5 Best Sectors To Invest In Long-Term

In this article, we discuss 5 best sectors to invest in the long-term. If you want to see more sectors popular among smart investors, head directly to 10 Best Sectors To Invest In Long-Term. 

5. Communication Services

Number of Companies: 10

Communication Services is one of the best sectors to invest in for the long-term. According to Allied Market Research, the size of the global telecommunication services market was $1602.5 billion in 2021, and it is estimated to reach $2556.2 billion by 2031, with a projected compound annual growth rate (CAGR) of 5.1% from 2022 to 2031. 

Meta Platforms, Inc. (NASDAQ:META) is a favorite communication services stock among hedge funds. On August 1, the company announced that it plans to introduce AI-powered chatbots with distinct personalities on its social media platforms, starting from September. The chatbots will be designed as different characters, including an Abraham Lincoln-like talker and a surfer-style travel advisor, aimed at enhancing user engagement. 

According to Insider Monkey’s first quarter database, Meta Platforms, Inc. (NASDAQ:META) was found in 220 hedge fund portfolios, compared to 194 in the prior quarter. Philippe Laffont’s Coatue Management is a prominent stakeholder of the company, with 8 million shares worth $1.70 billion. 

Wedgewood Partners Large Cap Focused Growth Fund made the following comment about Meta Platforms, Inc. (NASDAQ:META) in its second quarter 2023 investor letter:

“Meta Platforms, Inc. (NASDAQ:META) was the top contributor to performance during the quarter. The Company managed to grow adjusted expenses more in line with revenue growth, which helped re-establish management’s credibility with investors with respect to future profitability and returns. The Company also guided to accelerated revenue growth as product investments are beginning to bear fruit relative to easier comparisons from a year ago. Meta has been at the forefront of investing in some of the most valuable artificial intelligence IP extant, particularly with its ranking and recommendation systems that are in use across its suite of user-facing products and advertiser-facing tools. Despite the recent frenzy of attention around “Gen-AI,” Meta has been researching and developing generative-AI tools for years, so we don’t expect to see a large ramp up in expenses around this phenomenon. Although we trimmed Meta as positions reached our maximum weighting, it ended the quarter as our largest holding.”

4. Financial Services

Number of Companies: 13

According to Growth Market Reports, the global financial services market was valued at $25.51 trillion in 2022, and it is predicted to exceed $58.69 trillion by 2031, with a compound annual growth rate (CAGR) of 9.7% during the forecast period from 2023 to 2031. Financial Services is one of the best sectors to invest in. 

Visa Inc. (NYSE:V) is the most popular financial services stock among smart investors. Visa Inc. (NYSE:V) operates as a global payments technology company. On July 25, the company declared a $0.45 per share quarterly dividend, in line with previous. The dividend is payable on September 1, to shareholders of record on August 11. 

According to Insider Monkey’s first quarter database, 173 hedge funds were bullish on Visa Inc. (NYSE:V), compared to 177 funds in the prior quarter. Chris Hohn’s TCI Fund Management is the largest stakeholder of the company, with 19.3 million shares worth $4.3 billion. 

Manole Capital Management made the following comment about Visa Inc. (NYSE:V) in its second quarter 2023 investor letter:

“We like to start out all of our discussions by telling investors who we are. We are FINTECH investors, and we define Fintech as “anything utilizing technology to improve an established process.” We realize that half of Fintech is financial, but we don’t invest in traditional, credit sensitive banks. Having managed money during the Financial Crisis, we learned firsthand how certain opaque and balance sheet intensive financials could go bankrupt or insolvent.

We prefer transaction-based businesses, generating recurring revenue, with sustainable margins, and significant cash flow. From our perspective, the perfect example of a FINTECH business is the secularly growing payments industry. Names like Visa Inc. (NYSE:V) or Mastercard, that generate revenue and profit per swipe or transaction, without the underlying credit sensitivity or risk associated with that underlying line of credit.”

Number of Companies: 14

Consumer Cyclical is one of the best sectors to watch. In the second quarter of 2023, the US Morningstar Consumer Cyclical Index performed better than the overall market, surpassing it by 260 basis points. The median stock in the consumer cyclical sector is undervalued, trading at an 18% discount to their fair value estimates. Additionally, 52% of the coverage in this sector is considered to be in 4- or 5-star territory, according to Morningstar. 

Amazon.com, Inc. (NASDAQ:AMZN) is the preferred consumer cyclical stock among the hedge funds tracked by Insider Monkey. On July 25, Amazon.com, Inc. (NASDAQ:AMZN) and iRobot Corporation (NASDAQ:IRBT) reached an agreement to modify their merger deal, adjusting the price per share. As per the new terms, Amazon will now pay $51.75 per share to iRobot, which is lower than the original acquisition price of $61.00 per share. 

According to Insider Monkey’s first quarter database, 243 hedge funds were bullish on Amazon.com, Inc. (NASDAQ:AMZN), compared to 240 funds in the earlier quarter. Harris Associates is a significant position holder in the company, with 22.8 million shares worth $2.3 billion. 

The Ithaka Group made the following comment about Amazon.com, Inc. (NASDAQ:AMZN) in its second quarter 2023 investor letter:

“Founded in 1994, Amazon.com, Inc. (NASDAQ:AMZN) has evolved from its early roots as an online bookstore to become one of the world’s largest eCommerce retailers. At the end of 2022 Amazon stood poised to capture ~40% of all US e-commerce sales, representing five times more share than the next closest competitor. In addition to eCommerce, Amazon Web Services (“AWS”) has become the market leader in outsourced cloud infrastructure. Further, Amazon Advertising is garnering significant share in digital advertising, particularly product placement ads, thanks to consumers beginning their product searches on Amazon’s site. Despite providing tepid forward guidance on its 1Q23 earnings call, Amazon’s stock appreciated on the back of increased confidence the company would be able to contain expenses and push operating margins above prior peaks in the near-to medium term.”

2. Healthcare

Number of Companies: 21

According to Research Dive, the size of the global health and wellness market was $4,712.5 billion in 2021. It is expected to grow at a compound annual growth rate (CAGR) of 10.9% and reach a revenue of $12,850.3 billion by 2031. Healthcare is one of the best sectors to invest in for the long-term. 

UnitedHealth Group Incorporated (NYSE:UNH) is one of the most popular healthcare stocks among elite investors. It is a diversified healthcare company that operates through four segments – UnitedHealthcare, Optum Health, Optum Insight, and Optum Rx. On July 14, UnitedHealth Group Incorporated (NYSE:UNH) reported a Q2 non-GAAP EPS of $6.14 and a revenue of $92.9 billion, outperforming Wall Street estimates by $0.16 and $1.94 billion, respectively. 

According to Insider Monkey’s Q1 database, 116 hedge funds were bullish on UnitedHealth Group Incorporated (NYSE:UNH), compared to 110 funds in the last quarter. Rajiv Jain’s GQG Partners is the largest stakeholder of the company, with 4.8 million shares worth $2.28 billion. 

L1 Capital International Fund made the following comment about UnitedHealth Group Incorporated (NYSE:UNH) in its second quarter 2023 investor letter:

“Close observers of the Fund will note the increased exposure to healthcare, currently 13% of the portfolio. Healthcare is generally less macro-sensitive than some other sectors. In a reversal of market sentiment compared to 2022, the healthcare sector has been under modest pressure due to what we consider to be some short-term transitory issues, while technology, particularly anything to do with AI, has become the market’s dish du jour. We have been selectively increasing our investment in a few very high-quality healthcare businesses at prices we consider to be fair. UnitedHealth Group Incorporated (NYSE:UNH) is now a top 10 holding, and our investment thesis is outlined in this report.

We have previously written on our exposure to taxes through our investment in Intuit and its market leading TurboTax franchise (Intuit also owns the QuickBooks small business accounting franchise, Credit Karma and Mailchimp). UnitedHealth Group (UnitedHealth) is leading the charge to postpone the inevitable, while lowering overall healthcare system costs.

U.S. health spending has outpaced GDP growth for decades, with spending on healthcare increasing from around 12% of GDP in the 1980s to nearly 20% today, driven by advancements in healthcare capabilities and an aging population with increased life expectancy…” (Click here to read the full text)

1. Technology

Number of Companies: 25

Research and Markets forecasts the global technology market to increase from $8179.48 billion in 2022 to $8852.41 billion in 2023, with a compound annual growth rate (CAGR) of 8.2%. The market is projected to further expand to $11995.97 billion by 2027, with a CAGR of 7.9% during that period. Technology sector is one of the best investments for the long-term. 

Microsoft Corporation (NASDAQ:MSFT) is the preferred technology stock among the 943 hedge funds tracked by Insider Monkey in Q1 2023. On July 25, Microsoft Corporation (NASDAQ:MSFT) announced its financial results for the quarter ended June 30, 2023. The company posted an EPS of $2.69 and a revenue of $56.2 billion, exceeding Wall Street estimates by $0.14 and $710 million, respectively. 

According to Insider Monkey’s first quarter database, 289 hedge funds were bullish on Microsoft Corporation (NASDAQ:MSFT), compared to 259 funds in the prior quarter. Bill & Melinda Gates Foundation Trust is the largest stakeholder of the company, with 39.2 million shares worth $11.3 billion. 

L1 Capital International Fund made the following comment about Microsoft Corporation (NASDAQ:MSFT) in its second quarter 2023 investor letter:

“Microsoft Corporation (NASDAQ:MSFT) is a clear and substantial beneficiary of AI – not only through its investment in OpenAI/ChatGPT but through the incorporation of AI into core Microsoft products and services, and increasingly through Azure (Microsoft’s cloud computing business) providing ‘AI-as-a-service’. At this stage we don’t know what the long-term financial benefits of AI will be to Microsoft, but we have confidence that it will be meaningful, that barriers to competition are increasing and that Microsoft is worth more today than it was 12 months ago. That said, Microsoft’s share price has increased 33% (in U.S. dollars) over the past year, and we no longer consider the company to be undervalued in our central base case. We have started to trim our investment in Microsoft, although it remains one of the Fund’s largest positions.”

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