The 10 Biggest Business Trends of 2012
With less than a month left until year end, investors might be able to get some perspective on the markets by looking back and considering the biggest trends of 2012.
Overall, it was a fairly solid year for American stocks. Digging deeper, there were a number of sectors that experienced broad outperformance, while others lagged.
The following are the 10 biggest business trends of 2012. Some had a positive effect on stocks; others lead to a significant loss of shareholder capital. A few did both.
1) The Death of the PC
PC-related companies had, what can only be described as a brutal year in 2012. According to a report from IHS iSuppli, demand for PCs will have declined by 1.2 percent in 2012 -- the first decline in 11 years.
Processor manufacturers like Intel (NASDAQ: INTC) and AMD (NASDAQ: AMD) posted horrific years, down about 20 and 60 percent, respectively. Companies that rely largely on PC sales like Dell (NASDAQ: DELL) and Hewlett-Packard (NYSE: HPQ), saw shares decline as well -- down roughly 30 and 50 percent, respectively.
Microsoft (NASDAQ: MSFT) was the only company that managed to escape the selling, although its shares rose only modestly -- up about three percent for the year.
2) The Rise of the Tablet Computer
In 2010, the late CEO of Apple (NASDAQ: AAPL), Steve Jobs, introduced the iPad to the world. For almost two years, Apple had an effective monopoly on an emerging trend it largely created -- mobile computing.
While PCs were dying, mobile computing flourished.
In 2012, many consumers opted to forgo the purchase of a new laptop in favor of a tablet. Although Apple continued to lead with its iPad, 2012 was the year when competitors introduced devices that could hold their own. These included Google's (NASDAQ: GOOG) 7- and 10-inch Nexus, Amazon's (NASDAQ: AMZN) second-generation Kindle Fire, and Microsoft's (NASDAQ: MSFT) Surface.
3) 3D Printing
3D printing has been around -- in one form or another -- for decades.
Still, 2012 proved to be a breakout year for the industry.
Shares of the two major 3D printing stocks, 3D Systems (NASDAQ: DDD) and Stratasys (NASDAQ: SSYS), posted monumental gains. 3D Systems traded up over over 200 percent in 2012, while Stratasys added over 120 percent to its share price.
3D printing is exactly what it sounds like -- it allows companies and users to create relatively complex objects using a single machine. Unfortunately, the technology is (at the moment) limited to producing objects from plastics and similar materials, but this is still useful for creating things like prototypes.
Perhaps at some distant future date, every American consumer will have a 3D printer in their home, one that allows them to create the objects they desire whenever they want them.
4) Organic Food
The increased demand for organic foods has built for years, so it isn't fair to say the trend was confined to 2012.
However, there were still some noteworthy events that demonstrated just how far demand for organic food has come. Whole Foods (NASDAQ: WFM) saw a nearly 35 percent stock appreciation in 2012, while competitor The Fresh Market (NASDAQ: TFM) rallied about 30 percent.
In March, following a number of media reports (“pink slime” as it came to be known) rose to the forefront consumers' minds. "Pink slime" is a manufactured beef product -- low in fat, but composed primarily beef scrapings molded together in a factory.
A company that produced "pink slime" -- AFA Foods -- was forced into bankruptcy as consumers showed their preference for natural foods.
5) Housing Rebound
As far back as 2009, investment commentators have been calling for a rebound in the U.S. housing market. 2012 may finally prove to be the year when U.S. housing turned around.
Shares of nearly all home building and home building-related stocks rebounded strongly in 2012. Shares of Toll Brothers (NYSE: TOL) rallied about 50 percent in 2012. Competitors Beazer Homes (NYSE: BZH) and KB Home (NYSE: KBH) traded up about 45 and 130 percent, respectively.
While the market may never quite return to the exaggerated bubble levels of prior years, 2012 showed definite signs of a healing housing market.
6) Shale Gas Boom
If any single commodity could've been said to dominate the year, it would be natural gas.
In the first half of the year, natural gas prices were dropping at a rapid pace. At one point, the price of natural gas was less than $2 per cubic foot. Some analysts were predicting that natural gas would fall to nearly $0.
Of course it didn't. Prices nearly doubled in a few months during the summer, and now sit comfortably around $3.50.
Early in November, the IEA said that the U.S. was on par to surpass Saudi Arabia as the world's largest oil producer, and likely would do so over the next 10 years. With fracking technology, producers in the U.S. have been able to extract increased amounts of both oil and natural gas from shale reserves.
7) The Drought
The U.S. experienced one of the worst droughts on record over the summer. By most measures, it was the worst drought in at least 30 years. As a consequence, June saw corn prices skyrocket, as crop yields were expected to decline.
Meanwhile, meat prices actually fell, as farmers opted to slaughter additional cattle.
The drought may have an effect on the U.S. economy for several years. Although corn prices have subsided somewhat since the summer, they remain elevated. While meat prices may have dropped temporarily, over the long term they could be up. Cattle take years to raise, and thus more animals slaughtered now means less available in the future.
The higher prices for these commodities could mean food prices remain elevated for some time.
8) The Fiscal Cliff
In the summer of 2011, Republican lawmakers temporarily blocked the increase of the U.S. debt ceiling. The debt ceiling was eventually raised, but as part of the deal to raise it, lawmakers created the “fiscal cliff” -- a mandated set of tax increases and spending cuts that would go into effect January 1, 2013.
Following the 2012 presidential election, political focus shifted to a possible resolution of the "fiscal cliff". Democrats and Republicans appear to be far apart on resolving the matter, but daily speeches from politicians on both sides of the aisle have become a regular market-moving event.
The Patient Protection and Affordable Care Act -- commonly known as “Obamacare” -- was signed into law in early 2010. Two years later, a constitutional challenge brought it to the forefront of business in the first half of 2012.
There was widespread speculation that the law could be overturned by the Supreme Court. Luckily for supporters, that didn't happen. In a strange twist, George W. Bush nominee Chief Justice John Roberts opted to vote in favor of the law.
That benefited hospital stocks like HCA Holdings (NYSE: HCA), which rallied well over 45 percent this year.
10) Android/Apple Lawsuits
Eric Schmidt, current chairman and former CEO of Google (NASDAQ: GOOG), was once a member of Apple's board. In 2009, Schmidt resigned. In subsequent years, Google has placed more emphasis on its Android mobile operating system -- a direct competitor to Apple's iOS, the operating system that powers both the iPhone and the iPad.
As told by Walter Isaacson in his biography of the Apple co-founder, Steve Jobs felt deeply betrayed and believed Schmidt used his insider status on Apple's board to “steal” the idea of the Android operating system from Apple.
Thus began Apple's long legal dispute with Google's Android, which came to a head in 2012. Rather than sue Google itself, Apple took the route of attacking individual Android device makers.
In a San Francisco court, Apple won billions of dollars in damages from Korean smartphone maker Samsung. Ironically, Samsung won a similar case against Apple in its home country. A few months later, Apple settled its legal dispute with HTC.
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