America’s Fastest Growing Industries: 3D Systems Corporation (DDD), Lululemon Athletica inc. (LULU)

Another play could be in the Pilates & Yoga Studios industry.  Interestingly, there are not yet any nationally-branded yoga studios that have commanded a significant stake of this market (a free tip for anyone interested in the idea!)  But there are indirect beneficiaries from the neo-yogi movement.  Lululemon Athletica inc. (NASDAQ:LULU) retails high-end apparel that is designed specifically for yoga and pilates enthusiasts.  They have received incredibly favorable customer feedback, and even promote their brand by morphing their stores into studios to offer free yoga classes from local instructors.  A more creative consideration could be  Whole Foods Market, Inc. (NASDAQ:WFM). Yoga and pilates activists are often health-conscious consumers as well.  This movement bodes well for Whole Foods, who is the first nationally certified organic grocer in the US.

Valuations

Of course, in you want to get in on the fastest growing companies in America, don’t expect to buy them for pennies on the dollar.  “Obviously good ideas” are often priced at higher multiples than the market at large.  Take a look at a comparison between the stocks mentioned above and the S&P sector averages:

Industrials

Stock*/Sector** Name 2013 P/E Ratio
Stratasys 39.4
3D Systems 39.7
Industrials Sector Average 13.9

Consumer Discretionary

Stock/Sector Name 2013 P/E Ratio
Lululemon 25.9
Consumer Discretionary Sector Average 14.3

Consumer Staples

Stock/Sector Name 2013 P/E Ratio
Whole Foods 26.8
Consumer Staples Sector Average 15.8

*2013 estimated P/E ratios for stocks mentioned taken from Morningstar: www.morningstar.com.

**Sector averages taken from S&P Capital IQ:  http://www.sectorspdr.com/shared/pdf/sectorResearch/GICS_Sector_EPS.pdf

The fastest-growing companies demand higher prices per dollar of earnings than each of their respective sector averages.

Place your bets on the hare

The US gross domestic product grew a pathetic 0.6% per year between 2002 and 2007.  Fortunately, due to advances in technology, a newfound source of cheap energy, and a recovering housing market, US GDP is forecast to grow 3.3% a year in aggregate over the next five years.  If the US recovery continues as planned, many companies (and stocks) will do very well.

Investing in growth stocks is not without its own set of risks.  When highly-valued companies miss earnings estimates or fail to execute as hoped, they are often punished with excruciating one-day drops in stock price.  But if you’ve got a stomach that can handle the volatility, that rising tide could raise a few ships in your portfolio.

The article America’s Fastest Growing Industries originally appeared on Fool.com and is written by Simon Erickson.

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