At the moment, we believe that the markets have not fully priced in the potential impact these long-term trends have on companies’ future revenue and earnings, especially in a post COVID-19 environment. Given this situation, these are some areas we believe have a lot of potential for investors:
- Healthcare: The convergence of gene-based technologies and data, as well as a recent pick-up in biotech research and development (“R&D”) to find vaccines and cures for some of the world’s most deadly illnesses, may speed up the development of new innovative healthcare drugs and techniques, and lead to increased earnings growth for successful companies. While innovation in the healthcare industry is certainly not new, the speed in which it is unfolding today, is. At this rate, we could see an increase in the pace of new treatment approvals over the next five years yielding over US$250 billion of new revenues by 2024 for successful companies. If even a fraction of that goes into biotech companies, the revenues of (successful) biotech firms could double from current levels over this time.
- Clean Energy: The global interest and speed in which the world is moving towards sustainable, clean energy is also quite impressive in our view as well. According to research firm Allied Market Research, the renewable energy market is expected to reach US$1.5 trillion by 2025, up from US$928 billion in 2017, growing at a constant annual growth rate of 6.1% during this time. Further, the decline in wind and solar construction costs in recent years, falling 13% and 37% respectively, between 2013 to 2017 has made renewable energy a cost-effective alternative to traditional fossil fuel energy sources. As a result, this is leading to a greater rate of adoption of cleaner energy solutions among governments, businesses, and households. Lastly, increasing public awareness over climate change and climate-related issues around the world will only continue to increase, prompting many in the public and private sectors to continue to adopt clean energy.
- Technological Evolution: The roll-out of new technologies such as artificial intelligence (“AI”), 5G wireless technology, autonomous vehicles, Internet of Things (”IoT”), remote work solutions, and other similar technologies is already beginning to usher in a “fourth industrial revolution”, changing society in a way, and at a pace, that has never been seen before in history. We are already seeing evidence that the COVID-19 pandemic is accelerating adoption of technologies such as cloud computing, AI, cloud security, and remote working. If this continues, in the next five to 10 years, we could see these industries reaching valuations over US$16 trillion in market size.