2023 Investment Themes
Global Supply Chain Resilience
The aftermath of COVID-19 pandemic exposed structural flaws that have prompted organizations to fundamentally reassess their approach to global manufacturing and sourcing. Factory lockdowns, transportation disruptions, and panic buying led to shortages of everything from medical supplies and household necessities to critical automotive and electronics components. The crisis also heightened geopolitical tensions, trade restrictions, and nationalist policies aimed at promoting domestic industry that are likely to continue reshaping the global business landscape. With the passing of the CHIPS Act and Inflation Reduction Act, 2022 saw a slew of semiconductor companies and auto-manufactures announcing multi-billion dollar construction plans. Here are the companies poised to benefit from these large construction projects:
Stagflation
U.S. inflation fell recently, with consumer price index readings for November coming in at an 7.1% year-over-year increase, down from 9.1% in June. However, inflation still remains well above the Fed’s 2% target. Worryingly, gross domestic product fell for two straight quarters, meeting the technical definition of a recession. As a result, some investors are worried about stagflation, a dangerous combination of elevated inflation and stagnating economic growth. A stagflationary environment wreaks havoc on equity, fixed-income and cash assets, leaving investors with few shelters from the storm. Here are the companies that can outperform during stagflation:
Water Shortage
Globally, 785 million people lack access to clean water; 2.1 billion people don’t have clean drinking water in their homes. But the world’s surging population combined with the effects of global warming—extreme drought in some areas, extreme flooding in others—means water scarcity still affects 4 out of 10 people. With clean water becoming an increasingly scarce resource, water is more valuable than it’s been in decades. And so are the companies that supply it. The water crisis is clearly on Wall Street’s radar, and the institutions are investing in the push to solve it.
Energy Independence
The Russian-Ukraine War has put Europe and the rest of the developed worlds under unprecedented energy crisis. This is leading to energy demand wars and oil production cuts by OPEC+, which has continued to fuel the global inflation problem. The year ahead promises new growth paths for the renewable energy industry, with some potential headwinds toward helping nations become more engird independent. Here are the next-generation clean energy technologies to keep on your radar:
Next-Gen Computing
Whether or not you're a believer in the idea of the metaverse, one thing is for sure, mega-cup companies like Meta, Sony, Microsoft, and Nvidia are investing heavily in what they believe is the next generation of computing that will blend digital with physical spaces. Companies focused on creating the metaverse could be the next huge investing opportunity:
Reemergence of the IPO Market
Initial public offerings (IPO) came to a screeching halt in 2022 as the Fed increased rates in efforts to combat a persistent inflation. This led to the largest unicorn companies halting or delaying their IPOs as the liquidity in the market seemingly evaporated, some valuations we slashed and layoffs become the buzzword towards the end of 2022. However, late 2023 early 2024, could see the opening of the IPO market. Here're the mega-private companies to watch for IPO in late 2023 through early 2024:
Stripe
Flexport
Databricks
Fanatics
Epic Games
Any ~10 Stocks
2021 and early 2022 was the years of SPACs (special purpose acquisition company) aka blank check companies. SPACs have received a bad reputation recently due to their lackluster performance, however, there are some post SPAC mergers that a poised for longterm (5-8 years) growth. However, it's important to note the high likelihood of any of these companies going bankrupt within that time if they fail to materialize. These are the post-SPAC mergers to add to your watchlist:
Take a Basket with You
I know what you're thinking, how do you expect me to buy all these stocks? Lucky for you, there are some great ETFs tracking these themes. Here’re what you can add to your watchlist:
Global Supply Chain Resilience: Global X US Infrastructure Development ETF (PAVE)
Stagflation: Vanguard Health Care ETF (VHT)
Water Shortage: Invesco Water Resources ETF (PHO)
Energy Independence: iShares Global Clean Energy ETF (ICLN)
Next-Gen Computing: Vanguard Information Technology ETF (VGT)
Reemergence of the IPO Market: Renaissance IPO ETF (IPO)