Short term noise—the recent government shutdown fight, the latest threat from North Korea, bitcoin—is hard to ignore, but focusing on it can make investors completely miss long term trends that will matter far more to their portfolios in the long run.
The best investments you can make tend to rely on big-picture trends, or megatrends. Think the kinds of trends that can transform the global economy—widespread adoption of new technologies or broad demographic shifts—and don’t rely on a bull market to deliver gains.
Here are five megatrends to keep an eye on.
The number of Americans 65 and older will double to over 98 million over the next four decades. But America isn’t the only graying nation. Advances in modern medicine and increased standards of living have raised life expectancies around the world.
This trend isn’t exactly new, and has been predicted by demographers for years. But with the youngest Baby Boomers now in their mid-50s, the demographics of this generation are now reaching an important tipping point.
To profit on this trend, look to health care, pharma, and biotech stocks, especially those that are working on the next generation of treatments for seniors.
A.I. Health Care
The revolutions that will come as a result of more R&D investments in treatments for the growing senior population won’t be the only revolution that we’ll see in the healthcare space.
Over the last several years, computers have learned to see with help from complex algorithms deep neural networks. A neural network—which is loosely based on the web of neurons in our brains—can learn tests by identifying patterns in huge amounts of data. For example, a neural network can learn to recognize a bicycle by analyzing millions of images of bicycles.
Using this technique, machines can also learn to identify signs of disease and illness in medical scans – by analyzing CT scans, a neural network can learn to spot lung cancer for example.
This technology will not only improve health care in places where there are few doctors, but it will also streamline care in the developed world. Google (NASDAQ: GOOGL) is already running tests in two hospitals in India, and the start-up Infervision has deployed similar technology in hospitals in China.
Neural networks aren’t just limited to image recognition. The same techniques are rapidly improving gadgets like the Amazon (NASDAQ: AMZN) Echo—which can recognize spoken commands from across a room—as well as online services like Skype, which can instantly translate calls from one language into another. This technology—which understands the way people speak and write—is called natural language understanding.
The advances in this area may soon fundamentally change how we interact with potentially any machine. Imagine a future where Amazon’s Alexa could have an actual conversation with you. Right now, it recognizes words well and can respond to basic questions and commands, but truly understanding complex sentences is beyond machines at this point. But as advances are made, we near ever closer to a future with Rosie the robot maid from the Jetsons or Hal from 2001: A Space Odyssey.
Robotics & Automation
It isn’t China stealing our jobs, it’s robots.
For an example, just look to manufacturer First Solar (NASDAQ: FSLR), which is undercutting cheap Chinese solar panels with even cheaper solar cells manufactured in Ohio. It has done this in part by laying off hundreds of workers and fully automating their fabrication processes. As a result of the change, First Solar is “now in a better competitive position than ever” according to the company’s CEO.
Investors wanting to profit on this mega trend could look to big names in automation like Rockwell Automation (NYSE: ROK) and Siemens AG (OTC: SIEGY), or to smaller niche robotics companies. A good place to start with finding those would be to look at the holdings of the Robo Global Robotics and Automation Index ETF (NASDAQ: ROBO) which has a mix of 90 mid- and small-cap companies.
The future is electric. Robots, self-driving cars, flying cars, the global proliferation of portable devices, and the continued developments in sustainable energy all mean that demand for better batteries will continue to gather pace.
This rising demand is fueling companies engaged in battery research and production, as well as the miners of the raw materials that go into battery production including lithium and other metals.
Demand for lithium alone is forecast to grow 15 to 20% annually over the next decade, and miners offer an interesting way to profit.
The other option is to look for battery producers, as the battery manufacturing space for electric vehicles alone will become a $240 billion global industry in the next 20 years. Investors could consider large manufacturers like Panasonic (OTC: PCRFF), Samsung, LG Chem (NYSE: LPL), or BYD (OTC: BYDDF) which is both an EV manufacturer and one of the world’s largest battery suppliers. There are also multiple smaller EV battery manufacturers in China including CATL, Lishen Battery, and Wanxiang Group.