Given the difficulties in determining whether a company can
translate innovation into profits, you may prefer professional help
in spotting the next big thing. Two mutual funds, Fidelity New
) and Baron Opportunity (
), are worth a look. New Millennium manager John Roth holds a mix
of sometimes-volatile, high-growth companies balanced with
steadier, bargain-priced fare. Among his holdings: Tesla Motors (
), Google (
) and Illumina (
). He also owns KEYW Holding (
), a cyber-security play. Roth keeps his stakes in the most
speculative companies small at the outset, increasing his
investment only as a company proves itself. "The more long term the
bet, the smaller the position," he says. From the time Roth became
New Millennium's manager in July 2006 through December 31, the fund
returned 9.6% annualized, compared with 7.4% for Standard &
Poor's 500-stock index.
Baron Opportunity manager Mike Lippert invests thematically.
Current themes include DNA sequencing (Illumina is a top holding)
and Big Data, a catchall phrase that refers to collecting and
applying advanced analytics to massive quantities of fast-moving
data. Lippert owns Acxiom Corp. (
), a marketing company at the forefront of behavioral, or targeted,
advertising, which harnesses information about consumers to serve
up ads that are relevant to their interests. Other themes Lippert
likes include mobile technology, cloud computing and electric cars.
"You have to go where the growth is," says Lippert, "but you have
to be patient for some of these things to play out."
A host of exchange-traded funds allow you to sample
up-and-coming themes while diversifying your investment among
several holdings. You can invest in cloud computing--external data
storage that's accessible from anywhere through the Internet--via
First Trust ISE Cloud Computing Index (
). The Robo-Stox Global Robotics & Automation ETF (
) includes companies in such businesses as unmanned vehicles, 3D
printers and medical robots.