Monday 4th October 2021
Accelerating change and finding unexpected winners
With a current focus on climate and sustainability transformation, other life-changing developments may be battling for similar attention.
ETFs have a habit of cottoning-on to popular themes and ‘climate’ or ‘clean’ captures this zeitgeist. Cross-sector thematics, however, can struggle for a sensible screening tool to find the appropriate companies. Some such as automation, cybersecurity or biotech tend to end up with most stocks from a narrowly defined sector.
Take the example of 5G, a heady promise of a vastly faster and reliable internet. To date there is nothing that can capture the outcome of this technology, and only a handful of US ETFs have a lame selection of telco and related stocks in their portfolio.
Technology is the enabler, yet it is likely that the best opportunities will lie elsewhere. Simple functional parts of the daily grind could be quite different. Take the trip the supermarket, where purchase scan data is made available to the individual who would then always know what was in the pantry and what required replacement.
The consumer could elect online delivery of these items, click a link to a recipe which would know what was already in the home or had to be purchased, easily see price changes and special offers. Retailers and consumer-staples producers face a welcome change from the trolley with a mind of its own.
Energy inefficiency is obvious to any casual observer. Systems that accurately change lighting according to conditions, regulate temperature well, switch from grid to internal systems and optimise heavy industrial users may mean the chatter on outages from renewable sources becomes background noise.
Already a Tesla home-based battery installation with the App can instantly tell the user anywhere how much energy is being used and generated or whether the home is on the battery or moved onto the grid. It is only one more step to optimise home energy use via a set of sensors and links to household appliances and electronic goods.
If AI is going to be the future of driving, it begs the question why the tests were not done on remote vacuum cleaners. While they have been around for some time, reviews state they still struggle by getting stuck or eating the curtains and are unable to empty themselves.
Surely the mix of research into driverless cars and home sensors can overcome these problems. Personal gripes aside, everyone would have examples of tasks that the marriage of 5G and other technologies can solve. A host of possibilities across healthcare, tracking agricultural production and of course, industrial production, are there.
ETFs are an unlikely vehicle for an investment solution as it is often lateral thinking on the concept that leads to stock ideas outside the capability of a screening tool. But it therefore requires fund analysts that can step over momentum stocks without fear of underperforming the index to truly encapsulate the potential unexpected winners.
Giselle Roux is one of Australia's most well-known and highly regarded investment strategists, having held the role of Chief Investment Officer at both Escala Partners and JB Were. She has also held a number of senior equities analyst and investment banking roles including with Citigroup, Bank of America Merrill Lynch and McIntosh Securities. Giselle is a host of The Inside Network events, a member of the Advisory Committee and contributor to The Inside Adviser publication.
