As investors, it pays to keep an eye on industries that are growing quickly. Amazon.com, Inc. (NASDAQ:AMZN)’s ascent to grace as the king of e-commerce was nicely complemented by a nascent dot-com boom and consumers that were newly connecting to the internet. Netflix, Inc. (NASDAQ:NFLX)’s ability to take down Blockbuster was largely due to the aggressive expansion of the DVD industry.
Luckily for us, IBIS World released a special report last April that listed the 10 fastest-growing industries in the United States. The metric they based the rankings on was overall industry revenue growth during the next five years.
Here is that list of industries, shown with the fastest-growing on top.
There are a few important things to take note of before we start digging into the industries. First, the list is based off of compound annual growth rate, not absolute industry growth. For instance, social network game development is ranked #2 on the list and is predicted to rise at 22% per year through 2017. But even after all of that growth, it will still be less than 1/4 of the absolute size that the generic pharmaceutical manufacturing industry is today. So keep in mind that we’re dealing with relative change rather than absolute change.
The other thing that stands out is that Green & Sustainable Building Construction was not only the fastest growing industry on the list, but it was also the largest market. The report anticipates a whopping $180 billion of growth will be seen in just the next five years, which will nearly triple its total size today. If you start to notice a lot more Energy Star rated appliances and energy-efficient air conditioners, now you know why.
How to play these trends
A strong macroeconomic tailwind can often be a best friend to investors. A rising tide can raise many ships, meaning that multiple companies can simultaneously benefit from a growth in demand for the products in their industry. This is especially true if the companies target different types of customers.
As an example, Stratasys, Ltd. (NASDAQ:SSYS) and 3D Systems Corporation (NYSE:DDD) are competitors in the 3D Printer Manufacturing industry. Stratasys has targeted larger, industrial customers that have needs for more complex machines using fused deposition modeling. Conversely, 3D Systems is making strides to push into the consumer market, now selling their Cube 3D personal printer for only $1,299. So who’s going to be the ultimate winner in this race? The answer is most likely “both.” With top line industry growth of 14% per year, there’s enough room for both of these companies to ink up some new business.