With Greece and the Eurozone teetering on the edge, a lot of investors are understandably concerned about the markets and their investments - and I don't blame them a bit.
News of Greece's deepening woes has added to the drumbeat of worrying storylines: slowing economic activity in China, fuzzy economic numbers in the U.S., and worries about a Fed interest rate hike.
But the truth is, the "sparks," or catalysts I research, can take shape under small-cap shares no matter what's happening on the front pages. And the mid-year mark on the calendar - right when the "pundits" are poised to let loose the bears - is the perfect time to apply some of the sparks I'm tracking.
You'll see that my outlook for the second half of 2015 looks very different than what you'd expect from the news.
In fact, what I'm seeing suggests that 2015 may be the most profitable small-cap investing climate we've seen since the late 1990s. Here's why...
The Biggest Profit Trends for the Second Half of 2015
The trends I'm about to show you all appear very different on the surface, but what ties them together is "sparks.
Understanding these trends gets us into position early, often before Wall Street realizes what's happening. Once that happens, these companies can get beyond the reach of investors - at least those who lack billion-dollar bankrolls and private equity connections.
For investors like us, early-stage profits can be big. Here's where my research indicates those profits will hit in the second half of the year.
Trend No. 1: Online Infrastructure
The spread of streaming video services like YouTube.com or Netflix Inc. (Nasdaq: NFLX) means we'll see surging demand for companies involved in building the fiber-optic networks than can deliver these bandwidth-intensive services.
Trend No. 2: Smart Device Proliferation
The rise of smartphones is just the beginning. We're going to see smart "everything" soon: smart houses, smart cars, and smart medical devices. There's even a company developing smart toothbrushes. These devices are all going to be connected, which will drive demand for technology that can enable that connectivity.
Trend No. 3: Solid-State Drives and the "Cloud"
Old-school "spinning disk drives" are soon to be a thing of the past. The future belongs to memory and storage devices that have no disks to drive: no mechanical parts at all. The exponentially increasing storage capacity of these solid-state and all-flash memory devices is going to be critical to the rise of "Cloud" computing, where most traditional computing functions are performed at multiple redundant "offsite" locations on the Internet. One of the things this allows is smaller and smaller devices to run applications.
Trend No. 4: Institutional Cybersecurity
Hacking is a big problem, and it's getting bigger. We've dealt with "personal" cybercrime, like theft of credit card information, for years. But now, we're seeing an increase in attacks by powerful state actors attempting to steal critical technology or cripple other countries' infrastructure and their ability to respond to threats. This doesn't always make the news, but there's a good reason why President Obama has called for cybersecurity to be a national strategic priority over the coming years.
Trend No. 5: Biotech
Biotech is usually fertile ground for profits. It's resilient. But the companies that are going to do best are those currently developing novel or breakthrough treatments for unmet medical needs. My Small-Cap Rocket Alert readers have reaped double- and triple-digit biotech gains throughout 2015, and the outlook is even better over the next six months.
Trend No. 6: Artificial Intelligence
The sheer amount of data the human race generates in any single day can be daunting, and it's another facet of life that's getting bigger. At the same time, companies and governments are looking for ways to make use of this data (and not always for nefarious reasons, either). But there's a hard limit to the amount of data all the human analysts in Langley, Cheltenham, or Silicon Valley can process. That's where artificial intelligence comes in. Spending in the hunt for AI is expected to hit $67 billion by 2025. Frankly, I think that will turn out to be a very modest estimate when the dust finally settles.
High-Profit "Sparks" to Look for Now
Any and all of these catalysts can occur at any time; that's part of the beauty of this approach. But my research suggests that, in the current market, we'll see some appear a bit more frequently than others over the next six months.
Watch For...
Management Upgrades
Not many things are as encouraging as a CEO going out on a limb to raise estimates - because, after all, who knows the inner workings of a company better than management. The fact that they are willing to go out on a limb and raise expectations says they're very confident they can hit the new numbers. Once management raises guidance it doesn't take long for the analysts to jump onboard with upward revisions of their own - and then you can get an upward revision spark to go along with a management upgrade spark.
Watch For...
Disruptive Technology
[epom key="ddec3ef33420ef7c9964a4695c349764" redirect="" sourceid="" imported="false"]
Whether the markets are crashing or soaring, innovation rarely takes a holiday. Companies like Amazon.com Inc. (Nasdaq: AMZN) and Apple Inc. (Nasdaq: AAPL) have changed the way we shop, the way we dress, and the way we live. These are all huge companies now, but they didn't start out that way. With each passing day, the pace of technological innovation is increasing, and the means with which to achieve it are more widely available than at any time in history.
So, keep your focus on these trends, and watch for "sparks" igniting underneath companies out on the leading edge of these trends.
Do that, and you'll have the opportunity to outperform investors who can't take their eyes off the headlines.
About the Author
Sid is the investment community's best-kept secret. Since 2009, he's served at Money Map Press as Director of Research, analyzing thousands of securities and profit opportunities for subscribers. He's an expert in identifying "alpha" potential in a wide variety of industries, but especially the small-cap sector, where he's discovered a pattern of profits that's almost foolproof.