Technology is changing our world, and the Covid-19 pandemic has accelerated the process. This offers a thrilling investment opportunity, if you can stand the risks.
If you are looking to invest, say, $10,000 (Dh36,725) over the next quarter, here are three red-hot investment trends to consider right now.
The first will send your portfolio into orbit, the second should help keep it grounded, while the third will help you benefit from the next generation tech revolution.
While this may be an exciting time to buy into these sectors, as with any investment, you must consider both the risks and rewards, and aim to hold for years rather than hours or days. These are at the higher end of the risk scale.
Have a star-studded portfolio
Now could be a good time to join the space race and send your portfolio to the stars, Vijay Valecha, chief investment officer at Century Financial in Dubai, says.
“Space travel is one of today’s hottest trends, with the market cap of publicly traded, space-oriented companies skyrocketing to $25 billion, up from zero just a few years ago.”
This figure excludes Tesla founder Elon Musk’s SpaceX operation and Amazon founder Jeff Bezos's Blue Origin, both currently unlisted.
Businesses are competing to open up space for civil, commercial and defence purposes, and to mine new sources of energy and materials.
Some compare space exploration companies to the early stages of the internet, and Mr Valecha says the sky is the limit. “For now, the concept may be limited to orbiting the Earth, but what’s next? Maybe a trip to Mars?”
On July 20, the 52nd anniversary of the Apollo 11 moon landing, Blue Origin plans its first flight with Mr Bezos and brother Mark, plus the winner of an auction, with bidding for the seat ending at $28 million.
SpaceX’s Inspiration4 is planning an all-civilian mission into the orbit towards the end of the year, and Mr Valecha says the publicity will create favourable tailwinds.
“It is not far-fetched to foresee a day where the initial public offering of Blue Origin and SpaceX break ceilings. Space is no longer just about rockets and satellites; it is a growing digital platform in the sky.”
Today, you can invest in stocks such as Richard Branson’s British-American space tourism company Virgin Galactic, space infrastructure company Maxar Technologies, and aircraft maker Boeing, which is building its own space taxis and the most powerful rocket ever, Nasa’s Space Launch System.
Buying individual companies is risky and it might be wiser to spread your risk with an exchange-traded fund, such as star fund manager Cathie Wood’s ARK Space Exploration and Innovation ETF, or the Procure Space ETF, Mr Valecha says.
High-tech space exploration is not just about sending astronauts to Mars, Chaddy Kirbaj, vice director at Swissquote Bank, says.
“The space economy refers to a broad range of products and services, from aerospace design, such as the development of reusable rockets, to the production of high-tech materials and systems.”
It can also include manufacturing satellites for navigation or telecom services, R&D programmes and scientific experimentation, right down to “soft services”, such as sanitisation and catering, which present unique challenges in zero-gravity space conditions, he says.
Private investment in space infrastructure hit $8.9bn last year, while Nasa’s annual budget is $22bn.
“Fierce competition between the US and China in the fields of 5G infrastructure, robotics, AI and space tech will create enormous opportunities for growth,” Mr Kirbaj says.
The commercial space industry is still very much in its infancy and the rewards could be high, Mr Kirbaj adds. However, they are far from guaranteed. “Only invest for the long term, and make sure you understand the risks.”
If you fancy investing in something a bit more down-to-earth, Mr Kirbaj suggests the vegan and vegetarian revolution.
“Concerns over the negative impact of the meat industry on the environment, and the trend for more socially conscious lifestyles are fuelling rapid growth in plant-based industries, dairy alternatives and meat-free food,” he says.
Opportunities range from vegan food and dairy products, to plant-based clothing and footwear.
The global vegan food market was valued at $17bn in 2020 and is expected to grow 11.4 per cent a year to 2026, according to IMARC Group.
Food delivery firm Just Eat reported a 987 per cent growth in demand for vegan food in 2017 alone.
Vegetarianism is both a philosophy and socio-economic commitment, Mr Kirbaj says. “China has released new guidelines for reducing its national meat consumption by half, and this could be a good hedging strategy if your portfolio contains traditional food firms. This is a long-term, medium risk investment.”
Top stocks in the sector include Beyond Meat, whose plant-based products mimic beef, meatballs, ground meat and sausages. In the initial hype, its share price spiked to around $240 in July 2019 before crashing, although it is up 24 per cent so far this year to $155.
Other options include European frozen food giant Nomad Foods and Kellogg Company, which has an expanding range of vegan and vegetarian brands including Incogmeato and Gardenburger. Arkansas-based Tyson Foods, meanwhile, has launched plant-based protein brand Raised and Rooted.
Buying individual stocks is always risky, so you could spread your risk with the US Vegan Climate ETF, which screens large-cap US companies to exclude those involved in animal harm and exploitation, as well as fossil fuels, environmental damage and human rights violations.
Fifth-generation mobile phone technology will bring us faster download speeds and lower lag times, giving businesses and consumers access to more information faster than ever before.
This offers a great investment opportunity, YT Boon, managing director of investment manager Neuberger Berman, says. “5G technology is going to change our lives profoundly, across healthcare, entertainment, transportation, retail and much more.”
Connected factories and warehouses can implement real-time automation and analyse data instantly to improve production efficiency, he says. “Connected vehicles can improve traffic flow and reduce accidents, while connected health can enable remote patient monitoring.”
5G will bring about $13.2 trillion of economic opportunities and create 22.3 million new jobs by 2035, IHS Markit estimates.
“It is an unstoppable trend and the shifts to remote work, online education and virtual health seen in the Covid-19 pandemic will drive upgraded digital networks and 5G adoption,” Mr Boon says.
He sees opportunities across network infrastructure, connected devices and software, and new service providers supporting the expanded data flow.
Companies that should benefit include Snapchat developer Snap, whose 265 million users communicate through chat, photos and videos enhanced by filters.
“Snap is where marketers need to be if targeting advertising at an audience of Generation Z consumers. The app now reaches more than 70 per cent of 13- to 24 year-olds in the world’s most lucrative digital markets, but only takes tiny proportion of digital ad revenues,” according to Mr Boon.
Its “augmented reality” technology could transform how we shop, by allowing consumers to try on different outfits without having to actually wear them, and Mr Boon says Snap’s revenues are forecast to grow by an average of 50 per cent a year in the next few years.
He also admires Chinese radio-frequency component supplier Maxscend Microelectronics, whose customers include Samsung, Oppo, Vivo, Xiaomi and Huawei. “It has strong research and development capabilities, and looks set to benefit from the splitting of the supply chain, caused by rising China-US tensions.”
Mr Boon also highlights Nasdaq-listed II-VI, pronounced two-six, a global leader in optical laser material and compound semiconductors, which should benefit from new high-bandwidth applications such as autonomous driving, telemedicine, augmented reality and artificial intelligence, all of which require a vast amount of data.
Finally, he picks out electronic design automation software specialist Cadence Design Systems, which should see growing demand from customers seeking faster data speeds and smaller chips. “Recent acquisition AWR will complement its world-class analogue design software,” Mr Boon says.