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The industries you should and shouldn’t invest in in 2019

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It’s a brand new year – and a good time to rethink your investing strategy.

If you’re looking to branch into emerging sectors, IBISWorld has earmarked a number of new industries set for success and some that seem likely to tank this year.

Industries tapped to ‘fly’ in 2019

Ridesharing platforms

The sharing economy has married with smartphone penetration, resulting in stronger demand for convenient, cost-effective services such as transport. Uber has had to contend with international ridesharing firms such as Ola, Taxify and DiDi that have entered the domestic market.

“Revenue for the ridesharing services industry is still expected to grow by 81.7 per cent in 2018-19, to $286.3 million,” said IBISWorld senior industry analyst Kim Do.

Liquefied natural gas production

IBISWorld predicts the liquefied natural gas (LNG) production industry will grow 39.3 per cent in 2018-19 to $43.5 billion.

“The major markets for Australian LNG are Japan, China, South Korea, and Singapore,” Do said.

“Australia is expected to edge past Qatar as the world’s largest LNG exporter over the next two years, with Australia exporting more LNG than Qatar on a monthly basis for the first time in November 2018.”

Organic farming

Do observed that both global and domestic demand for organic products will continue to grow as consumers gravitate towards healthy, fresh and environmentally friendly food choices.

The organic farming industry’s structure has changed, with demand for organic livestock and poultry produce soaring in the last five years and revenue expected to grow by 26.3 per cent in 2018-19.

Software publishing

The software publishing industry is expected to see 11.5 per cent growth in 2018-19 thanks to greater adoption of new distribution models.

“Greater reliance on cloud computing has boosted the popularity of Software-as-a-Service distribution models, as they allow publishers to offer interconnected systems on the cloud, giving clients access to services anywhere they have access to an internet connection,” Do said.

Foreign banks

The banking and financial services Royal Commission has seen a tightening effect on lending standards in the sector and higher interest rates.

But despite the low interest rate environment for the better part of the last five years, the foreign banks industry has grown thanks to the establishment of a number of Asian banks in Australia. This industry’s revenue is forecast to be $18.4 billion this financial year.

Industry tapped to ‘fall’ in 2019

Diamond and gemstone mining

The diamond and gemstone mining industry is expected to drop by almost a quarter of its value (24.2 per cent) in 2018-19 as Australia’s last operating diamond mine, which accounts for more than 80 per cent of industry revenue, winds down production.

“The Argyle mine’s closure represents the beginning of an extended downturn in the industry, as Australia currently does not have any new diamond resources to develop,” said Do.

Discovering a new diamond mine would take at least 10 years, she added. “Consequently, industry revenue is anticipated to remain well below previous highs for the foreseeable future.”

Hydro-electricity generation

Due to falling wholesale electricity prices, especially in Tasmania, revenue for the hydro-electricity generation sector looks to fall by 20.9 per cent in 2018-19.

“In addition, new generation capacity is anticipated to come online across the entire National Electricity Market, increasing supply and placing downward pressure on prices,” Do commented.

Toy and game retailing

Amid major toy retailer Toys ‘R’ Us closing up shop in August 2018 and consumers turn to online channels to purchase their toys, revenue for the toy and game retailing industry is expected to drop 15.9 per cent in 2018-19 to $740 million.

“Prior to its demise, Toys ‘R’ Us was the largest retailer in the industry, with a market share of over 20 per cent,” the senior industry analyst said.

“However, the company’s decline has accelerated the rate at which department stores and online-only retailers have captured market share, as consumers have shifted their spending away from industry retailers.”

Black coal mining

As demand softens and international economies turn away from coal, global prices for coking and thermal coal are dropping and the black coal mining industry is falling with it.

It’s expected to lose 14.2 per cent of its revenue in 2018-19.

“Australian coal production capacity is anticipated to remain limited due to slowing investment in the industry,” said Ms Do.

With such uncertainty in mind, coal projects will encounter difficulty attracting investment finance in the next few decades.

Butter and dairy

Declining prices will see revenue in the butter and dairy product manufacturing industry fall by 7.7 per cent in 2018-19.

Butter and butter-related manufacturing alone makes up around a quarter of total industry revenue, Do pointed out.

“The amount of butter manufactured has decreased significantly over the past two years as demand for other dairy-based products, such as milk powder and full-cream milk, have reduced the availability of milk fat for the industry.

“To make matters worse, falls in the global prices of butter and anhydrous [containing no water] milk fat are expected to further erode industry revenue.”

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