There will be money, but not immediately
How to make money on long-term trends
Dmitry Nuriakhmetov, Forbes, 03.06.2019
The gradual slowdown in the growth of stock indices and, consequently, the return on investment has already caused headaches for market participants: in 2018, investors did not receive the indicators they used to count on. As a result, many began to look for new tools and sectors that could bring income above the market. We have selected four sectors that can claim to be "dark horses" and provide potentially higher profitability compared to the average market level.
(Read about electric cars and esports in the original article – VM.)
Human genome: Breakthrough research
Today, the fields of biotechnology and genetic engineering are among the most dynamic in the world. People are driven by the desire to cope with diseases that are considered incurable today. The genome provides invaluable information that can be used to determine predisposition to diseases and effectively select the optimal treatment through personalization. There are many synergistic opportunities with other areas of biotechnology: for example, stem cell research combined with the success of genetic engineering can improve the efficiency of organ transplantation.
Genetic engineering has already left the field of pure science and has become a business. The volume of the genome sequencing market (that is, the analysis of its structure) in 2017 amounted to $6.2 billion. By 2025, according to forecasts of Allied Market Research, it can reach $25.5 billion, which means an increase of 19% per year. The gene therapy market is estimated by the same company to grow from $0.6 billion in 2016 to $4.4 billion by 2023. And the volume of the gene editing market for the treatment of diseases, according to Global Market Insights, will reach $7.5 billion by 2024.
Many firms working in these areas are traded on the stock exchange, and you can invest in them directly through a broker. This is, for example, Illumina, which is engaged in DNA decoding, or Genomic Health, which performs analysis in order to diagnose and personalize cancer treatment. BlueBird Bio company works in the field of gene therapy, and CRISPR Therapeutics is engaged in genome editing – however, this project is still at the beginning of the road. If an investor has no desire to analyze companies, it is possible to invest in a diversified exchange-traded fund (ETF) with the subject of biotechnology and genetic engineering, for example, on the Solactive Genomic Index.
We believe that this is one of the most promising and profitable investment ideas. It is able to overtake market benchmarks by 5-10% annually, although it can be quite risky.
Population aging: Treasures of the Silver Economy
There are more and more elderly people in the world due to advances in medicine, which are steadily increasing life expectancy. According to Credit Swiss forecasts, by 2040 there will be twice as many people aged "65 plus" – 1.3 billion people.
Older people have different priorities and consumer preferences. Accordingly, the trend of population aging will have a strong impact on the economy, consumption structure, healthcare, real estate market and financial services. It is important that these will be mostly "atypical" elderly people for us. They will want not just to bask on the bench and nurse their grandchildren, but to prolong their active age. Accordingly, the services of companies that are focused on life expectancy will be in demand.
With the improvement of medicine, people will prolong their active age and will spend more money on tourism, entertainment and cosmetics. For example, in the UK, spending on the beauty category of women aged 60+ accounts for more than a quarter of the market. Of course, healthcare will also develop. As a result, health spending in the United States alone, according to Centers for Medicare and Medicaid Services, will grow from the current $3 trillion to $5 trillion by 2023.
An increase in the duration of active life will also affect the real estate market. A separate class of real estate has already appeared – senior housing. Its peculiarity is that elderly people can live in comfortable conditions without the help of children, they are provided with medical care at home and proper care if necessary. By the way, the senior housing sector is significantly less susceptible to fluctuations in business cycles than other types of real estate.
In addition, do not forget about the financial sector. An increase in the number of pensioners compared to working citizens will increase the relevance of life insurance tools, from pension products to protective and service ones.
You can make money on this trend by buying, for example, shares of pharmaceutical companies, manufacturers of medical equipment, biotechnologies, tourism and cosmetics. You can participate in senior housing through REITs (real estate funds specializing in this class of real estate).
There are also ETFs investing in similar topics: Global X Longevity Thematic ETF (focus on pharmaceuticals and biotechnology) and Janus Henderson Long term Care ETF (diversification between real estate, pharmaceutical sector and biotechnology). According to our forecasts, this area can bring an investor an income of 3-5% per annum above market benchmarks over a long time horizon. At the same time, it should be remembered that the trend is long-term and requires conscious investment for a period of at least 5-7 years.
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