Secular growth is higher-quality growth than seasonal or cyclical growth because it’s long-term growth. Here are two secular growth trends that you can ride on and profit tremendously from over the long haul.
The shift from fossil fuel to clean and green energy is a secular trend. Brookfield Renewable Partners (TSX:BEP.UN)(NYSE:BEP) is a top stock that has been thriving from this trend.
BEP is one of the world’s largest renewable power platforms. Its portfolio is comprised of more than 17,500 MW of capacity and 882 generating facilities in North America, South America, Europe, and Asia.
Brookfield Renewable is run by one of the best management teams in the world. A few quarters ago, its high-cash distribution yield seemed close to unsustainable with a funds-from-operations (FFO) payout ratio of close to 100%.
However, the company’s payout ratio has markedly improved to about 70% in the first half of the year, as the FFO per unit climbed more than 25% year over year with the support of operational improvements, contributions from recent acquisitions, and strong generation from its diversified portfolio.
Thanks to the elimination of any anxiety of a potential dividend cut, the stock has skyrocketed, appreciating by 54% since the beginning of the year!
Currently, BEP is good for a yield of 4.8%, which is set to increase by 5-9% per year.
Cybercrime is growing by the day. There’s no turning back as the number of connected devices and the amount of data that attracts hackers is exponentially growing.
Statista estimates there are more than 27 billion connected devices globally this year, and that number is forecasted to grow by about 19% per year to more than 75 billion by 2025.
As a result, it is expected that there will also be an increase in cybersecurity investment over the next decade. Investors can easily gain exposure to the secular growth of the cybersecurity industry by investing in Cyber Security Index Fund (TSX:CYBR), an exchange-traded fund that invests in global companies that are involved in the high-growth industry.
Geographically, CYBR’s weighting is about 73% in the United States, 12% in Israel, and 5-7% in Japan and the Netherlands, respectively.
The ETF has 39 holdings. It has a weighting of 7-8% in each of its top five holdings, including Booz Allen Hamilton, Palo Alto Networks, Symantec, Fortinet, and Check Point Software Technologies. The fifth-largest holding is based in Israel, while the other four are U.S. companies.
Since July, CYBR has dipped about 4%. The ETF will move with the market. So, interested investors can wait for meaningful market pullbacks of at least 10% before buying CYBR.
On finding an area of secular growth, investors can either gain exposure via an ETF or invest in the best company in the industry. In either case, aim to buy on dips to lower your risk and improve your long-term returns.