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, and so forth, 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 (Facebook, Apple, Amazon, Netflix, Google) stocks.
In fact, 1 percent of companies generated 40 percent of all shareholder returns since 2000, Morgan Stanley’s research noted.
Obesity
More than half of the country is overweight or obese. And Eli Lilly could have on its hands one of 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 a patient’s weight.A similar drug—semaglutide—is sold under the Wegovy name by Danish pharmaceutical firm Novo Nordisk. Different formulations of the drug also treat type 2 diabetes.
Cyber and Data Security
Cybersecurity isn’t a new industry, but it’s 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, smartwatches, and “internet of things” devices, will double in number compared to today. And almost every consumer and every company large or small needs to consider cyber security protections.
Nanotechnology and New Materials
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.Space
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.Food and Water Security
It may be basic, but necessities such as food and water shouldn’t 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 winners include fintech/digital payments, waste management, robotics and automation, and artificial intelligence/machine learning.
The idea is to look forward and seek opportunities even during times of distress. But, as always, investors need to do their research and keep a long-term investment horizon.
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