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Jeff Bezos, CEO and Founder of Amazon
This quote beautifully exemplifies the extraordinary disruptions that have occurred in Industries for the past twenty years and is projected to accelerate in the coming decades. Some industries such as the newspaper business are a shell of their former selves after the emergence and broad adoption of the Internet. Telecommunications and Media is currently undergoing its business transformation with the emergence of direct-to-consumer business model (Disney Plus, Netflix) and the rapid pace of cord cutting. Healthcare and Auto Industries disruptions are looming in the horizon. Big data and technology promises to transform how healthcare has traditionally been delivered. Driverless and electric vehicles may reshape the stodgy Energy and Auto Industries.
At the beginning of a new decade, it’s an appropriate time to reflect on some of the major themes that shaped the investment markets in the past. Such insight may offer clues on what may impact the future of investments: secular tailwinds that will drive up future cash flows, create competitive advantages and boost shareholder value. I have selected 10 themes that may substantially impact investment returns or create investment opportunities for the next decade.
You will find that my 2020 predictions on investment themes are derivatives of themes that affected the market in the past. Undoubtedly, something extraordinary—a so-called ‘Black Swan Event’-- may develop that is below or even off my radar. It will be the Osler Funds portfolio manager and analysts job as investment professionals to keep on top of investment trends. (We will keep our readers and investors updated with future blogs and commentaries). As you may know, we are value investors first and foremost. We try to find companies that trade below intrinsic value. One of the concerns that individual investors may have about value investing is that value investors miss out on the growth stocks. It is true that we are unlikely to invest in start-ups; however, our theme-based screening does pick up and forecast investment trends. We want to find growth-oriented companies at value investing prices, essentially GARP (growth at a reasonable price) or fallen angels investment strategies. We strive to protect our downside, but will keep on the lookout for the next FAANG type events.
Reflections: Hindsight is 2020
Two themes that drove stock returns in the past 20 years
Tech: Internet, A New Business Architecture
China: New Superpower
Two themes That Drove Investment Returns
There were many themes that drove investment return for the past 20 years, but the two mentioned are arguably two of the most important themes. Internet and other technological advances in the past twenty years created a new business architecture. China was the manufacturing muscle for the world’s economies with its large and inexpensive workforce. Together, these two themes drove the world towards a more globalized economy. There were very few Industries in the past two decades that were not significantly impacted by one or both these investment themes.
10 Themes That May Affect Investments for 2020 and Beyond
1. Tech: AI and Big Data- Is the Hype Real?
2. Peak Globalization
3. Renewable vs. Fossil Energy: The Battle of the Century
4. Space: The Final Frontier
5. Tech: Cloud Everywhere
6. Fintech: Banking At Your Fingertips
7. Environment, Social and Governance: The Movement
8. Passive Investing: A Great Investment Tool but Not Without Risks.
9. Gig Economy: Redeploying the Workforce
10. Big Tech Companies Getting Bigger