Growth Stocks for the 4th Industrial Revolution
Increased infrastructure spending, AI, robotics, and the digitization of everything leads to opportunities for investors seeking long-term capital gains.
Back in 2016 (which seems like eons ago in terms of technology advances), Klaus Schwab, Founder and CEO of the World Economic Forum, published an article describing what he called the Fourth Industrial Revolution.
The First Industrial Revolution used water and steam power to mechanize production. The Second used electric power to create mass production. The Third used electronics and information technology to automate production. Now a Fourth Industrial Revolution is building on the Third, the digital revolution that has been occurring since the middle of the last century. It is characterized by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres.
In the future, technological innovation will also lead to a supply-side miracle, with long-term gains in efficiency and productivity. Transportation and communication costs will drop, logistics and global supply chains will become more effective, and the cost of trade will diminish, all of which will open new markets and drive economic growth.
Others talk about this new era in terms of Industry 4.0 and discuss how advances in AI (Artificial Intelligence), robotics, the digitization of manufacturing processes, the Internet of Things (IOT), and data analytics are shaping a brave new world in the 21st century. The Covid-19 pandemic at first stalled and then accelerated the Industry 4.0 transition as described by McKinsey and Company:
Before the pandemic, the top motivators for companies to digitize varied by industry. But in 2020, three drivers were common across all sectors and geographies: agility, flexibility, and manufacturing efficiency. Companies that had already scaled up Industry 4.0 technologies before COVID-19 were better positioned to handle the challenges that arose.
Now, 8 years since the term was coined by Schwab, we are starting to realize some of those gains in efficiency and productivity in multiple industries. In the United States with the recent passage of several major new laws that were passed to stimulate infrastructure spending including the Bipartisan Infrastructure bill, also called The Infrastructure Investment and Jobs Act (IIJA) passed in 2021, and the Inflation Reduction Act (IRA) that was signed into law in 2022, significant funding catalysts are now driving spending on large scale projects.
Several companies that I follow in my investing research that provide engineering and construction services are starting to realize substantial revenue and earnings growth from the combination of productivity efficiencies gained from the implementation of Industry 4.0 technologies along with increasing demand for their services on large scale, multi-year infrastructure projects.
There are 4 companies in particular that I have analyzed and written about on the Seeking Alpha platform. They are American Superconductor (AMSC), Powell Industries (POWL), Sterling Infrastructure (STRL), and Orion Group Holdings (ORN).
AMSC stock has seen its share price soar by more than 330% in the past year as the company benefits from diverse solutions for multiple industries as I describe in my recent coverage: American Superconductor: Diverse Power Solutions Fuel Revenue Growth. The primary growth markets for AMSC include Renewables, Mining and Materials, Semiconductors, and Military applications.
POWL stock has also seen tremendous gains in its share price over the past two years, and especially in the past year with more than 130% growth since July 2023. I first reviewed POWL back in March 2023 when I wrote: Powell Industries: A Growth Stock For The Fourth Industrial Revolution. At the time, I rated the stock a Hold but it blew past my expectations and has since delivered a return of more than 220% since that article was written.
STRL is yet another small cap growth stock that has realized tremendous benefits from the increased spending on transportation and other infrastructure projects along with increased efficiencies from its Industry 4.0 transition. I most recently covered STRL after the stock popped in May of this year after reporting a substantial earnings beat in the Q1 report. STRL shares are up 110% in the past year and remain a Buy in my opinion based on a growing backlog, tailwinds from existing projects, and a strong balance sheet.
ORN is the latest company stock to come across my radar in the context of Industry 4.0 and growing demand for their specialized engineering and construction services. Orion Group Holdings specializes in marine services and concrete construction services and is in the midst of a turnaround plan since appointing Travis Boone as President and CEO in 2022. Already in the past year ORN stock has seen an increase in its share price of over 200%, however, I feel that the long-term growth potential is just getting started. Stay tuned to Seeking Alpha for more details about this stock idea.
These are just a few ideas that I have come across in my research on growth stocks that have realized substantial benefits from the new world order that includes growing demand for infrastructure to support new data centers that will enable AI as well as other Industry 4.0 technologies that are likely to be adopted in a variety of industries. Many large-scale infrastructure projects are being funded with trillions of dollars in allocated funding at the federal, state, and local levels further fueling the growth in the engineering and construction industry.
Follow me on Seeking Alpha for more ideas like these, and please share this post with others if you found it interesting. Thanks for reading and good luck in your investments.