For the past 30 years, Wall Street has had no shortage of next-big-thing investment trends to latch onto. Some of these have been game changers, such as the advent of the internet in the 1990s, while others never came close to living up to lofty expectations (e.g., consumer-level 3D printers).
No matter what happens with the U.S. economy and stock market in 2024, there are bound to be investment trends that garner the attention of professional and everyday investors.
However, today’s hottest trends may not carry over into the following year. Recently, I discussed why artificial intelligence (AI) and electric vehicles (EV) are two popular trends that could face-plant next year. Thankfully, other investment trends stand at the ready to take their place.
What follows are five unstoppable trends to invest $1,000 in for 2024.
Image source: Getty Images.
1. Cybersecurity
Perhaps the most surefire trend investors can continue to count on in the upcoming year is cybersecurity. Regardless of how well or poorly the U.S. economy and stock market perform, hackers and robots don’t take time off from trying to steal sensitive business or customer information. Any company that has an online or cloud-based presence requires protection, and this is increasingly falling into the hands of third-party providers.
The cream of the crop in cybersecurity looks to be CrowdStrike Holdings (CRWD 0.19%). CrowdStrike’s cloud-native security platform, known as Falcon, relies on AI and machine learning (ML) solutions to become more effective at identifying and responding to potential end-user threats over time. Falcon is overseeing trillions of events each week.
Despite being a pricier cloud-based, software-as-a-service (SaaS) solution than many of its peers, CrowdStrike’s gross retention rate is superior. Moreover, 63% of its ever-growing client base has purchased at least five or more cloud-module subscriptions.
Don’t overlook Okta (OKTA 1.77%), either. Despite the negative press associated with a recent security breach, identity-verification company Okta is also relying on AI and ML to steadily boost the efficiency of its cybersecurity solutions.
In particular, the acquisition of Auth0 opens new doors in international markets for Okta, as well as gives the company a firmer foundation to build on its Customer Identity segment, which is a $30 billion addressable market, according to the company.
2. Gene editing
A second potentially unbeatable trend to consider putting $1,000 to work in for 2024 is gene editing.
Generally speaking, investors don’t have to dig too deeply to find exciting and promising new research in the drug-development space. Gene editing just happens to be one of the more revolutionary approaches.
As its name suggests, gene editing involves the “editing” of targeted DNA. A small piece of guide ribonucleic acid (RNA) is attached to an enzyme (e.g., the Cas9 enzyme) and introduced into target cells. The enzyme then “cuts” the DNA at the targeted location. The belief among the scientific community is that gene editing could be a successful approach to treating single-gene disorders, which include cystic fibrosis.
What really puts gene editing on the map as a hot investment trend for 2024 is the approval of Casgevy (formerly exa-cel) in the U.K., i.e., the very first approval anywhere for a gene-editing drug. On Nov. 16, Vertex Pharmaceuticals (VRTX -0.20%) and CRISPR Therapeutics (CRSP 0.77%) announced the groundbreaking approval of Cas9 gene-editing therapy Casgevy for the treatment of sickle cell disease and transfusion-dependent beta thalassemia. With label-expansion opportunities and approvals awaiting in other regions, including the U.S., this gene-editing treatment developed by Vertex and CRISPR has the potential to top $1 billion in annual sales.
It’s worth noting that gene editing may also hold promise beyond single-gene diseases. It’s being examined by CRISPR Therapeutics as a treatment for a variety of cancer types.
Image source: Getty Images.
3. Financial technology (fintech)
The third unstoppable trend you can confidently invest $1,000 in for 2024 is financial technology, which you probably know better as “fintech.” Fintech involves the use of software or technology to facilitate banking and lending services.
Based on a report from Boston Consulting Group that was issued in May, global fintech revenue is expected to catapult by more than 500% to $1.5 trillion by 2030. This type of growth isn’t hard to believe considering that many of the world’s emerging markets are still underbanked, including Southeastern Asia, the Middle East, and Africa. Mobile-based payments and lending solutions may be the answer to bridging this lack of access to basic financial services.
PayPal Holdings (PYPL 2.78%) currently finds itself in the driver’s seat in the fintech space. Even with an above-average inflation rate weighing on the purchasing power of lower-earning workers, PayPal has seen its total payment volume (TPV) grow by a double percentage, without stumble, on a currency-neutral basis.
Furthermore, PayPal’s active users are more engaged than ever. This is a particularly important point given that PayPal’s top platforms (PayPal and Venmo) are driven by transaction fees. In other words, more transactions will liken to higher gross profit for the company. In less than three years, PayPal’s active customers have increased their average number of transactions completed over the trailing-12-months from 40.9 to 56.6.
Even in a challenging economic climate, fintech stocks would be expected to preserve growth in TPV.
4. Data-center economy
A fourth seemingly invincible trend to invest $1,000 in for next year is the data-center economy. By this, I mean almost anything that’s directly or indirectly tied to the growing demand for data centers.
As the world becomes more digitized and data gets moved into the cloud at an accelerated pace, demand for everything from physical facilities that house data-center server towers to the host of solutions powering this expansion will fuel the data-center economy.
Perhaps the safest way to play this expansion is with real estate investment trust (REIT) American Tower (AMT 0.17%). Just days before 2021 came to a close, American Tower completed its acquisition of CoreSite Realty, which owned 25 data centers at the time. Purchasing properties and leasing them out for extended periods usually leads to highly predictable operating cash flow and a market-topping yield for REITs.
The puzzle pieces are also in place for storage stocks to rebound nicely in 2024. Companies appreciate Western Digital (WDC 0.11%) are well positioned to take advantage of the growing storage needs presented by data-center expansion. Though hard-disk drives have been a staple in data centers for as far back as the eye can see, Western Digital’s NAND flash-memory solutions have the potential to become the new standard in enterprise data centers.
For investors with a higher tolerance for risk, Amazon (AMZN -1.61%) and Alphabet (GOOGL -0.74%) (GOOG -0.72%) present smart ways to play the burgeoning data-center economy. Amazon Web Services (AWS) and Google Cloud respectively accounted for 31% and 10% of global cloud infrastructure-service spending in the third quarter — and enterprise cloud spending is still in its early innings.
5. Small-cap investing
As of this time last month, megacap tech stocks were outperforming small-cap stocks by the largest margin on record — yes, even more than during the dot-com bubble in the early 2000s. While this, in some way, speaks to the time-tested nature of brand-name businesses, it also suggests a generational buying opportunity awaits small-cap investors.
As of the closing bell on Dec. 5, the benchmark S&P 500, which houses mostly large-cap and megacap components, had a forward price-to-earnings (P/E) ratio of 18.7. This is roughly the midpoint of where the broad-based index has traded on a forward-earnings basis over the past 25 years.
Meanwhile, the S&P 600, which is comprised of small-cap companies, had a forward P/E ratio of 13.2, which isn’t too far from its 25-year low. In my view, this makes small-cap stocks a bargain, and 2024 could be the year value investors wake up to this realization.
A perfect example of a small-cap company with the potential for multiple expansion is furniture retailer Lovesac (LOVE 12.32%). Whereas traditional furniture retailers offer little in the way of true product differentiation and are heavily reliant on foot traffic into physical stores, Lovesac has resolved these headwinds.
Lovesac’s sactionals (modular couches) are unique in that they can be rearranged to fit most living spaces, have more than 200 different cover choices, come with an assortment of upgrade options, and use recycled plastic water bottles for their yarn. That’s functionality, optionality, and eco-friendliness all rolled into one.
Furthermore, Lovesac’s omnichannel sales platform features a burgeoning online presence, pop-up showrooms, and a couple of brand-name partnerships. With lower overhead expenses and a reduced reliance on brick-and-mortar stores, Lovesac has handily outperformed its peers. This should continue in 2024 and beyond.
