Immigration is Accelerating in the U.S. As a Result, Investment Opportunities in Immigration-Fueled Stocks Abound.
I’m continuing my series on the Key Demographic Trends that I believe will provide the next great investing profits. And today, I want to focus on how to profit from immigration – that is, the investing opportunities that have emerged from the influx of immigrants into the U.S.
Without getting embroiled in the pros vs. cons of immigration, it makes sense to look at it from a business point of view. Immigration is a fact of life. The media primarily focuses on the human interest as well as the economics of immigration, but the reporters rarely address the overlying statistics of the immigration trend and what affect immigration has on the business climate over time.
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Let’s start with a few statistics:
- International migration reached 243 million in 2015, up from 172 million in 2000.
- The U.S. immigrant population increased 180%—from 10 million (5% of the population) in 1970 to 45 million (14%) in 2015 while the native-born population increased by only about 20% over the same period.
- Roughly one in five Americans is a first- or second-generation immigrant.
And no surprise, but you can see by the chart below that the immigration trend has steadily increased since the mid-1800s.
But what may be surprising to you are these stats:
- Among startup companies that were valued at more than $1 billion in 2016, half were founded by immigrants.
- Among Fortune 500 companies, 40% were founded by immigrants or their children.
Just take a look at the following graph, which depicts the applications for H-1B visas—those filed by professionals with higher education and specialized knowledge who want to come to the U.S.
As you can see, more than 30% of those applicants are very educated folks who will earn north of $100,000 per year—and those professionals are highly-skilled contributors to our growing economy.
Immigrants, specifically, are driving investment opportunities in three fields:
1. Higher education institutions. As the following chart depicts, the education level for immigrants is rapidly increasing, providing rising enrollment for colleges and universities, as well as for-profit private education providers.
2. Housing. According to NewAmericanEconomy.com, immigrants have added $3.7 trillion to U.S. housing wealth, boosting the home building, home resales, and rental markets.
a. Immigrants make up 17% of the U.S. workforce
b. File one-third of the patents
c. Account for more than one-third of U.S. workers with a PhD in one of the STEM subjects of science, technology, engineering, and math.
d. One study found, “More than half of the high-skilled technology workers and entrepreneurs in Silicon Valley are foreign born.”
Sounds to me that we have some incredible opportunities to profit from immigration. With that in mind, I searched for companies in each of these three niches (for-profit education stocks, housing stocks, technology stocks), looking for fundamentally sound businesses, with catalysts that could move their stocks. I found about 25 companies that looked interesting, and from there, I winnowed the list down to the top three that showed growing sales and profits, minimal debt, and market leadership in their fields.
3 Stocks to Profit from Immigration
Let’s start with New Oriental Education & Technology Group Inc. (EDU). It’s a Chinese-based company that specializes in language training and test preparation courses. More than 6% of U.S. immigrants are coming from China, and most are well-versed in the English language, thanks to companies like EDU.
Tim Lutts, Chief Analyst of our Cabot Stock of the Week investment advisory, recently wrote about EDU, saying, “New Oriental serves 36 million students through 87 schools and 994 education centers. It’s grown revenues more than 20% in each of the past three years. In the second quarter of 2019, revenues slowed to grow just 20% while earnings grew 9% to $0.60 per share. Its P/E is 41. The stock had a correction of 53% last year but has rallied back well and is now very close to breaking out to new highs.”
Tim’s analysis continues to be correct; the shares are trading near their 52-week high, and the company beat analysts’ EPS estimates by $0.07 in its latest quarter, prompting Wall Street to forecast its 5-year growth at an annual pace of more than 25%.
Next, hailing from the housing sector, is Mid-America Apartment Communities, Inc. (MAA).
MAA has ownership interest in 102,629 apartment units, including communities currently in development, across 17 states and the District of Columbia. It focuses on the ownership, management, acquisition, development and redevelopment of quality apartment communities in the Southeast, Southwest, and Mid-Atlantic regions of the United States. The company is well-diversified across more than 30 markets in the Sunbelt, and offers substantial economies of scale due to its size. For its recent quarter, funds from operations grew to $1.53, up from $1.50 a year ago, and revenues rose $415.63 million, up from $397.11 million. Analysts favor this stock, forecasting 27.5% growth this year.
Lastly, from the tech realm, is FormFactor, Inc. (FORM). FormFactor manufactures probe cards, analytical probes, probe stations, integrated measurement systems, and thermal sub-systems, and sells its products in the United States, Taiwan, South Korea, China, Japan, Europe, the Asia-Pacific and internationally. Earnings estimates for the company have increased more than 30% recently, with seven analysts raising their forecasts for the company in the past 30 days. FormFactor is now expected to see 20% annual growth over the next five years. Hedge funds have been stepping up their purchases of FORM’s shares, with 14 funds now active participants. Trading at a P/E just over 16, the shares look attractive.
These three “immigration stocks” look attractive from a fundamental and technical standpoint. As always, please make sure they fit your personal investment strategies and goals before jumping in. But they’re prime examples of how to profit from immigration.
Nancy Zambell, Editor of Wall Street’s Best Investments, has spent 30 years helping investors navigate the minefields of the financial industry. Nancy scours more than 200 advisories and research reports to select the top recommendations, which she collects for you in this easy-to-read digest.Learn More