Capital (A large US fund manager) asked 3 of its fund managers to name their top 3 investment themes over the next 10 years.
Cheryl
1) Cloud computing demand will reach new heights. Today penetration is 30% and Global revenue is US$20B. Within 20 years this is expected to grow to US$500B. The main players are Amazon, Microsoft and Google.
2) Pharmaceutical Discovery. China is ramping up pharmaceutical research. There are breakthroughs in gene therapy and gene editing which can treat cancer. China will produce drugs at 10% of the cost to produce them in the US.
3) ESG (Environmental, Social and Governance) investing. Big opportunities investing in de- carbonisation businesses, battery technology and water utilisation.
Brad
1) Streaming platforms. There is a 5% per year increase in this industry. Examples are Netflix, Disney + and Apple TV.
2) AI machine learning and autonomous vehicles.
3) The Big are getting bigger. In advertising in 2007, the top 2 companies accounted for 4% market share whereas as now the top 2 account for 40% market share. This is happening across a number of industries. Incumbents have scale advantages, the fixed costs of new entrants are high and content costs are lower.
Chris
1) Innovation that is happening in emerging markets. Copycats in China. There are lots of new companies coming to market. One example of this is Pinduoduo which has a market cap of US $100B. In Brazil there are new E-commerce and payments companies and new healthcare companies in South Africa.
2) US / China Cold War. This is not going away. Examples of this are the Chinese embassy being shut down in Houston and the military activities ramping up in the South China Sea.
3) Demographics is emerging markets. Populations are declining in the west. There is slower growth in Europe and Japan. A middle class is/will rise in emerging markets.
Cheryl
Telemedicine is projected to grow rapidly in the year ahead. The Global market size in 2019 was US$46B and is forecast to be US$176B by 2026. There will be a big increase in connectivity and big ramp up in monitoring. Also a rise in alternative health treatments including mindfulness.
Brad
In Phoenix autonomous cars are already happening and in the next 4 – 5 years Google will launch their vehicles which are cheaper and safer in multiple markets. Growth will compound as this business is scaled up. The value proposition will also improve. Globally there are 15 trillion miles driven. AI will transform cities and vehicles. Big growth in streaming services.
Company Year Subscribers
Netflix
2020: 187m
2025: 258m
Disney +
2020: 47m
2025: 202m
Amazon Prime
2020: 100m
2025: 141m
50% of Disney and Netflix business is outside the US. The Global market is worth US$350B and has massive growth ahead.
Chris
We are living in a bifurcated world. Countries may have to take sides. Xi Jinping is 57 years old and made himself president for life. There will be more tit for tat going forward. China is spending 20% on research and development spending. Avoid Chinese state -owned enterprises. Avoid companies caught in the crossfire. Companies including Alibaba and Tencent are not hurt by this.
Innovative companies in emerging markets. Ali Pay (ANT Financial) are soon to list, US$200B market cap. Reliance (Indian company) spent US$30B building a 4G network in India. They recently sold 34% of it to Google and Facebook for US$20B. These businesses can leverage their investment across the 350m subscribers. Digitisation of daily life is here to stay.
Populism
Governments need to develop models that are more inclusive of the total population. Higher taxes will occur. More focus on ESG (Environment, Social and Governance). Less CEO pay.