Investment Solutions for 2018 (Part 2)
MEGA TRENDS THEMES
Investors are well advised to keep an eye on mega trends that are taking centre stage, because they offer long-term growth opportunities for new players and companies that can reinvent themselves.
VIDEO TRANSCRIPT - MEGA TRENDS THEMES
Now we'll move to the second phase of our themes, megatrends. These are themes for the long run. A lot of clients are asking, with very high levels of equity markets, "What do I buy for the longterm?" These are the kind of themes we buy, especially on any correction in markets.
So firstly, we like the millennial theme. Who are the millennials? That's a 600 billion cohort, which will become the largest consumer globally. We've seen sales to companies that are focused on millennials in the consumer space outperform by about 80% relative to companies who are just broadly spread in the consumer space. Hence, we think this is a durable theme for the long run.
Secondly, we also like electricity, mobility, autonomous cars. Right now, the cost of an electrical vehicle in terms of its all-in cost is closing in on a petrol vehicle. Also, we like the value chain.
The semiconductor content's higher in the materials that go into the batteries that produce these vehicles. Penetration is below 1% globally for electric vehicles. We expect that to increase gradually in the coming decades.
Moving to more traditional investments in our megatrends theme, we are very focused on infrastructure and urbanization. The world population will grown by 25% between now and 2040, hence, we are focused on the China One Belt, One Road, which, is a multi decade policy, which will grow investments in Asia in pipelines, utilities and construction, and also develop markets where countries are now upgrading their existing infrastructure.
For example, companies that are geared to healthy eating have outperformed the broader food and beverage sector in sales by about 80% over the last few years, hence, that can lead to higher stock prices.
Finally, we also like business investment for the long run, not just for a late cycle theme. We are very bullish on themes such as automation, robotics, digitization, big data, and we expect them to also increase in the coming years.
To summarize, for 2018, we would focus on late cycle themes for investors who want to be tactical and nimble, in shorter term in duration for this year. However, we'd always refer back to our megatrends or ideas that we'd like to buy for the long run.