watch how its eSports arm grows in the years ahead.

A place for students

The last growth sector I would look at is the purpose-built student accommodation (PBSA) industry. PBSA is an apartment community designed for students in higher education. These communities have amenities such as study areas, fully furnished units, and roommate matching.

In major markets such as Australia, the US and the UK, the provision of student housing is low, ranging from 6% to 24%. Uncertainty around UK’s Brexit and the trade policies in the US have not affected the sector’s appeal much in those areas.

In Australia, for example, the number of 18- to 25-year old is projected to climb by 104,000 between 2016 and 2026, increasing the number of Australian university students. With high demand and low supply, companies involved in the PBSA would benefit.

In our country, listed companies that have investments in the PBSA industry are Centurion Corp Ltd (SGX: OU8), Singapore Press Holdings Limited (SGX: T39) and Wee Hur Holdings Ltd (SGX: E3B). To know more about them and their involvement in the industry, you can check out the article here.

These aren’t the only sectors we’re excited about. We found 12 solid stock ideas in various industries for you. We think these have the potential to drive wealth to your portfolio even in an uncertain market. Everything you need to know about the 12 stocks, including a how-to guide on investing, is included in our latest project called Stocks 2019. But you’ll have to read it soon because Stocks 2019 (and those 12 stock ideas) will be gone after 26th December 2018. Click here to read it now.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.