Five Trends To Watch In 2008

Five Trends To Watch In 2008

By Timothy LuttsPublished December 22, 2007

In 2007, the biggest trend - still ongoing - was the rise in solar power stocks. And next year? Here are my five best guesses for the trends that will reward investors in 2008.

One. The race to alternative energy will continue, and solar power will remain the leading light of the industry. High oil prices and rising demand for non-polluting power will be the big drivers for the industry, but equally important for investors in the stocks will be the growing public perception of the sector. While active investors are clearly aware of the performance of the leading stocks, the man-on-the-street is not. Solar power is not yet the talk of the town, and until it is, I think the sector's current strong uptrend can continue. First Solar (FSLR) is the king of this hill today, but Suntech Power (STP) and JA Solar (JASO) are close behind.

Two. Investment in faster-growing foreign companies will continue to reward. The China boom remains amazingly resilient, and while I'm concerned that the advent of the 2008 Olympics may mark a temporary high-water market for the China market, I have little doubt that the demographic and capitalistic forces transforming that country will continue. Ditto for India, which is several years behind China on the same path, as well as Brazil. Russia, because it has amazing natural resources, has awesome potential, but I'm disappointed with its backward-looking government; I'm more impressed by the progress at former soviet satellites like Azerbaijan (with 35% GDP growth), Latvia (11.9% growth), Estonia (11.4% growth) Kazakhstan (10.6% growth) and Belarus (9.9% growth). Foreign stocks I like (traded in the U.S. as ADRs) are Baidu (BIDU), New Oriental Education (EDU) and Turkcell (TKC).

Three. The build-out of the utility infrastructure in developing nations will reward investors in two sectors. First will be the global construction and engineering firms that accomplish these big products: think power lines, dams, water filtration plants, gas pipelines and more. Second will be the local utilities that evolve to distribute these goods to consumers. This is not rocket science; these companies merely need to follow the paths trod by U.S. companies over the past century and their earnings will multiply rapidly. Chicago Bridge & Iron (CBI) is a leader here, and I also like Companhia de Saneamento (SBS) in Brazil.

Four. Resources of all sorts are meeting with growing demand in China, India and other countries, and there's no sign yet that supply will catch up with demand. Companies that benefit from this trend are those that own, mine, create, and deal in gold, silver, coal, copper, iron ore, steel, phosphate and silicon. Also benefiting are the companies that make the equipment these companies use. I like Bucyrus (BUCY) and Deere (DE) and I also like silicon producer MEMC Electronic Materials (WFR), which gets a boost from the solar power industry.

Five. Communications will continue its process of rapid evolution. We'll see greater access to wireless networks, and greater bandwidth everywhere as content becomes increasingly rich. Apple (AAPL) is a high-profile leader in this space today, and you can read more about that great company below.