2016 Forecast: Growth Sectors

By Wayne Mulligan, on Thursday, December 31, 2015

Right around this time last year, we issued our forecasts for 2015—

We offered you our perspective on which sectors and investment themes would be important for the coming year.

Today, we’ll review our predictions and see how they panned out...

And then we’ll tell you where you should focus in 2016 if you’re on the lookout for explosive gains.

2015 in Review

We made four major forecasts for 2015:

The Beginning of The Private Stock Market — We predicted that 2015 would be a pivotal year for the private markets.

More specifically, we predicted that in October of 2015, the Securities & Exchange Commission would vote to enact Title III of The JOBS Act, thereby allowing all investors to finally access the private stock market.

On this front, we were 100% correct. On October 30, 2015, the SEC voted to enact Title III, and it will go “online” in May 2016.

The End of the Public Stock Market — We also predicted that we were witnessing the end of big gains in the public markets for the foreseeable future.

We were correct on this prediction as well:

The Dow will finish the year down about 2.5%, and the S&P will be down about 1.2%.

Furthermore, according to data from Renaissance Capital, the average IPO in 2015 provided a negative return on its first day, falling 3.5%.

Frontier Markets — While we continue to believe emerging markets like South East Asia will turn out to be attractive long-term investments, 2015 wasn’t their year.

The MSCI Frontier 100 ETF (FM) was down over 15% in 2015 and the Global X ASEAN 40 ETF was down nearly 25%.

We continue to be long-term bulls on markets like Cambodia and Myanmar. If you have the capital and patience, the economic transformation occurring in that region should yield substantial returns in the coming years.

But if you’re looking for short-term profit opportunities, it might be wise to look elsewhere.

"Hidden Gems" — While we were bearish on the overall stock market last year, we were excited by one corner of the market in particular: small-cap stocks.

More specifically, a special type of small-cap stock we call “Public Venture” opportunities. These are publicly-traded companies that are still in the development stage—much like start-ups.

According to historical data from Morningstar, since 1926, small-caps outperformed large-caps by an average of 50% each year. In fact, at the middle of 2015, small-cap indices for the year were up, on average, anywhere from 8% to 10%.  That’s compared to 3% for the broader market.

However, after the August correction, micro-cap and small-cap stocks were hit hard, and they finished the year flat.

We remain bullish on small-caps overall, but we don’t recommend buying into broad index funds or ETFs to get exposure to these opportunities. Instead, investors should focus on conducting deep research and identifying the most promising individual opportunities in order to build out a high-quality, high-return portfolio.

2016 Growth Sectors

Here’s where we see things going in 2016...

The Private Stock Market — Once again, the private markets top our list.

Given the progress that’s happened with The JOBS Act in 2015—and the fact that the private market will finally open its doors in May of 2016—we expect private investment opportunities to play a bigger role in your portfolio.

You won’t likely reap big rewards this year—but gains aren’t what you should be focused on initially.

This year, you should focus on educating yourself, preparing yourself, and taking a few small steps:

Specifically, you should plant some seeds by making some small, diversified private investments.

And then, in the coming years, you should expand your private portfolio, and then start harvesting profits.

The Dow Is Dead — Conversely, we believe we’ll continue to see weakness in public stocks.

We believe the market has finally hit its resistance level, and with the recent Fed rate hike, we’ll likely see another down year in 2016.

You’ll want to start positioning yourself to find opportunities elsewhere—and here’s one “high-end” idea to get you started:

America’s Next Cash Crop — In late 2014, we wrote an article entitled, "The Next $100 Billion Market."

This article was controversial at the time...

You see, we predicted that America’s next great “cash crop” would be marijuana, a plant that’s currently illegal in most states and at the Federal level.

However, even with a limited legal market, over the past two years, the marijuana sector has grown by nearly 70% each year, making it one of the fastest growing sectors in the country today.

At the time we wrote our article, we advised readers to stay away from most of the “public pot stocks.” These companies tended to be fly-by-night operations that were more in the business of pumping up their stock prices than providing a valuable, long-term service for their customers.

However, we did offer one investment recommendation: GW Pharmaceuticals (GWPH)—a British pharmaceutical company focused on the development of marijuana-related therapies.

Within eight months of publishing that article, the stock nearly doubled, rising by 94% at its peak in June 2015.

The stock has since pulled back, which presents us with another buying opportunity.

But even more importantly, we believe that 2016 will present investors with an even more profitable set of investment opportunities:

Private "Pot Profits"

We’re beginning to see high-quality, marijuana-related start-up companies take advantage of The JOBS Act to raise money from investors.

And not just wealthy, accredited or institutional investors—we’re talking about regular, individual investors just like you.

For example, a company called Med-X is currently accepting reservations for its next round of funding here »

To be clear, Med-X isn’t in the business of selling marijuana—it simply sells infrastructure and cultivation equipment to marijuana producers.

Furthermore, since the company is leveraging a special component of The JOBS Act known as Title IV, anyone—regardless of their income or net worth—can invest in the company.

We expect many more deals like Med-X to hit the market this year: as the marijuana industry continues to expand, more start-ups will seek funding to capitalize on the opportunity.

And once Title III of The JOBS Act goes live in May, we imagine many of them will offer all investors the opportunity to get involved.

Happy Investing—and Happy New Year!

Best Regards,
Wayne Mulligan
Wayne Mulligan


If you enjoyed this article, subscribe to updates:

Sign-up today and you'll receive our daily insights on early-stage investing, as well as our FREE "Equity Crowdfunding Action Kit" – where you'll learn:

  • The Ins & Outs of Equity Crowdfunding
  • A step-by-step path to get started
  • Tips from dozens of Venture Capitalists
subscribe to updates

Thank you for subscribing!

Tags: Private Equity Pot Stocks

Share This:
comments powered by Disqus