BOSTON (TheStreet) -- With the U.S. economy in tatters, the political system nearly broken and the stock market seesawing along to intermittent good and bad news, focusing on industries' prospects is the first step in getting a clear focus for an investment strategy.What's more, as technology evolves and companies from abroad add to competition, U.S. businesses would do well to study money flows favoring certain sectors over others. A ranking of industries by their long-term business outlook was constructed by IBISWorld, a Santa Monica, Calif., publisher of research and market analysis. The firm based its analysis on more than 700 industries, from Internet service providers to hospitals to fisheries. IBISWorld's latest research has identified a handful of industries with some of the best prospects. They range from alternative-energy-infrastructure providers to privately run prisons. The firm's outlook over the next five years may help guide investors, businesses and even job-seekers. IBISWorld, however, didn't disclose specific companies in its research, choosing instead to break down the American economy into its functioning parts. Mary Gotaas, an IBISWorld research analyst, told TheStreet that, among the factors the firm's analysts weigh in their rankings, are an industry's growth potential, barriers to entry that can influence competitiveness, the potential for exports and impact of imports, and sensitivity risk to external factors that could impact the industry, such as government regulations. Five industries with some of the best business prospects follow: Wind- and solar-energy companies are expected to post revenue growth of roughly 18% annually through 2016. Wind power is currently a $3.7 billion industry, and IBISWorld said it should benefit from lower equipment costs and government-funded initiatives to reduce greenhouse gas emissions and create an alternative energy infrastructure. "Moreover, the government will mandate that certain downstream buyers buy renewable energy, further stimulating revenue," IBISWorld said. Wind-industry leaders include NextEra Energy ( NEE) and Xcel Energy ( XEL). Solar, now a relatively small industry, is seen benefitting from many of the same government incentives for alternative energy as wind. On the downside, favorable market conditions are expected to lure more players into the industry, including low-cost manufacturers from countries such as China, and that will slightly offset the substantial growth prospects for the industry. Leading solar companies include SunPower ( SPWRA), First Solar ( FSLR) and NextEra.
The correctional-facilities industry, based on the privatization of prisons, is expected to grow as government budgets dwindle while tough mandated sentencing guidelines put more people in jail. It's a $36 billion industry now, with a projected 7% annual growth rate through 2016. "Privatized facilities and services will continue offering governments cost-effective alternatives to proprietary facilities and services," IBISWorld says. Industry leaders include Corrections Corp. of America ( CXW) and The Geo Group ( GEO).
Plastics wholesaling, a $51 billion industry, is seen increasing revenue at 1.9% annually in the five years to 2016, based, in part, on new residential and commercial construction. The industry is involved in the distribution of plastic (PVC) pipes, rods and tubes used in plumbing and electrical systems, as well as plastic film and sheeting used for insulating. The industry also includes companies involved in wholesaling flexible plastic packaging, plastic bags and sheeting, coated and laminated packaging materials, tapes and adhesives. IBISWorld analyst Mary Gotaas said big manufacturers such as Dow Chemical ( DOW) and DuPont ( DD) are increasingly relying on one wholesaler rather than several, which boosts the prospects for a handful of such firms, including Nexco Solutionsand PolyOne ( POL).