Commentary
As an investor, it’s very easy to look at the current environment and shake one’s head.
There’s a tremendous amount of headwinds. Given the volumes of headlines involving inflation, the debt ceiling, incompetence in Washington, geopolitical risks, China, etc., some investors may just give up and stash away their cash.
But that could prove to be rather short-sighted.
If your investment horizon is three, five, 10, or more years, there could be opportunities out there. It’s important to realize that if you zoom out enough, the daily and weekly headlines matter little. No matter the environment, there are asset classes or industries that thrive—not forever, but certain themes will have staying power over a period of time.
Every decade has at least one thematic investing winner, Morgan Stanley investment strategists pointed out in a note to clients.
During the high-inflationary 1970s, for example, it was gold. In the recessionary 1980s, it was Japanese stocks. In the roaring 1990s, it was tech stocks—until the dot-com bubble burst. In the 2000s, it was oil and energy. And in the 2010s, it was big tech and the so-called FAANG stocks (Facebook, Apple, Amazon, Netflix, Google).
In fact, 1 percent of companies generated 40 percent of all shareholder returns since 2000, Morgan Stanley’s research noted.
What are some of the potential secular winners of this decade?
More than half of the country is overweight or obese. And Eli Lilly could have on its hands one the iconic drugs of the decade. Tirzepatide, marketed under the brand name Mounjaro, is shown to be able to drop more than 20 percent of patients’ weight.
A similar drug—semaglutide—is sold under the Wogovy name by Danish pharmaceutical firm Novo Nordisk. Different formulations of the drug also treat type 2 diabetes.
Other companies are also joining the arms race to develop drugs to treat obesity and related illnesses. At a conference at the beginning of the year, Pfizer chief executive Albert Bourla believes that the market related to weight loss, diabetes, and related issues will become a $90 billion category by the year 2030.
Cybersecurity is not a new industry, but it is quickly becoming an extremely important one. Cyber attacks and hacks continue to increase every year costing governments, companies, and consumers billions of dollars annually and untold trauma.
By 2027, the number of digitally connected devices such as computers, smartphones, smart watches, and “internet of things” devices will double in number compared to today. And almost every consumer and every company large or small need to consider cyber security protections.
Firms involved in this sector include Fortinet, Palo Alto Networks, and Darktrace.
Nanotechnology relates to applications involving materials less than 100 nanometers in size. The production of these microscopic materials has tremendous upside and application across numerous industries including life sciences, consumer products, defense, green technology, and more. As an industry, nanotechnology could grow to almost $130 billion by 2027.
Companies involved in nanotechnologies include Analog Devices, Applied Materials, Taiwan Semiconductor Manufacturing, and Thermo Fisher Scientific.
Space is the final frontier, as we know from Star Trek. The broader space economy has enormous potential, although much of it is still untapped. The space industry could be extremely broad, including space tourism, space exploration and commodity gathering, and space defense.
Investor Cathie Wood manages ARKX, the ARK Space Exploration & Innovation ETF, which is an actively managed fund with holdings selected by Wood’s team. Firms involved in this sector include Leidos, Planet Labs, Rocket Lab USA, and Aerovironment.
It may be basic, but necessities such as food and water should not be taken for granted in today’s environment of soaring inflation, global wars, pollution, and increasing global population.
Given this backdrop, companies involved in providing clean water, making food and agricultural production more efficient, and water/food infrastructure could become increasingly more critical.
Firms related to these fields include Xylem, Itron, Yara, Deere, and Adecoagro.
This is nowhere near a comprehensive list. Several other potential thematic winner include fintech/digital payments, waste management, robotics and automation, and artificial intelligence/machine learning.
The idea is to look forward and seek opportunity even during times of distress. But as always, investors need to do their research and keep a long-term investment horizon.
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.