Note from Ed Coburn, CEO, Cabot Wealth Network
Michael Proffe applied the discipline and rigor he learned as an engineer and certified pilot to his emerging passion for investing to build Germany’s largest independent investment advisory publisher – as well as one of the most recognized and influential investing experts in Europe. His particular area of expertise is investing in megatrends.
When he and his colleague contacted me about contributing an article for Cabot Wealth Daily, I gladly accepted.
Please let me know if this is of interest to you. I would be happy to invite them back. Let me know your thoughts at support@cabotwealth.com.
-Ed
2025 was certainly a wild year in a variety of ways.
But for the markets, nothing was bigger than artificial intelligence (AI).
And that growth doesn’t look like it’s diminishing yet.
We’re still in the early stages of this boom by most measures. The big tech firms have tons of cash to throw at this new AI world, and enterprises, governments, and individuals are still working through how best to implement and use it.
In 2026 adoption of these models will be key to success in a variety of sectors, from banking to consumer retail.
A $1.3 Trillion Sector in Just Six Years
According to web hosting company Hostinger, AI’s projected compounded annual growth rate (CAGR) is projected to be 42% over the next six years.
And that’s not the most optimistic estimate.
This is a long-term technological shift. And companies like the Magnificent Seven have been stockpiling cash for decades.
This differs from most Old Economy industrial revolutions because scaling data isn’t as costly as laying railroad tracks or building ships and cars. The margins are much greater.
And that means this new breed of post-industrial, New Economy titans can hold that money for significant purchases, whether it’s new offices, new tech research, or new technology.
Much of that money is now being deployed into AI.
Focusing on the Long Run
But our long-term growth focus means we’re not looking for the headliners during the first bull run. We’re looking for the companies that can establish leadership now and then maintain that over the next decade.
As we saw with the dotcom boom, a lot of things happen very quickly in the beginning of a new tech wave. But those companies have to go through years of iteration before they can sustain their dominance.
Cisco Systems (CSCO) was one of the big winners during the dotcom boom. But the stock just broke its all-time high…set in 2000. It has been in limbo since that crash.
A recent article from Brad Simmerman on 2025’s top performers will be instructive to see how many of these stocks, in key growth sectors will remain leaders over the long term and which ones will be overtaken by MegaTrend players in coming years.
There are certainly key long-term trends and exciting names in sectors like quantum computing, energy storage, and data storage. But gauging long-term growth on short-term performance is a dangerous bet; one that individual investors aren’t well capitalized enough to play.
Plus, in the early boom cycle in a sector, each niche has numerous competitors, so jumping in because an unknown company has a good story, and an impressive run can be a costly mistake.
This is why I choose to pick MegaTrend stocks. Stocks that will dominate, lead, and innovate for years to come.
My Trendsetter Strategy helps me find the best long-term growth stocks in the market using:
Fundamentals like:
- Turnover – a positive development is a plus.
- EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization – a strong record of growth is key.
- Stock Yield – a stable, growing and consistent dividend is favored if possible since it reflects a company that’s shareholder friendly.
- Positive Working Capital – whether a company has enough cash on hand to manage its debt obligations; the more the better.
Technicals like:
- MACD or Moving Average Convergence/Divergence – a trend-following momentum indicator that shows the relationship between two moving averages of prices. Positive momentum is key.
- MOM – a momentum indicator that measures the velocity of price change instead of looking only at the price levels. A reading above 0 is crucial.
- RSI, or Relative Strength Index – compares the magnitude of recent gains and losses over a given time period to measure speed and change of price movements of a stock. It’s used to identify overbought or oversold conditions in a stock.
- Williams %R – the current closing price of a stock in relation to the high and low of the past x number of days.
And sentiment indicators that consider the behavioral and psychological aspects of the markets in relation to the economics and finance aspects of the market.
It’s why I can trounce the market averages on a regular basis with just 10 stocks.
It’s also why these stocks are proven long-term winners.
Let MegaTrend Stocks Do the Work
Another benefit to finding the best stocks in the biggest long-term trends is, you don’t have to constantly do the work of “finding” winners.
Some of our foundational picks are very common names for a reason – they’re leading the way in the AI MegaTrend, and they have the leadership that can monetize innovation.
Alphabet (GOOG) is a perfect example. It has been quietly building its Waymo robotaxis for years and has become a dominant player in the business, with every other competitor trying to gain market share. It also has developed its own Tensor family of chips that are now considered a real alternative to NVIDIA (NVDA) graphic processing units (GPUs).
International Business Machines (IBM) was always renowned for its R&D work but struggled to commercialize it. Yet its management has shifted Big Blue to shorten its “lab to fab” cycle and is leveraging its long-standing work in AI to be a leader in enterprise AI software. It’s also involved with Advanced Micro Devices (AMD) on work with hybrid quantum chips.
Intuitive Surgical (ISRG) is a global leader in medical robotics. This is a sector with significant potential across the globe. And there are significant barriers to entry in the healthcare sector, so ISRG has built an impressive competitive moat that will serve it well as it expands.
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