May 24, 2022
Trying to predict the future is an impossible task when it comes to the stock market, yet..We can’t help but give it a shot. Stock prediction can be addicting in a sense, and everyone wants to be the one to be able to say “I told you so” about a specific stock or sector.
Luckily though, there are several measures we can take to increase our odds at accurately forecasting the future and ultimately put ourselves in a position to be ahead of the game. So maybe investing isn’t about timing the market, but more so about getting there early.
“Don’t wait to buy stocks, buy stocks and wait.” – Warren Buffet.
Steps to assessing the future
If we make our stock predictions based on analytics and reliable forecasts, then we’ll be able to live with whatever the outcome of our decision is, knowing we did our due diligence on the companies we chose to invest in. So, when investing in future-oriented sectors, this is a great method to ascertain value.
Here’s a few things to look for when predicting stocks
- Expected sector revenue: Checking the industry’s growth prospects for total value is a good start when it comes to due diligence. Essentially, the number is exactly what it sounds like and gives us a good idea of just how big an industry can expect to become in the future.
- Compounded annual growth rate, or CAGR: Compounded annual growth rate is, you guessed it, a math formula. Look up the intricacies of the equation if you want, but we’ll spare you the stats class nightmares. CAGR is another growth metric that helps us develop our foresight for any given sector. It shows the expected growth rate within a given time span, and although there’s no standard for wha’s considered “good,” it’s generally accepted that above 15% is well to do.
- Other standard ratios, P/E, P/B, EPS, Revenue: A one-off look at a company’s balance sheet may not tell you much. Still, if you compare numbers like these to prior reports and see solid progress in conjunction with a viable product/business model, then you’ve found something worth evaluating.
A few ideas for stock prediction
To finish off our basic overview of future-oriented investing, here’s a few sectors with high potential for growth in the next few decades.
- ESG investing: ESG stands for environmental, social, and corporate governance, and although it’s not technically an “industry” by definition, it is a category of investing that’s been increasing in popularity recently and intends to continue that trend. Analysts foresee this niche reaching a total value of near 1 trillion dollars by 2030, and that’s about a 15x increase from where we are now.
Are you looking to invest more consciously? Welcome to ESG investing.
- Greentech: The world’s advancements toward cleaner energy and renewable resources are undeniable, and despite the transition period we must endure first, the future seems pretty straightforward. With a CAGR of 24% and still being one of the smaller growth sectors in terms of revenue, there’s much room to grow.
- Fintech: One of the fastest-growing industries out there with growth rates expected in the high teens over the next decade, and forecasts of over $500 billion in revenue by 2030, the Fintech sector looks like a good place to park some long-term money.
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Front will also give you free portfolio analysis to better understand your situation and set you up for financial success. With Front, people learn data-driven investment strategies, better portfolio management, and can connect their broker to help you make stock picks and invest with confidence.
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