Everyone knows that I love to think about investment themes. Take an industry or a demographic that’s experiencing a positive trend and see where the best investment opportunities are.
We’ve done that in this column with the alternative energy investment theme. We also identified the eye care business as one extremely attractive area for investing. Finally, the resource/commodity theme continues to play out, seemingly with more upside ahead.
It is always useful as an individual investor to look at the stock market, take some of the best performing stocks, and then look for related companies or industries that are experiencing related success.
As you well know, the price of gold and most other precious metals has been on a tear. So, just like the oil business, the mining industry is now booming. Again, look at the leaders on the stock market in this area. Goldcorp is going up and has been going up for quite some time. Pan American Silver has been doing the same in the silver market, and First Quantum Minerals has been doing the same in the copper market.
So, the best question to ask is: what other businesses are benefiting from the wealth being created from these top performing stocks?
For one, Caterpillar is doing great in this market selling heavy construction and mining equipment around the world. How about Joy Global? This company sells all kinds of specialized mining tools and equipment and guess how well their customers are doing? If you are a Goldcorp, you are awash in cash and your stock is going up. Therefore, you are only to happy to expand your business and buy more products and services from your suppliers.
The point here is to look laterally at the best performing industries and stocks in the market. At any given point in time, there are always companies experiencing great success due to the strength in a related industry.