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A couple of days ago I woke up after the night took me to the library of the future. All the books were re-classified after principles from year 2020. The first thing I noticed was that the travel guides were on the same shelf as the fantasy literature. But it was more. A lot more. Political books grouped with science fiction, books on business and economics grouped with spiritualism and books on climate and environment together with books on religion. I turned around facing the opposite wall. Journalism was grouped under political activism, books on investing in the stock market were in the entertainment section and science together with fiction. Powerful forces had reclassified the books. But it was all just a nightmare. Or?
A lesson learned from 2020 is that rapid changes can occur fast. And they rarely come alone. So it is with humble strokes that I draw little lines describing directions of change, of disruptions, for the coming years. But I have one advantage. This is my job.
Every day I look for investment opportunities that follow from changes in technology, regulations, and consumer behavior within the five investment categories:
(1) Connectivity
(2) Urban mobility
(3) Machine revolution
(4) Demographics
(5) The green economy
2020 – the year when Covid-19 reinforced, changed, destroyed, and created a wide range of business models.
But let us start with Covid-19. For those of us who survived the rave parties of the 90s it is hard to have life put on hold because of a virus named after Corona, a low-alcohol beer brewed on corn. So what happened within my five investment categories?
Covid-19 reinforced, changed, destroyed, and created a wide range of business models. Within connectivity the changes in e-commerce, streaming of audio and video, videoconferencing after Covid-19 are substantial and lasting.
Urban mobility includes how people and goods are transported within and between cities. As we entered 2020 a range of ridesharing services (e.g. Uber, Lyft) were very popular. That changed with Covid-19s demand for less social contact. People from China who used to spend small fortunes on international travel started buying electric cars instead. We experienced a rise in new subsidies in the EU and a range of new and sexy electric cars that contributed to monthly world records in in terms of share of total car sales in 2020. This marks the beginning, everyone.
The third investment category, the machine revolution, also got a lot of pull from Covid-19.
The shutdown of suppliers in China in Q1 2020 quickly had implications for the Japanese, European and American industry. Shutdowns due to disruptions in the Global value chain became some sort of mantra in Q2 2020, often paired with the words “never again”. Covid-19 reinforced the already existing trend of moving the entire, or parts of, production out of China. Robotization and automation of production processes are now at the beginning of a new investment cycle. Often a cycle like this lasts for four to five years.
Covid-19 has affected the fourth investment category, Demographics, as well. The effect Covid-19 has on where and how people live are mainly related to food and biotechnology. Among those who can afford it, we expect to see more and more people choosing healthy foods to strengthen their immune system. And the answer to your genetic predispositions, and what you need more of or to avoid in either nutrition or lifestyle, you will soon get from Biotechnology.
However, the greatest disruptive change that came along with Covid-19 was how the world will return to some form of growth. Meaning green circular growth. The green subsidies in Europe, Biden's entry into the White House combined with majority in the congress, and Japan and South-Korea's commitments lead to green regulations that will create, strengthen, destroy and weaken a range of business models. Emissions, production and distribution of energy, materials, recycling, biodiversity and carbon capture. Words and terms that will be associated with other words like subsidies, mandatory and prohibitions.
Everything paid with loans. With a negative interest rate that makes it possible. For a while. Perhaps until the subsidies return in the shape of taxes? In year 2030? Going green with black numbers is the biggest bet in Europe in decades.
So how does 2021 look, through my eyes?
2020 was the year of the large tech companies. Apple, Google, Facebook, Amazon and maybe Tesla. There will not be a re-run. This year we will stay away from these. At least until we know what will happen on the regulatory side. There is a sense of “discomfort” in the “big-tech” culture. All the years we have believed we have used their services, have they actually been using us?
E-commerce companies (Amazon, MercadoLibre, Sea, Alibaba) will continue to increase their market shares, and maybe they will start to attack the banks account-hegemony?
In 2021 we will see estimates towards 2030 for sale of electric cars increase significantly. Hydrogen will have pockets of breakthroughs. Towards autumn 2021 we expect to see American, European and Japanese companies' reshoring aided by automation and robotization. The wealthy part of the world will to a greater extent focus on clean foods. Genetic research will have a breakthrough with a record number of studies completed within the next two years.
Now that I look into 2021 with my disruptive analytical eyes I see even bigger disruptive opportunities. A green world, as a result of regulations and changes in consumer behaviour. It will happen on all continents. And in many ways, it is about the heart and blood of society – its infrastructure.
2021 marks the beginning of a wave of investments into electrification (Siemens, Schneider Electric, Rexel, Atkore, Alfen), offshore wind (Gamesas, Vestas), solar power (First Solar, Sunrun), hydrogen (Iwantani, Bloom, Hydrogenpro, Xebec), power cables (NKT, Nexans, Prysmian), construction of offshore wind farms (Offshore Heavy transport, Cadeler), smart grid (Itron, Landis, Badger), storage (Wärtsilä, Enphase), energy efficiency (Covestro, Hunstman, Cornerstone, Barratt), circular economy (Veolia, Carbios, Renewi, Biffa, Re:newcell), carbon capture (Geo-Loop), water purification (Energy recovery).
Maybe even old Alstom who manufactures trains will experience a push by multiannual subsidies within green and urban mobility. Old “boring” companies that seize a disruptive opportunity are often good investments. In 2021 I believe there will be many of them. Cash flow, value and debt ratio will again be used with respect. They are financial tools that will return. Maybe like a boomerang?
I am an optimist. On March 28th 2021 we will again adjust to daylight savings time. At that point I believe we have gotten so far with vaccinations - that we are so close to a victory - that we just want to set the clock one hour forward. Not six months like in 2020.
Thank you for your time – I will see you in the future.
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