Before we get started, I want to welcome the +91 subscribers who signed up for the Let’s Analyze newsletter in the last week! If you want to join our community, make sure to sign up here:
What makes stock prices go up?
For instance, cybersecurity company Fortinet (FTNT) saw its share price surge 917% between 2018 and 2021.
And between 2015 and 2018, NVIDIA Corp. (NVDA) and Netflix (NFLX) saw their share prices rise 1,361% and 482%, respectively.
These four companies have one thing in common; they all grew their earnings between 450% and 4,000% on the back of “mega trends."
Mega trends like cloud computing, blockchain, and streaming all fueled gains for these companies, making early investors rich in the process.
But that begs the question: what are the next mega trends that'll define the next ten years?
I have a few ideas…
How to Find Mega Trends
Futurist Peter Diamandis contends the next decade will experience more progress than the last 100 years combined.
This makes sense, as technological breakthroughs are poised to reshape healthcare, energy, transportation, agriculture, finance, and a host of other industries.
There are mega trends in all these industries waiting to unfold.
The trends I’m about to discuss may not be the “coolest” or more “bleeding edge” technologies. But they’re the ones drawing the most venture capital money, producing the most patent filings, and overall have the largest implications for both consumers and institutions.
While the data can be noisy, my job is to separate the signal from the noise and find which of these trends will translate to higher earnings and share prices.
So, without further ado…
Mega Trend #1: The Digitization of Everything
In 2020, McKinsey surveyed nearly 900 executives and found that their adoption of digital products and services jumped ahead six years because of the pandemic.
On the consumer side, the average US smartphone used more than 15 gigabites per month in 2020. By 2026, that figure is expected to surge to 50 gigabits, representing 30% growth per year.
Artificial intelligence, internet of things, cloud computing, blockchain, and a host of other applications will drive data growth globally for both institutions and individuals.
Devices to transfer data is a direct way to play this trend. However, don’t forget companies who use powerful machine learning tools to make sense of this data and protect it from hackers.
Mega Trend #2: The Biotech Revolution
Countries like the US, Europe, Japan, and China will see their populations decline over the next 50 years.
This is due to the rapid aging of the Baby Boomer generations:
Out of necessity to care for this aging generation, an entire new crop of healthcare services will emerge. Hyper-personalized medicine, rapid vaccine development, and medical robotics will all drive growth in this space.
Mega Trend #3: De-Globalization
Most of the 20th century was defined by advances in transportation and communication technologies that allowed economies to work with each other.
This is known as globalization, and it led to the greatest economic expansion in the history of mankind.
Globalization allowed U.S. companies to tap low-cost labor abroad to create efficient global supply chains, reduce the need for warehouses filled with inventory and contributing to record profits and a free flow of cheap goods that helped keep a lid on inflation.
But frayed US-China tensions, the pandemic, and Russia's invasion of Ukraine has put this process in reverse.
Countries like the United States are investing heavily to bring manufacturing capacity back to the homeland with an aim to be less reliant on foreign manufacturing.
Mega Trend #4: Agricultural Sustainability
The global population is expected to reach almost 10 billion by 2050.
That’s up from 7.8 billion today:
Most of these population gains will come in Sub-Saharan Africa and India, both of which will be some of the largest countries in the world in 25 years:
We will need to feed an additional one billion in the next five years alone. And by 2050, we need to increase food production by 50%.
That’s good news for companies who are responsible for increasing crop yields, water management, and farming efficiency.
Mega Trend #5: New Generation of Investors
In 2019, Millennials (those born between 1981 and 1996) surpassed baby boomers as the largest demographic cohort in the U.S. population. Millennials account for 22% of the US population compared to Gen Z (those born after 1996) accounting for another 20%.
But the first Millennials turn 40 this year. And while most Millennials cringe when being compared to Boomers, their investing path is quite similar.
At present, only 6.5% of Millennials’ assets are in stocks. That’s compared to 6.0% when the first Boomers turned 40.
But over the next 20 years, Boomers’ allocation to stocks grew to over 25%. If Millennials follow the same trajectory, they also will see their exposure to stocks grow.
I will be digging deeper into these "mega trends" over the coming months. And I’ll be telling you the exact stocks I’m buying to capitalize on these trends.
But for those of you who are new to investing, these five mega trends are a great framework on which to make investing decisions.
Stay safe out there,
Thanks for reading Let's Analyze! Subscribe for free to receive new posts and support my work.
Was that all analyzed before COVID shots were distributed to the vast majority of the world? I believe the deaths that they produced changed those trends significantly.