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The Future & beyond 🔮

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The Future & beyond 🔮

4 Sectors for the long-term

Ali Kokaz
Mar 28, 2021
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The Future & beyond 🔮

alikokaz.substack.com

Hello all! I hope you’ve had a great week. I’ve not put out any stock research this week for two main reasons:

  • Markets have been volatile this week, meaning no particular stocks stood out as good opportunities.

  • I have been working hard in the background on bringing you more features, including providing interactive access to the results of my algorithm and more. I can’t announce too much yet, but stay tuned, I’m massively excited about this!

Why have the markets been volatile?

A few things have been at play to cause the market to both go up, and down.

  • Doubts growing around the vaccine roll-out, fuelled by export bans from the EU and India, along with the looming threat of a 3rd wave in Europe, saw bond yields dip earlier in the week. This helped support the price of growth/tech stocks earlier in the week.

  • Tensions between the US and China increased, and US regulators renewed their threats to delist Chinese stocks quoted in the US. This saw Chinese tech giants such as Baidu, Tencent and Alibaba all drop significantly (there’s actually a bit more to this story now, rumour has it that a hedge fund or family office blew up last week, creating a fire sale).

  • Energy stocks & related commodities shot-up as a massive ship blocked the Suez canal, blocking the fastest shipping route linking Europe and Asia.

    Shipping losses mount from cargo vessel stuck in Suez Canal
    You won’t be able to 3-point turn that…
  • Quarter-end rebalancing for many asset-management firms will see a flow out from equities to bonds, as many have to maintain proportions of equities-to-bonds in their portfolios, which would have been thrown out of whack given the rally stocks have been on since the start of the year.

    Money put into stocks was at its lowest since Dec 20 ($4.1Bn) while money flowing into cash instruments was at its highest since Apr 20 ($45.6bn), TIPS (Treasury Inflation-Protected Securities) saw its third largest inflows ever.

What does this mean for the weeks ahead?

Definitely more volatility, especially as COVID outlooks yo-yo. Prices likely to dip lower, particularly for the highly overvalued growth stocks (EV anyone?) and a continued rotation from tech/growth stocks into cyclical stocks and inflation-protected bonds.

What about the longer term?

The outlook is better. A return to normal (how many times have you heard that saying now?) is now more tangible, as more vaccines get announced and administered (Biden has doubled targets to 200m doses in his 100 days in office, UK have confirmed they are on target to offer a vaccine to all adults by July, with nearly half already administered a first dose). After all, the whole worry of rising inflation is due to rapidly recovering economies.

This makes these few weeks a perfect opportunity to research and pick out some long term prospects, to purchase at these subdued prices and hold through the volatility.

To help you do that, i’ve researched up and coming sectors, and likely players in that field to help give you some inspiration. Now just because a stock is on this list does not mean it’s a good investment choice, but it’s a good place to start looking.


Cloud computing ☁️💻☁️

What is it?

Cloud computing is the delivery of on-demand computing services, including servers, storage, databases, networking and software over the internet. Typically, You only pay for the services you use, and can obtain extra resources or computing power within minutes, meaning quicker set-up and lower operating costs with more flexibility.

Why should I be excited?

Cloud computing has seen tremendous growth over the last decade. Revenues grew from $197Bn in 2018 to $266Bn just 2 years later. This is forecasted to grow to $354Bn by 2022 as take-up scales.

source: Gartner

Cloud computing is already a go to solution for internet services like large websites (Reddit), content delivery platforms (Netflix, Spotify) and start-ups. This is driven by its simplicity, flexibility, cost advantages and an ever-growing number of solution services (AWS offering pre-built fraud detection solutions for example).

Larger, more traditional corporations have been also making the move to cloud computing, albeit at a slower pace. This could be due to security hesitancy (worries of hacks, leaks etc), legal requirements (GDPR requires personal data to be stored in the same jurisdiction, FDA has stringent requirements for cloud usage) or the right solution not available currently.

These barriers are reduced constantly as the sector advances, meaning take up of cloud becomes easier, and more necessary, as computing requirements increase.

Additionally, with increasing internet bandwidth and speed across the world, new cloud solutions also become more feasible. Take cloud gaming for example. Rather than having to build and maintain your own gaming PC, Shadow provide a high-end PC to play with, streamed over your internet connection, all for a minimal monthly fee. Since the company maintain the infrastructure, in a few years time when more powerful PC parts come out, they will upgrade that infrastructure for you.

Relevant Stocks

  • Amazon (AMZN)

  • Microsoft (MSFT)

  • Google (GOOGL)

No cloud computing list is complete without the 3 stocks above, between them and their services (AWS, Azure and GCP) they absolutely dominate the cloud market.

  • Digital Ocean (DOCN)

  • Salesforce (CRM)

  • DataDog (DDOG)

  • Cloudflare (NET)

  • Twilio (TWLO)

  • Dropbox (DBX)


Clean energy 🌿🔋

What is it?

Clean energy is useful energy that is collected from renewable, zero emission sources, most of which are naturally replenished on a human timescale, including carbon neutral sources like sunlight, wind, rain, tides, waves, and geothermal heat.

There is a large crossover between clean and renewable energy sources, although they are not the same. Uranium for example is classed a clean energy source (due to low atmosphere pollution) but is not renewable.

Why should I be excited?

This one is pretty obvious, globally people are moving towards more sustainable uses of the Earth’s resources, to ensure we don’t damage the planet even more.

Governments are becoming more stringent with energy regulations, and companies are now measured by ESG standards (Environmental, Sustainable and Governance).

As clean energy technology improves, it will without a doubt become more widely used and adopted. It has rapidly picked up over the last year, accelerated by Biden being voted into power, and a SPAC frenzy meaning more capital is being pumped in than ever before.

This extract from the FT summarises the breadth of this sector well:

From new battery storage technologies to sustainable aviation fuel, lab-grown meat and low-carbon concrete, investors are rushing to put money behind renewable energy producers and other companies fighting climate change.

Source: FT

Michael J Burry has also recently gone in on clean energy, through Uranium holdings, here is a good post discussing it.

Relevant stocks

  • URA

  • URNM

  • NLR

  • ICLN

  • TAN

  • BEP

  • Nextera (NEE)

The majority of these are ETFs, which would be my suggested way of investing into clean energy, given that most of the companies in this sector are still immature, and you would need to allocate a large amount of time into researching them to select the right one.

Genetic therapy and genomics 🧬💉

What is it?

Genetic therapy is an approach that uses a person’s genes to treat or even prevent diseases. There are several different types of therapy, such as replacing a mutated, disease-causing gene with a healthy version, getting rid of a mutated gene that isn’t working properly and even introducing a new gene into the body to fight off diseases.

Why should I be excited?

While still in very early stages, and likely to take the longest to develop compared to the other sectors I’ve discussed, this one can have tremendous pay-off.

So far, two therapies have managed regulatory approval, Novartis’ Zolgensma for spinal muscular atrophy, and Spark’s Luxturna for a rare form of genetic blindness. More are waiting their turn. To give you an idea of the magnitude of diseases gene therapy can solve, here are some recent developments:

  • Earlier in the year, German scientists reported they were able to use gene therapy to help paralyzed mice run again. 

  • Chinese scientists develop gene therapy which could reverse the effects of ageing.

  • Trials are ongoing with CRISPR technology to tackle leukemia and lymphoma

Relevant stocks

  • CRISPR Therapeutics (CRSP)

  • Invitae Corp (NVTA)

  • Sarepta Therapeutics (SRPT)

  • Agilent Technologies (A)

  • Editas Medicine (EDIT)

  • Bio-Rad (BIO)

Artificial Intelligence

What is it?

Artificial intelligence is intelligence demonstrated by machines, unlike the natural intelligence displayed by humans and animals, which involves consciousness and emotionality.

Artificial General intelligence (AGI) which attempts to emulate a more broad level of intelligence, similar to humans, is still a fair way away.

However, Narrow Artificial Intelligence (what most people refer to when mentioning today’s technology) which is good at performing a specific task, like playing a game of poker, or faking videos of Tom Cruise, has come on leaps and bounds, and is an area of both massive funding and development.

Why should I be excited?

AI has already become an integral part of technology solutions. Ranging from recommending Youtube videos, powering FaceID and enhancing photos to self-driving tech, property heating optimisation and trade execution optimisation.

Believe it or not, the technology is still relatively young, the first working deep learning algorithm being purchased by Google in 2012 (oh, you don’t believe it was that recent? read this article then).

There is still a tremendous amount of potential to be gained from AI algorithms, with uses in pretty much every industry imaginable, from manufacturing, to health care and social media.

Relevant stocks

This one is trickier than you think, lots of companies use AI, but there aren’t many pure-play AI stocks, especially since up and coming technology tends to get purchased by the big players at early stages.

ETFs in such a fast moving world would be a good option in this case.

  • IBM (IBM)

  • Palantir (PLTR)

  • Baidu (BIDU)

  • C3.ai (AI)

  • ARKQ

  • IRBO


Honorable mentions

I can’t do all the research for you! Think of this as a pointer for other sectors you can look into.

Proptech 🏡📱

Mental health 🧠🏥

Space 🛰🧑‍🚀


What do you think of these sectors? are you involved in any? let me know by dropping a comment!

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The Future & beyond 🔮

alikokaz.substack.com
8 Comments
RKS
Apr 6, 2021Liked by Ali Kokaz

mashaAllah keep up the brilliant work

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Max Saville
Mar 29, 2021Liked by Ali Kokaz

As someone who has only recently started investing this sort of content is incredibly helpful, keep it coming!

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