6 months ago • 6:33 mins
Megatrends shape our world for decades at a time, and they represent the potential for huge gains if you time them right – and if you make the right investment in the first place. So having asked you what the megatrends are playing on your mind, here’s my two cents about how “mega” an investment opportunity they might be.
The megatrend: Companies and economies alike are moving away from fossil fuels and toward energy generated from natural, renewable resources like sunlight, wind, and water.
My take: This is absolutely a megatrend worth paying attention to: the world’s biggest economies are all squarely focused on reducing greenhouse gas emissions, and renewable energy sources will play a crucial role in achieving their goals. As for the opportunities here, we’ve previously written about how wind stocks might be a better bet than solar, and the European Union’s green spending plans could boost a whole host of green energy firms in the medium term.
The megatrend: The pandemic has accelerated the shift from on-premises servers to the off-premises cloud across all manner of businesses.
My take: There are hard numbers that illustrate that there’s an opportunity here. UnivDatos Market Insights, for example, is forecasting the cloud computing-driven digital transformation market will be worth $3.6 trillion by 2026, while Allied Market Research is expecting the cloud services market to double twice by 2027. It’s hard to see anyone other than the Big Tech players reaping the rewards, but there could be (admittedly riskier) opportunities in the smaller players they might end up acquiring.
The megatrend: More and more sensitive data is being accessed remotely, which makes keeping it all safe a fast-growing market.
My take: You can’t reasonably buy into the cloud computing boom without also buying into the cyber security boom: it’s a market growing 15% a year, and it’s expected to be worth $400 billion by 2026.
We highlighted some of the most attractive cybersecurity names in the space back in May, so along with exchange-traded funds like the ETFMG Prime Cyber Security ETF and the First Trust Nasdaq Cybersecurity ETF, that’s where I’d start.
The megatrend: Between Space-X, Virgin Galactic, and Blue Origin, the future of commercially available space travel is closer than ever…
My take: It’s no surprise this came top of several Finimizers’ lists: it’s been all over the news in the last week, with Richard Branson and Jeff Bezos making headlines for taking trips to the stratosphere. But while there may be space services companies that are worth looking at more closely, travel companies probably aren’t. Just look at the airline sector: it generates revenue, sure, but it’s also a prime example of an industry that’s never generated positive free cash flow. And with even more overwhelming costs to cover, “spacelines” are likely to find themselves in much the same position.
Even if you disagree, it’s difficult to invest in space in any case: Ark Investment Management’s Space Exploration and Innovation ETF only actually includes space-adjacent businesses like satellite services firms, which leaves you with just one publicly listed space company to “choose” from: Virgin Galactic.
The megatrend: The United Nations is estimating that we’ll have to grow 50% more food than we did in 2013 by 2050, when we’ll need to feed a global population of 10 billion.
My take: The big question here for me is: what’s the tipping point? That is, when will potential food shortages pose such a high risk that they become as big a focus as reducing greenhouse gases is now? I don’t have an answer to that question, or a view on what exactly will catalyze a global focus on food technology. But there’s good reason to be positive on some of the investment opportunities in the space, which span tech firms, pharma companies, and specialist agricultural equipment makers.
The megatrend: Digitized healthcare – using apps for consultation and diagnosis – has become more popular during the pandemic, and it could be here to stay.
My take: There’s certainly a place for digitized healthcare to help improve current practices, but it’s not necessarily a great investment opportunity yet. Your biggest concerns should be around how healthcare apps will make money, as well as how they’ll scale enough to benefit from “big data” applications. I do see a big opportunity in traditional healthcare, though. Specifically around diabetes: there are all sorts of companies working on glucose monitoring, diabetes medication, and insulin – all of which could make profitable long-term investments.
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