Investment ideas for 2020 and beyond. Learn what trends will drive the stock market in the next decade.
Disruption creates opportunity
2020 has been challenging in multiple ways. The global pandemic changed our lives. We have adapted rapidly to a brand new world. Six months through the outbreak, it is almost unthinkable to go back to where things were before. The covid pandemic accelerated many habits and trends that we were making strides in our lifestyle.
With the world getting closer to a covid vaccine, I want to offer you several investment ideas based on how our life we look like after the pandemic. Technology is bringing a lot of changes. It opens opportunities that have been unimaginable before. All these secular tailwinds make me feel optimistic about the future of the U.S. economy and the stock market since we are already leaders in technology, healthcare, and financial services.
Firstly, my strongest investment idea for 2020 is digital expansion. From online shopping through mobile banking to remote learning, home fitness, and telemedicine, the digital transformation is here to stay. Moreover, we can order our groceries online. And get our dinner delivered at our front door. Talk to our doctor over Zoom. Take an online fitness class. And deposit our checks on our phone. You can even buy a new house or get a mortgage refi without leaving your home. My two-year-old son knows how to use my laptop by now.
E-commerce has been steadily growing over the years. From merely 4% in 2010, e-commerce now has a 12% share of the total U.S. retail sales in 2020. Even after the covid pandemic, e-commerce has barely scratched the surface and has a massive runway for expansion. Furthermore, besides the U.S. and China, e-commerce is just beginning to spread in the rest of the world. Digital opportunities are still limitless.
The businesses that can rapidly adapt to these changes will become the next industry leaders in their respective fields.
Same day delivery
For all of you, Amazon, Walmart, Costco, and Target fans out there, same-day delivery will become an industry-standard sooner than you think. All major retailers are moving in this direction, and smaller competitors must catch up very quickly to stay in the game.
Instacart, who is the pioneer of same-day delivery, has existing relationships with Walmart, Safeway, Costco, CVS, Kroger, Loblaw, Aldi, Publix, Sam’s Club, Sprouts, and Wegmans. Amazon is already in the running, while more competitors such as Uber and DoorDosh are starting to make strides in the same direction.
Distribution and logistics
With commerce moving quickly from physical retail to online shopping, your local Sears, JC Penny, Neiman Marcus, and Stein Mart will become distribution centers for the e-commerce giants. I visited our local Nordstrom store for the first time in 8 months. Half of their first floor was covered with shipping boxes. Make your own conclusions.
Retailers of all sizes will need to master the art of logistics. They will need to learn how to move goods quickly and cost-efficiently around to country to meet customer demands.
Digital payments is one of our strongest investment ideas for 2020 and the next decade. Major card payment networks comprise barely 12% of the total world payments. Still, 29% of all these payments are in cash, while the remaining 59% are made through bank and wire transfers. I see an enormous opportunity in the growth of digital payments. Within the next decade, the physical credit card will become archaic. Coming soon, we will simply make our payments through digital wallets, Q.R. codes, voice control, and even face recognition.
The digital transformation requires an enormous amount of data storage and I.T. infrastructure. Every single day, the humankind sends 500 million tweets, 294 billion emails, and 65 billion messages on WhatsApp. We make 5 billion Google searches a day. In 2020 the digital universe is going to reach 44 zettabytes. By 2025, experts estimate that the world will create 463 exabytes of data each day. That’s the equivalent of watching 212,765,957 DVDs per day!
To support this data demand, the global annual spending for cloud computing will grow from $371.4 billion in 2020 to $832.1 billion in 2025. That is 17.5% average yearly growth in the next five years.
Cybersecurity is no longer optional. It is a necessity for both individuals and businesses. The digital growth is bringing bad actors looking to profit from our fears and weaknesses. Protecting your data is critical for safely navigating the digital universe.
Here are some numbers. The 2019 U.S. President’s budget added $15 billion for cybersecurity. Microsoft has committed to spending $1 billion annually for safeguarding their customers’ data. The size of the cybersecurity market was at $161.07 billion in 2019. It will reach $363.05 billion by 2025, with an annual growth of 14.5%. Therefore, cybersecurity becomes one of my best investment ideas for 2020 and beyond.
Automation and robotics
There are currently almost 6 million job openings in the U.S. and 1.2 million in Germany. In Japan, there are 1.5 vacancies for every job applicant. Therefore, with labor shortages around the world, there is a strong case for more manufacturing automation and robotics. Companies will push for more automation to provide faster service, better quality control, enhance job safety, meet unexpected demand surges, and keep profit margins high. Today’s general-purpose robots can control their movement to within 0.10 millimeters. The future generation will have a repeatable accuracy of 0.02 millimeters and could go even lower. Advanced sensor technologies and data connectivity will therefore allow robots to take on tasks that are not currently available in real-time.
Another investment idea for 2020 is 5G. The 5G is the next-generation mobile network and the new global wireless standard. For us, the consumer, the 5G, will bring higher speed, better responsiveness, and more reliability to our phone calls, text messaging, video conferencing, and home internet. Initial projections estimate that we will have a 10X higher speed than current levels. Moreover, 5G will take the world of connected devices to the next level. For instance, the growing network of smart homes, devices, smartwatches, speakers, cameras, and connected cars can dramatically change the way we interact with the rest of the world.
One of the primary beneficiaries of 5G will be autonomous driving. Driverless cars require a huge amount of real-time data – sensors, GPS, traffic, weather, vehicle to vehicle, and vehicle-to-infrastructure communication. The 5G network alongside cloud computing capabilities will accommodate more driverless cars on the road. Several companies, above all, are pioneering the autonomous driving efforts – from Tesla to Google and Uber. While still unproven and controversial, I could envision early adoption of driverless cars in smaller communities such as college campuses, assisted living communities, and amusement parks. Furthermore, the second wave will expand to robotaxis and commercial short- and long-haul vehicles.
Work from home (anywhere)
You probably got a taste of working from home during the covid lockdown. While WFH is quite popular in California, but it was not as common in other parts of the country. Google, Twitter, Facebook, and other big tech companies are not calling their employees back to the office until the Summer of 2021.
During the Spring and Summer of 2020, we saw a huge spike in housing demand in suburban areas near large metropolitan cities – Marin and Contra Costa County near San Francisco, The Hamptons and Fairfield County, CT near New York City. Furthermore, we also saw a massive demand for remodeling, gardening, and various house improvement projects. Home fitness apps such as Peloton have more doubled their active users in just one year. Athletic apparel giants like Nike and Lululemon continue to attract new customers and gain market share.
Working from home is here to stay. Both public organizations and private companies will have to adapt to this trend. New leaders will emerge, and old vanguards will vanish. To survive in the WFH economy, the new office will turn from a cubicle maze to a collaborative space.
Employers can look for talent not only in the local communities but everywhere in the world. Workers will avoid being in traffic for 2 – 3 hours. Productivity will get an enormous boost by improving work-life balance and remote team collaboration.
Socially responsible investing
Socially responsible investing has been building a strong base in the past decade. It is no longer a niche investment endeavor for altruistic investors. According to Global Sustainable Investment Alliance, strategies that take a company’s environmental, social, and governance factors into consideration — grew to more than $30 trillion in 2018 and expected to grow to $50 trillion over the next two decades. For example, reporting transparency, green technologies, community support, sustainable operations, carbon neutrality, employee satisfaction, and customer wellbeing will become flagship criteria by how corporate managers will be evaluated in the future. Furthermore, the Security and Exchange Commission is evaluating a playbook to standardize the sustainability disclosure between various sectors and public companies. We will continue to see a steady push towards organic farming, renewable energy adoption, electric vehicle expansion, and community engagement.
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