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The views expressed are those of the author at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.
We’re on the cusp of the next big tech wave and, in our view, we’re all poised to benefit. Innovation is constantly improving the lives of people all across the globe, transforming our homes, schools, businesses, and daily lives. From digital payments helping to make finance more accessible, to the cloud and the Internet of Things (IoT) boosting efficiency everywhere from farms to factories, to artificial intelligence solving problems from auto safety to disease diagnosis — the world’s progress is grounded in innovation.
We’re at the beginning of a multidecade journey of massive disruption and we believe investors need to be positioned to harness the tech driving this innovation.
Critically, we think many investors are missing the full opportunity of the firms powering these enduring themes. Below are three examples of areas where some investors worry the market is overly exuberant, but that we think continue to have robust growth opportunities beyond the headlines.
There are several high-profile electric vehicle (EV) chains that are rapidly growing. But competition is heating up from many other companies, including established automakers transitioning from combustion engines to EVs. This is a long-term secular trend that is highly likely to persist while having an important impact on the environment and society as a whole. However, with elevated valuations, many investors are wondering how to access the opportunity it presents.
The rise of automation is often thought of in terms of factories replacing workers with more productive robots. After all, the world is not growing as fast as it once was — and we need innovation to offset the slowdown. But the opportunity this technology offers stretches far beyond factories and robotics.
The long-term growth of e-commerce has continually brought increased convenience and accessibility to new markets, companies, and customers. The benefit of this trend came into greater focus in the wake of the pandemic. However, as a few of the largest companies in the world are harnessing the e-commerce theme, some may think that we are in the late stages of this disruption and the opportunity has passed us by. But, in our view, there are still many areas for e-commerce to grow.
In our view, the key to investing in the long-term secular themes driving tech and innovation is to look beyond the hype and the news flows. We cannot stress enough the need to dig deeper into fundamentals and understand “the trends beyond the trends” that can sustain growth for the long term. We think investors need the depth and breadth of research to harness the opportunities innovation creates beyond the traditional “innovative” sectors.
Tech progress has marched on through the pandemic, trade wars, and economic cycles. This pervasive innovation continues to disrupt industries and drive growth while, in our view, making the world a safer, more efficient, increasingly equitable, and overall better place. We believe the question should not be “Have we missed it?,” but rather “What’s next in innovation?” and “How do we capture that growth?.”
1Sources: Company reports, Wellington Management. Data as of 31 December 2020. | 2International Energy Agency, 2021. | 3Source: STiR Coffee and Tea International, September 2018. | 4Sources: IHS, Deloitte Analysis. | 5Source: McKinsey & Company, “Notes from the AI Frontier,” 2018. | 6Source: eMarketer, March 2021. Penetration in online grocery is defined as consumers who have used it at least one time, meaning there is even more potential for growth within the existing market. | 7Source: Pandaily, “Why is the Community Group Buying Model Surging in China?,” December 2020.
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