The Credit Suisse global research team implements in-depth analysis rewarding the highest quality companies to predict the most lucrative equity market sectors, and stocks, for investors. The current top three are Big Fast Data, the Untapped Potential of the Internet and Healthy Living. Top stock picks within these categories include Nike Inc., SAP AG and Alphabet Inc. (the former Google Inc.)
The research team uses cash flow analysis to identify top sectors. Using Credit Suisse's proprietary "cash flow return on investment" multiple, the companies most able to grow cash flow and translate the results into increased growth and profitability, score highest. Close attention is also paid to momentum, the ability to improve profitability ratios over time, in order to select the most sustainably lucrative investments. The sectors with the best combination of quality and momentum are listed as most promising.
Big Fast Data is the research team's choice as the most promising equity sector. For many investors, however, the term "big data" manages to be both vague and intimidating at the same time. Simply put, the big data sector involves the companies that collect, store and analyze the oceans of data being created by new technology.
Investors are aware that every click on the Internet creates data points, but the business opportunity goes far beyond that. In the free e-book Big Data Beyond the Hype, three IBM executives detail the explosion in data creation, noting that mobile devices create the equivalent of 10,000 Blu-ray discs of data every day and that one electric car model throws off 25 gigabytes of data for every hour of charging. The Internet of Things – online connections between devices that will, for example, allow for remote monitoring for at-risk medical patients – is a trend that is only now gaining strength. Credit Suisse predicts that big data sector-related spending will grow at 10 per cent per year until 2026.
All of this data will eventually be processed and analyzed to improve the quality and sales of goods and services. Stocks in the sector that Credit Suisse recommends most highly include semiconductor and data software designer ARM Holdings PLC, global software designer SAP AG and Tableau Software Inc., a software company focused on data analytics.
The Untapped Potential of the Internet theme is the research team's next most favoured market focus. Credit Suisse believes that while smartphone sales growth has slowed, it's still robust and devices are becoming more affordable in the developing world. Consumer-related functionality is also a key to the investment theme as e-finance, online retail, Internet security, education and advertising spending are set to soar.
Specific stock ideas within this theme are include Alphabet Inc., Facebook Inc. and Visa Inc.
Healthy Living is the third most promising sector according to the team's analysis. This investing theme identifies companies benefiting from the ongoing shift toward physical exercise, and a nutritional evolution away from sugar and processed food.
The Credit Suisse stock picks within the Healthy Living umbrella include Nike Inc. and fitness facility chain Planet Fitness Inc. Lesser known stocks like Hong Kong-based Anta Sports Products Ltd. and XXL ASA, a Scandinavian sports retail operator, are also listed as top investment ideas.
Big Fast Data, the Untapped Potential of the Internet and Healthy Living represent the three most attractive investing opportunities at the current time, according to Credit Suisse. The team, however, remain confident in the long-term prospects for all 10 of their top investing themes. The remaining seven are Aging in the Emerging Markets; Content is King (media content creation – Time Warner is a top idea in this area); Healthcare/Oncology, Automation, China Environment, Energy Efficiency, and the eventual global proliferation of shale oil and gas production.