At a glance
Many of the changes to our everyday lives during the COVID19 pandemic will hopefully be relatively short-lived. At the same time, this crisis will also, in our view, accelerate some longer-term trends. We see longer-term opportunities in health technology, genetic therapies, e-commerce and fintech (as part of the ongoing digital transformation), food, and automation and robotics.
Trends that are here to stay
The structural changes set in motion by the COVID-19 crisis will pose challenges for investors. But they will also offer opportunities for thematic investing and stock selection. We think companies exposed to healthtech (including genetic therapies), digital transformation (including fintech, e-commerce, and food), and automation and robotics are all likely to see an enduring boost in demand.
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Areas of focus
- Healthtech. During the crisis, telemedicine has enabled individuals to access routine medical care without risking exposure to the virus or further straining the health care system. Since the outbreak began, one leading medical consultation platform experienced a 1,000% rise in monthly active users. Importantly, telemedicine also has the potential to lower the cost of care. But telemedicine is just one aspect of a larger trend toward healthcare technologies, or "healthtech." The healthcare industry generates 5% of the world's data, yet remains one of the world's least digitalized industries. Over the next decade, we expect a set of data-driven technologies, such as robotic surgery and artificial intelligence-assisted diagnostic imaging, to make healthcare more effective, efficient, and accessible.
- Genetic therapies. Gene therapies will probably not provide a cure for viral diseases like COVID-19. But they could significantly help healthcare systems improve service provision, something likely to come heavily into focus post-crisis. Unlike traditional drugs, genetic therapies aim to cure diseases by modifying or removing faulty human genetic information, actually removing the cause of illness. This represents a paradigm shift in medical care today, which usually just slows disease progression or relieves symptoms, requiring lengthy and costly care.
- Fintech. We think the pandemic will likely accelerate the shift toward fintech-based digital solutions as the experience of "lockdown" is encouraging consumers to adopt, or increase their use of, digital services like ecommerce, video streaming, food delivery, and online education, all of which are usually paid for using fintech solutions via mobile or online payments. Regulations have also favored fintech adoption, as the WHO has encouraged people to use cashless transactions.
- E-commerce. Similar to fintech, e-commerce penetration should increase due to the crisis, in our view. The lockdown measures implemented in response to the spread of COVID-19 have clearly hurt in-store sales, but there's also been a significant uptick in online shopping. Retailers with a strong online presence have also benefitted: Nike noted during its recent conference call that digital sales grew by a triple-digit rate in China while the country was on lockdown, and accelerated further even after stores reopened.
- Food revolution. The rapid spread of the virus and its devastating human and economic consequences have set in motion a call for greater safety and transparency across the food supply chain. This could lead to developments across the food supply chain. One potential area of growth is in the emergence of high-tech foods, such as plant-based meat alternatives, which may help satisfy demands for greater safety and transparency. Furthermore, many cities have required restaurants to shift to delivery-only service, in accordance with social distancing measures, a trend that we expect to continue even as virus concerns abate, as consumer preferences shift and urbanization continues. We expect the food delivery segment to grow by about 16% annually, and to be worth about USD 365bn by 2030.
- Automation and robotics. The COVID-19 pandemic, arriving on the back of the US-China trade tensions, has clearly demonstrated the vulnerability of global supply chains. Following the crisis, companies and governments will likely seek to diversify their supply chains and bring them closer to home. We see several long-term beneficiaries of this trend. One is warehouse automation, which we expect to experience structural growth alongside the rise of online shopping. Another is factory automation—companies with automated factories have been able to maintain production through the crisis, a clear competitive advantage.
- The structural changes set in motion by the COVID-19 crisis will pose challenges for investors. But they will also offer opportunities for thematic investing and stock selection. Trends such as population growth, urbanization, and aging are indisputable, and identifying sectors and companies poised to benefit from those trends can be important to long-term financial success.
- While investors can take a diversified approach to longer-term themes, we also highlight key areas that have been accelerated by COVID-19.
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