As interesting as it is to discuss yesterday’s winners, investing will always be a forward-looking game. And while none of us can know the future for sure, it’s not all that difficult to identify emerging trends.
Here are three I think could make committed ‘buy and hold’ investors a lot of money over the next decade.
The robots are coming
If you believe the tabloids, many of us face near-certain redundancy as machines take over the world. Sensationalist headlines aside, it does feel like the trend towards automation is only going to get stronger as the years pass. Using robots for repetitive, mundane tasks does, after all, free up more time for humans to focus on more important work.
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One way of getting exposure is through the L&G Global Robotics and Automation ETF. This invests in a basket of 90 companies, all of whom generate a “material proportion of their revenues” from the industry. Fees are high, relative to your average FTSE 100 tracker, but this has been more than compensated for by the growth seen to date (+62.6% over the five years to December 31, 2019).
An alternative would be the iShares Robotics and Automation UCITS ETF which has a lower ongoing charge and slightly less concentrated portfolio.
Going electric
The fact US manufacturer Tesla eclipsed £100bn in value last week should give some indication of just how excited investors are over the electric car revolution.
This enthusiasm makes sense. Assuming the consensus forecast is right, there’ll be approximately 30m such vehicles on the roads in 2030. Right now, there are only 3m.
You could, of course, just invest in Tesla (although be prepared for a bumpy ride). An alternative would be to buy into companies providing services to the global automotive industry, such as UK-listed AB Dynamics.
For those with strong stomachs, there’s also the option to invest in businesses that specialise in mining for metals that will be essential to this market. Electric cars will, for example, require roughly three times the amount of copper needed in conventional vehicles. Nickel is likely to be a central component of the batteries that power them.
While there are few funds currently dedicated to tracking this trend, iShares does offer a way in through its Electric Vehicles and Driver Technology UCITS ETF. With 95 holdings, the fund is sufficiently diversified and has a reasonable ongoing charge of 0.4%.
Climate crisis
From the push for retailers to use less plastic, to the growing popularity of veganism, to using more environmentally-friendly ways of generating power, tackling climate change has become a priority.
Looked at purely from an investment perspective, this is potentially great news for a number of UK-listed firms. FTSE 100 member and corrugated packaging specialist DS Smith could be a big beneficiary, particularly as more and more of us are choosing to shop online. With its growing vegan range, high street baker Greggs could also be a tasty long-term hold.
When it comes to renewable sources of energy, a relatively cheap exchange-traded fund might be best option, particularly as identifying the long-term winners in this space arguably requires more specialist knowledge.
Blackrock’s again offers such an option with its iShares Global Clean Energy UCITS ETF. The fund rose a little under 44% in 2019 alone, highlighting just how lucrative going green is becoming.
