Trying to invest in a quality business in today?s day and age is never an easy task. Along with looking at figures such as the current stock price compared to future prospects, or the P/E or gearing ratios, we also have to analyse consumer trends, innovation of other companies and new products and take into account the performance of industries as a whole.
The BRW Rich 200 has given us a helpful nudge in the right direction, with BRW releasing its take on the best three industries to consider — and the three which have been avoided.
The three industries considered to be proving ?increasingly lucrative? are:
Finance: In the lead up to the global financial crisis in 2007, the proportion of the Rich 200 to invest in the finance sector grew substantially. Although it has fallen away slightly since, it has begun to climb again in the last three years, with more than 7% heavily involved. Whilst companies such as Commonwealth Bank (CBA.AX) and Westpac (WBC.AX) are considered heavily overpriced currently, other smaller companies like Mortgage Choice (MOC.AX) could be worth looking at. Its share price is currently $2.15 with a P/E ratio of 14 with growing revenues and profits.
Resources: Unsurprisingly, the Resources sector has been very popular amongst the nation?s wealthiest over the past decade, but has fallen away this year. Although statistics from BRW show that around 12% of the top 200 are still involved, it is a good idea to steer clear of this industry for a while, as it remains highly volatile.
Technology: After an enormous leap in the involvement in the Technology industry in 2000, the numbers certainly fell away following the bursting of the dot-com bubble. However, the wealthy are slowly and sustainably re-entering the scene, where involvement has grown steadily over the last few years. Companies such as Integrated Research (IRI.AX) and Melbourne IT (MLB.AX) have given investors very good returns over the last 12 months, and look set to continue performing exceptionally. Although Integrated Research reported below par earnings for the first half, it is expected that it will recover strongly in the second half.
The industries that are seemingly out of favour with the Rich 200 are the Manufacturing, Retail and Entertainment sectors. With only 10 of those 200 involved in the manufacturing industry, it is being stated that the problems are structural within the industry and are unlikely to change anytime soon.
Meanwhile, whilst the retail sector still plays a huge part on the list, the trend over the past decade shows that the importance of the industry could be declining. Now that shares in many of the nation?s largest retailers such as Myer Holdings (MYR.AX) and JB Hi-Fi (JBH.AX) have recovered their losses, it may be time to consider other industries before putting your hard earned money here.
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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.