The biggest winners in the stock market are often driven by megatrends.
These are new technologies, and other demographic or macroeconomic developments, that drive massive changes in business. Think video streaming and Netflix, e-commerce and Amazon, or mobile technology and Apple. Not surprisingly, all three stocks were big winners over the last decade.
Just as emerging technologies and megatrends drove big investing gains in the 2010s, the 2020s will be similar. Two of the most promising trends that are just taking off are telemedicine and the hybrid cloud. Let's discuss these opportunities, and see why you can profit from Teladoc Health (NYSE:TDOC) and Nutanix (NASDAQ:NTNX).
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Why telemedicine is a megatrend
It's no secret that the U.S. healthcare system is broken. Americans hate the healthcare industry more than any other institution in the country, including Wall Street banks and Congress. There's no shortage of politicians offering solutions to the healthcare crisis, and plenty of companies, from start-ups to behemoths like Amazon and CVS Health, have sought ways to improve the industry as well. But one of the biggest disruptors and fastest-growing segments in healthcare is telemedicine, the process of seeing a doctor remotely using video communication technology. Among the benefits of telemedicine are that it's convenient and cost-effective; its applications should only grow as technology improves, and more insurers and doctors embrace it.
According to Fortune Business Insights, the global telehealth market is expected to grow by a compound annual growth rate of 23.4% through 2026, to $266.8 billion, up from $49.8 billion in 2018.
Younger doctors are increasingly looking for telemedicine positions, and the need for healthcare will only grow as the baby boomer population ages. Sitting at the intersection of healthcare and technology, telemedicine may be the best way to tap into growth in both industries; as it goes mainstream, investors should benefit.
Image source: Getty Images.
Why the hybrid cloud is a megatrend
Cloud computing has made plenty of winners during the 2010s, especially in the SaaS (software-as-a-service) sector, but it has gone mainstream as enterprises big and small embrace the cloud. However, there are still significant challenges in cloud computing. Perhaps the biggest is the transition to hybrid cloud or multicloud services, allowing enterprises to move seamlessly from on-premise private clouds to third-party clouds like Amazon Web Services and Microsoft Azure.
The global hybrid cloud market is expected to grow 22.7% from 2018 to 2023, from $40.6 billion to $138.6 billion, according to Research and Markets. And IBM sees a $1.2 trillion opportunity long-term as IT managers gradually adopt the hybrid model.
According to a survey commissioned by Nutanix, 90% of IT managers were choosing to adopt hybrid cloud environments over specifically private or public ones, but nearly 70% of respondents said that their current IT vendors were unable to "provide the right solutions for building and managing a hybrid environment."
While the hybrid cloud presents a number of advantages, including agility, cost-effectiveness, and security, much of the transition to the hybrid cloud is still to come.
Two stocks to benefit
In telemedicine, Teladoc has established itself as the market leader through rapid growth and a series of acquisitions. The company is on track to reach between $546 million and $550 million in revenue for 2019, up 31% at the midpoint from the previous year, and it had 2.9 million visits over the first three quarters of the year.
Shares jumped recently when the company acquired InTouch Health, the leading provider of enterprise telehealth solutions for hospitals and health centers. Most importantly, Teladoc has established itself as the leader in an industry that should have a long runway of growth ahead, as insurers and others search for cheaper ways to provide healthcare and as videoconferencing technology gets even better. With a market cap around $7 billion today, Teladoc has plenty of room to grow if the industry fulfills its promise.
In the hybrid cloud arena, plenty of tech companies are angling for a piece of the market. One intriguing and overlooked option is Nutanix, a company that has transitioned from selling hardware to subscription software, embracing a SaaS model. Nutanix specializes in hyperconvergence: technology that combines computing, storage, and networking functions, which were traditionally siloed in enterprise IT. Nutanix was also named a leader in hyperconverged infrastructure (HCI) by Gartner, which said that 70% of enterprises would be running some form of HCI by 2023, up from less than 30% in 2019, showing significant room for growth.
Through its leadership in HCI, Nutanix should see significant growth from the transition to the hybrid cloud; the company's tools reduce the complexity that can accompany hybrid clouds, and allow for scalability and portability in moving applications between the public and private clouds. In addition to its leading position in hyperconvergence, Nutanix also has a 97% customer retention rate, indicating strong customer loyalty. Like Teladoc, Nutanix is worth about $7 billion today and looks undervalued compared to many of its cloud computing peers. If the company capitalizes on the hybrid cloud transition, shares could take off.
While no one knows what the market has in store over the coming decade, following emerging technologies like these two is one of the best ways to get blockbuster returns from investing.
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January 20, 2020 at 12:28AM
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2 Megatrends to Watch Over the Next Decade, and How to Profit From Them - Motley Fool
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