Investment
Thematic Investing: How to Invest in the Next Big Idea
|
|
Thematic Investing: How to Invest in the Next Big Idea
From clean tech to artificial intelligence, thematic investing provides exposure to disruptive innovations that underlie the next frontier of investing.
In this infographic sponsored by Opto from CMC Markets, we identify the trends and investment themes that could reshape society and unlock future growth opportunities.
Long-Term Structural Growth Trends
Which four trends could define our future?
- Climate Change: Extreme weather disruptions, investment in green solutions.
- Climate-related risks and their implications are gaining serious attention from governments, businesses, and investors. Consider how global government green spending has risen by nearly 40% since 2008, rising to $714 billion in 2022.
- Disruptive Technology: Exponential speed of technological advancement.
- More technological progress is forecast to occur over the next ten years than the last 100 years combined. In fact, the computational capacity of the fastest supercomputers has skyrocketed from 17.6 quadrillion floating-point operations per second in 2012 to 1,100 quadrillion in 2022.
- Floating point operations are a form of measuring the performance of supercomputers, some of which are one million times faster than a laptop.
- Demographic and Social Change: Aging populations.
- From China to Europe to the U.S., a great demographic transition is underway. The global elderly population, defined as those 65 years and older, is anticipated to double from 761 million in 2021 to 1.6 billion in 2050.
- Next Generation Economy: Decentralization, Web3.
- Decentralization involves distributing power away from a single, powerful authority. Web3, the third generation of the internet and web-based technologies, uses decentralized blockchain technology instead of a centralized database seen in many websites and applications today.
With these trends in mind, which themes are set to offer outsized investment opportunity over the next 10, 20, or 30 years?
Thematic Investing Opportunities
Here is a breakdown of the next wave of thematic investing opportunities. Each theme shows the market’s expected compound annual growth rate (CAGR) from 2022-2026, and a timeline for when growth is expected to slow down.
Although most themes will likely continue to grow for decades, some may experience plateauing growth as their industries mature.
| Theme | CAGR 2022-2026 | Expected Slowdown in Growth |
|---|---|---|
| ⚛️ Hydrogen | 6% | 2050 |
| 🚀 Space | 7% | 2050 |
| 🚙 Autonomous Vehicles* | 23% | 2047 |
| 🏙️ Smart Cities | 26% | 2045 |
| 🤖 AI | 19% | 2040 |
| ☀️ Solar** | 7% | 2038 |
| 🧬 Genomics | 18% | 2030 |
| 🔋 Lithium & Battery Tech | 11% | 2028 |
| 👩🏻⚕️ Telemedicine | 8% | 2026 |
| 📱Semiconductors | 5% | 2026 |
*CAGR is for the period 2021-2026. **CAGR is for the period 2021-2025.
The space economy is attracting significant capital investment driven by its future role in climate change, security, and broadband telecommunication. For instance, satellites may provide data on greenhouse gas emissions to help improve renewable energy infrastructure.
In addition, lithium is forecast to play an even greater role in the economy. Global electric vehicles surpassed a record 10 million in sales in 2022, and will continue to drive demand for lithium looking ahead.
Characterized by boom and bust cycles, semiconductor chips help process vast amounts of data across smartphones, cars, home appliances, and smart infrastructure. As ChatGPT and AI advancements have taken off in the last year, several semiconductor companies have seen their stocks soar in value.
The investment landscape is set to change significantly in the years to come. While some themes are widely recognized, others are just beginning to gain traction.
Analyzing Themes Across the Adoption Curve
Diving deeper, let’s take a closer look at the growth outlook across four thematic investing opportunities and how to gain exposure to each.
1. Disruptive Technology: Semiconductors
Laggard: Growth is slowing
Pure-Play ETFs:
- SPDR S&P Semiconductor ETF (XSD)
- VanEck Semiconductor ETF (SMH)
Many chipmakers have long-term agreements with Big Tech. As the pace of technological advancement accelerates, the implications will be far-reaching for semiconductor companies. In 2022, the global semiconductor industry was estimated to have record sales of $636 billion.
2. Climate Change: Solar
Early Majority: Growth is moderate
Pure-Play ETFs:
- Invesco Solar ETF (TAN)
- Global X Solar ETF (RAYS)
Thanks to cost efficiencies, 90% of new global power capacity is forecast to come from renewables by 2027—with solar making up the lion’s share. Over 70 countries, 1,200 companies, and 1,000 cities have made net-zero pledges.
3. Demographic and Social Change: Smart Cities
Early Adopter: Growth is increasing
Pure-Play ETFs:
- Lyxor MSCI Smart Cities ESG ETF (IQCY)
- Amundi Smart City ETF (SCITY)
High-speed internet coupled with sensors, IoT, and machine-to-machine communication could drive a paradigm shift in urban design. By 2050, it’s expected that 68% of the world population will be living in urban areas.
4. Disruptive Technology: Space
Innovators: Growth is accelerating
Pure-Play ETF:
- ARK Space Exploration & Innovation ETF (ARKX)
Space has over 200 use cases including energy, agriculture, and defense activities. By 2040, it could become a $1 trillion dollar industry, up from $469 billion in 2021.
Each theme could present a significant opportunity for investors, fueled by rapid technological advancement and broader societal shifts.
How can investors gain exposure to these thematic ETFs?
The Opto App helps users identify the top trends shaping our future. Compare, analyze, and track 40 disruptive themes and over 160 ETFs.
|
|
Warren Buffett, commonly known as the Oracle of Omaha, is a familiar name to many when thinking of the financial world.
Of course, many mimic his portfolio moves.
One of his purchases in particular, Occidental Petroleum OXY, has gained widespread attention over the last year amid volatile energy prices.
And it seems that the Oracle of Omaha can’t stay away from the stock; Berkshire has been buying more OXY throughout May, now holding roughly 2.2 million shares, reflecting a 25% stake in the company.
In addition to OXY, two other stocks that the legendary investor has placed big bets on include Coca-Cola KO and Apple AAPL.
For those interested in investing like Buffett, let’s take a closer look at each.
Occidental Petroleum
Buffett’s been in the headlines numerous times over the last year regarding his OXY purchases. Still, it’s worth noting that the Oracle of Omaha said there were no plans to fully acquire the company at the latest annual shareholder meeting,
OXY posted lighter-than-expected results in its latest release amid falling energy prices, with the company falling short of the Zacks Consensus EPS Estimate by roughly 16% and posting a negative -3.7% revenue surprise.
Image Source: Zacks Investment Research
Of course, the favorable operating environment has allowed OXY to reward its shareholders nicely, growing its dividend payout by nearly 40% just over the last year. Berkshire owns roughly $10 billion of OXY preferred stock, which pays an 8% dividend yield.
Image Source: Zacks Investment Research
Apple
Buffett has stated many times that he’s attracted to the mega-cap giant due to a simple fact – brand loyalty. Apple consumers tend to trade old Apple products for new ones, establishing a loyal customer base.
The company posted solid results in its latest quarter; iPhone revenue totaled $51.3 billion, 4% above the Zacks Consensus Estimate and improving 1.5% from the year-ago period.
As we can see from the chart below, the better-than-expected iPhone results snapped a streak of back-to-back negative surprises.
Image Source: Zacks Investment Research
In addition, shares provide exposure to technology and provide income, with the company’s annual dividend currently yielding 0.5%. While the yield is undeniably on the lower end of the spectrum, Apple’s 6% five-year annualized dividend growth rate helps pick up the slack.
Image Source: Zacks Investment Research
Coca-Cola
Coca-Cola is an American multinational corporation best known for its flagship Coca-Cola beverage. It’s a long-term holding for Berkshire, having first purchased shares in the late 1980s.
The company continues to grow steadily, with earnings estimated to climb 5.3% on 4.7% higher revenues in its current fiscal year (FY23). The growth is forecasted to continue in FY24, with estimates indicating earnings and revenue growth of 7.5% and 5.2%, respectively.
Image Source: Zacks Investment Research
Coca-Cola’s annual dividend presently yields 3.1%, well above the Zacks Consumer Staples sector average. It’s also worth highlighting that KO is a member of the elite Dividend King club, showing an unparalleled commitment to shareholders through 50+ years of increased payouts.
Image Source: Zacks Investment Research
Bottom Line
Many mimic Buffett’s moves for understandable reasons.
And interestingly enough, the Oracle of Omaha has continued to purchase Occidental Petroleum OXY shares throughout May.
Two other stocks – Coca-Cola KO and Apple AAPL – also reflect sizable bets from the legendary investors.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Investment
A Bull Market Is Coming: Here's Warren Buffett's Life-Changing Investing Advice – The Motley Fool
Recession fears sent the S&P 500 tumbling into a bear market last year, and the benchmark index is still down 12% from its high. But history says that drawdown is temporary. Every past bear market has eventually ended in a new bull market, and investors have no reason to expect a different outcome this time. That makes the current situation a buying opportunity, but not every fallen stock is worth buying.
Consider this investing advice from Warren Buffett.
Buy and hold high-quality stocks
Buffett once said, “All there is to investing is picking good stocks at good times and sticking with them as long as they remain good companies.” There are two important lessons there. First, valuation matters. A great business at the wrong price can be a terrible investment. Second, think long-term. Investors should ignore the day-to-day fluctuations in the market and instead focus on buying and holding good stocks.
But what qualifies as a good stock?
Invest in companies with a competitive advantage
In his 1995 letter to Berkshire Hathaway shareholders, Buffett wrote the following: “In business, I look for economic castles protected by unbreachable moats.” The term “moat” refers to a competitive advantage, the quality or qualities that protect a business from its competitors.
There are many different types of competitive advantages. Apple possesses immense brand authority that not only keeps consumers loyal, but also affords the company a great deal of pricing power. Amazon Web Services offers a broader and deeper suite of cloud computing products than any other cloud provider. Nvidia can design more performant graphics chips and data center accelerators than other semiconductor companies. Costco Wholesale derives significant purchasing power from its scale, and its operating expertise further enhances that purchasing power.
All of those stocks have crushed the S&P 500’s return over the past decade, and investors can attribute those market-beating performances to the fact that each company possesses a durable competitive advantage.
Buy stocks within your circle of competence
In his 1996 letter to Berkshire shareholders, Buffett wrote the following:
You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.
Buffett expanded on that advice a few years later. In his 1999 letter to Berkshire shareholders, Buffett explained that he typically avoids investing in technology companies — despite knowing their products and services will transform the world — because he finds it difficult to identify competitive advantages in that sector. In other words, Buffett avoids technology stocks because they are beyond his circle of competence.
Think carefully before buying or selling a stock
Buffett once said, “An investor should act as though he [or she] had a lifetime decision card with just twenty punches on it.” Those words should not be taken literally — Berkshire owns far more than 20 stocks. Instead, Buffett is telling investors to think deeply about every decision. Never buy or sell a stock on a whim.
Knowledge can pay huge dividends
Buffett once said buying Benjamin Graham’s book, The Intelligent Investor, was the best investment he ever made (excluding two marriage licenses). Graham is viewed as the father of value investing, and his teachings formed the bedrock of Buffett’s investing style. The message here is simple: Never stop learning. An investment in knowledge can produce incredible returns.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Trevor Jennewine has positions in Amazon.com and Nvidia. The Motley Fool has positions in and recommends Amazon.com, Apple, Berkshire Hathaway, Costco Wholesale, and Nvidia. The Motley Fool has a disclosure policy.
Investment
Tom Brady’s investment in Raiders is believed to be more than ceremonial – profootballtalk.nbcsports.com
From time to time, celebrities purchase what amounts to a small sliver of an NFL team. When it comes to Tom Brady’s looming acquisition of a piece of the Raiders, one thing that hasn’t been leaked to ESPN or other media outlets is the percentage Brady will acquire.
So we started poking around a little. Per a source with general knowledge of the situation, Brady is believed to be buying something more than a ceremonial sliver of the Raiders.
It’s unclear why Raiders owner Mark Davis is selling any of the team to Brady. Usually, the controlling owner of an NFL team sells some equity to generate revenue. For most owners, there’s a strong preference to hold the equity for as long as possible, given that it constantly appreciates.
That’s why Brady would buy it. Having a piece of the Raiders makes a lot more sense than, for example, plunking cash into FTX.
Especially now.
So either Davis wants to take a little cash off the table, or he wants to be in business with Brady. Already, Brady has purchased a piece of the Las Vegas Aces, primarily owned by Davis.
Once Brady’s purchase of a portion of the Raiders is approved, he can always acquire more. If he ever hopes to succeed Davis, however, Brady will need to make a lot more money than he has.
The social media apps we use, from best to worst – Mashable
Revealing show cleverly pairs two female Impressionists – The Globe and Mail
Halifax-area wildfire 85% contained and not expected to spread, officials say – CBC.ca
-
News22 hours ago
Man charged after allegedly threatening to shoot Toronto mayoral candidates, police say – CBC.ca
-
Tech22 hours agoApple's AR/VR Headset Expected to Enter Mass Production in October Ahead of Late 2023 Launch – MacRumors
-
News21 hours ago
Housing affordability in Canada just saw the biggest improvement in almost 4 years – Global News
-
Real eState10 hours ago
‘All hell is going to break loose’: Property titan and Shark Tank star Barbara Corcoran says Elon Musk is right about commercial office space
-
Real eState23 hours ago
Calgary home sales reach new May record: real estate board – CBC.ca
-
Economy22 hours ago
Equities may rally since the U.S. economy remains strong: Dennis Mitchell – BNN Bloomberg
-
Science22 hours ago
Scientists discover mysterious cosmic threads in Milky Way – The Guardian
-
Tech21 hours ago
Meta reveals the new Quest 3 VR headset with a $499.99 price tag – Space.com
