Spring is here. In that spirit, investors may want to consider a basket of shares that diversifies and spreads risk. When looking for the best eggs, one clue is to look at sectors that are expanding and growing.
Growth markets are the key to smaller investments, as these tend to be more volatile. The upside is that growth markets with their smaller shares actually help buoy share price and can, in some cases, over time, cushion the hard swings.
Three markets which investors, if not already watching, should keep an eye on are the e-cigarette market, the network and communications segment and the alternative energy sector, as new innovations in each of these are helping to spur demand and stock price.
American Heritage International (OTC:AHII)
In the e-cig sector, investors will note that disposable maker American Heritage International Inc. has quadrupled its trading volume this week. Shares have gone from an average 143,272 traded in three months to a volume of 612,487.
As of March 10th, the e-cig producer announced that it is now selling in 251 more retail outlets, which means the number of stores the product is available in is now greater than 400. Large national retail stores such as 7-11 are now part of the Company's distribution network that has expanded into key states such as California, Florida, New Mexico, Texas, and now New York and Oklahoma. New York is one of the key states.
The result? On March 19th, AHII's share price closed at $1.56, up 13 cents from the share price of $1.43 on March 17th.
JDS Uniphase (JDSU)
If you think the mobile and networking market continues to grow, you would be correct. The technologies behind 3G and 4G networks are helping that sector grow, even as consumer demand stemming from slower growth around the globe continues to lag by comparison to these new technologies in the sector.
One of the beneficiaries of continual growth from technology is JDS Uniphase Corp. The Company is a communications test and measurement solutions firm, creating optical products developed for telecom, cable and network equipment providers.
Since 2009, the Company has invested heavily in targeted acquisitions such as E-TEK Dynamics, Optical Coating Laboratory, and the Networking Monitoring & Test Solutions division of Agilent Technologies, Inc. (NYSE:A). It has also purchased Networking Instruments, a company key to advancing the Company towards approximately $1 billion in revenue.
And with customers such as AT&T (NYSE:T), Verizon (NYSE:VZ), Cisco (NASDAQ:CSCO) and Time Warner Cable (TWC), which use JDSU's laser diodes for datacom plugins, gesture recognition and capacity and connectivity speed for both mobile and fixed networks, the Company is poised for stronger sales throughout the year.
Last year, 44% of the Company's revenue stream came from its test and measurement segment, which helps OEMs design, deploy and maintain their equipment and networks.
A variety of testing tools are also available from JDSU. The optical products division, for example, offers components, subsystems, modules and solutions, as well as a laser portfolio for both telecom and enterprise data communications customers. Approximately 44% of revenue was also generated from this division last year.
When it comes to security, a range of products are available to customers with 12% of last year's revenue generated by the optical security performance and digital verification division.
JDSU forecasts that Q3 2014 will bring between $420 million and $440 million, as the Company's 4G network solutions are being installed in China. The Company also says it should see demand increase for its 10 Gbps and 40 Gbps solutions to data center and cloud networking.
If the Company continues its targeted mergers and acquisitions add-ons, and if cash flow remains strong, the demand for faster Internet connections and applications should help with consistent quarterly and yearly revenue increases.
As a result of the Company's ongoing ability to generate cash the share price, as of March 19th, closed at $14.42 up from a 52 week low of $11.68 and in the direction of the high, over the same period, of $16.61.
China Ming Yang Wind Power Group Limited (NYSE:MY)
When it comes to the clean energy or the alternative energy sector, traders and investors are always wise to look to markets that have set mandates for growth. One such market: China.
China's 12th 5 Year Plan calls for a 16 percent reduction in energy consumption per unit of GDP, increasing non-fossil fuel energy usage to 11.4 percent of total energy consumed by the country, and a 17 percent reduction in carbon emissions per unit of GDP.
So what does that mean for alternative energy output? Wind.
One such company that stands to benefit, but has until recently withstood mixed reviews, mostly for its lack of publishing forecasts, is Ming Yang Wind Power Group Ltd.
Last quarter the Company completed its product line development, offering 1.5 megawatts to 6.5 megawatts units. To date, MY has produced wind turbine generators (WTGs) of 2 megawatts, 2.5 megawatts and 3 megawatts. Next year, the Company is planning to build 4 megawatts and a 6.5 megawatts SCD WTG for offshore wind power. Meanwhile, MY's 1.5 megawatts 77 WTG has a GL certificate, which is the highest certification in the world.
While the Chinese market is MY's home territory, China's government has given priority to offshore development firms, which, because of the listing on the New York Stock Exchange, has helped the Company secure its current contracts.
MY has also booked contracts in Eastern Europe and India. Last July, the Company signed a 200 megawatts contract with Group of Romania. The second phase of that wind farm project should be complete by the second half of this year. According to MY, by the end of this year or the first half of early 2015, that project will be complete.
In India, MY's 1.5 megawatt 77 meter rotor wind turbine has been certified for use and has obtained both GL and also local certification, which has assisted the Company with its operational and market capabilities in India.
The Company, investors should note, has so far been in the investment phase, with the goal of new revenue sources in overseas markets, which the Company anticipates will bring additional revenue streams.
Meanwhile, MY has argued that the
pricing environment in the Chinese wind power market has actually been increasing and that's certainly been reflected in (its) our gross margins in the last couple quarters.
In Q3 of last year, MY also won the bulk of the first tranche of the first offshore wind contacts in the Guangdong Province of China.
A somewhat clearer picture of the Company's direction and the demand from China's alternative energy mandate have given investors reason to be optimistic. The stock closed at $3.45 on March 19th, up from a 52 week low $1.13 but not yet at the 52 week high of $4.34.
Therefore, with the megawatts expanded offerings, combined with China's mandate and overseas expansion, it is too early for investors to argue that this stock is blowing in the wind.
Investors should be aware that each investment carries its own risk. Some equities are more speculative than others. In particular, investors should be aware that additional risks may exist for some smaller cap and microcap stocks which trade at a discount when compared to stocks in the same sector, as these stocks may have notable company risks that could lead to lower valuations. Stock price manipulation may take place in the case of microcap stocks, as both a result of fewer firms trading the equities, or high distress within a specific company or market segment. Further, liquidity risk may be introduced in some instances where small trading floats and low volume creates large spreads and high volatility. Investors should thoroughly investigate any stock by performing due diligence before trading.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.