Even the best crystal balls are cloudy on a good day.
But that doesn’t stop hundreds of millions of investors from trying to predict stock prices.
Some want to know what stocks will do in the next month, or even tomorrow. Others play the long game and ask where this stock might be in 5 to 10 years.
There are no certainties in the stock market, of course.
But you can cut out a lot of uncertainty simply by betting on businesses with predictable earnings.
A name that immediately comes to mind is Verisign Inc. [NASDAQ:VRSN].
Verisign is a very special business. And because of regulation there are only a few companies like it in the world.
The company controls the .com, .net and .name domain names throughout the world.
While you might buy a domain from Go Daddy or WordPress, these companies have to pay Verisign to rent these domains.
So…as long as we all keep using .com, .net and .name domain names, Verisign continues to receive royalty cheques.
OK, picking predictable stocks is an easy way to improve your crystal ball. But what if you want to predict what will happen to a whole industry?
To do that we’ll need to look abroad.
What will the future of retail look like?
A lot of investors like to talk about and buy retail stocks. And it’s probably because they’re easy to understand.
It’s easy to wrap your head around most products and services. Why are they useful? How is it valuable to customers?
Then, if demand is booming, retail companies can roll out stores to improve sales dramatically. A good recent example of this is Aussie jewellery business, Lovisa Holdings Ltd [ASX:LOV].
Maybe it’s a store your wife, daughter or sister goes to?
While Lovisa is by no means a luxury brand, it caters to a market of women that like to mix and match jewellery with different outfits.
As you’re well aware, fashion is fast moving. A pair of last season’s earnings usually don’t match this season’s dresses (or so my wife has told me).
This is why Lovisa has become so popular (not to mention a rocketing stock price). Women see the store as a low cost way to buy different styles of jewellery to match their latest outfit.
And on this demand, Lovisa has been able to roll out store after store. In the 2018 financial year, Lovisa added 38 new stores to a portfolio of now 326.
Judging by the multiple stock trades on 36-times earnings, investors believe there will be far more stores to come.
But back to retail…
How can you predict what the Aussie retail landscape will look like in the next 10 years?
One option might be to look abroad to China.
Advanced might not always come to mind when you think of China. However, their retail industry is miles ahead of anyone else.
Car vending machines, cash free supermarkets, mirrors that let you try on virtual makeup before you buy.
The Chinese consumer is in heaven.
One of the companies driving China’s retail industry is Alibaba Group Holdings [NYSE:BABA].
Some refer to it as the Amazon of China. However that’s just an easy way to classify the company. Alibaba is pushing the boundaries of retail.
As Technode writes:
‘Alibaba wants to use data and technology to transform retail, including offline retail, which accounts for 82% of the total.
‘New retail is Alibaba’s strategy to redefine commerce by enabling seamless engagement between the online and offline world. It’s not about converting online users to offline customers or vice versa. It’s about building a retail ecosystem that blends online and offline channels in a unified way that features the consumer at the centre, often in new and unexpected ways.
‘The company used the occasion of the Double 11 Shopping Festival – which itself has transformed retail by being 18 times bigger than Amazon Prime Day and 2.5 times bigger than Black Friday and Cyber Monday combined – to showcase their vision.’
And they’re not just revolutionising retail for China, they’re extending a branch to Aussie businesses as well. According to news.com.au:
‘The company (Alibaba) claims to already have 2000 Australian companies on board its Tmall shopping website. This includes big brands like Bellamy’s and Blackmores. Woolworths even has its mini supermarket on Tmall selling infant formula, Weet-Bix, metamucil and white wine.’
Alibaba’s head of marketing Australia, James Hudson added:
‘When you go to China and look at those retail experiences it’s pretty clear that China is a long way ahead of where Australia is, in how these environments are interpreted to make them more fun, enjoyable and convenient for consumers.
‘This is how the future of retail could look like in Australia.
‘There are already around 10,000 retailers and attractions in Australia that use Alipay purely focused on Chinese visitors. The second they arrive in Sydney, they can open the app, see what stores are around and collect coupons and promotions to use in stores like Chemist Warehouse and Kathmandu.’
And if you want to potentially cash in on this consumer boom we’re about to see, you can find out how here.
Editor, Money Morning