Five growth trends for the 2040s

Each week, an investor tells MoneyWeek where he’d put his money now. This week: Angus MacDonald, founder of Financial News and chairman of Helius.

When I sold my publishing business in 2007 I was keen to invest in sectors that would have real growth over the next decade or two. Rather than buying a portfolio of listed equities, I wanted to take a significant stake in a few companies and have a say in how they were run. There were several areas I wouldn’t have the skill to influence, such as insurance or software. Others such as pubs or textiles are declining in the UK, while some were out of my league (oil exploration and nuclear power among them). My highlighter settled on just four sub-sectors where there was a high likelihood of fast growth in areas where I might be able to use my capital to create a business that would be widely recognised as excellent in its industry and produce great shareholder returns.

I also wanted to put the bulk of my money into a very long-term asset that would grow steadily, didn’t need watching much, and offered some real security. Forestry had these attributes and more; with trees growing at 4% a year, a major new customer base in biomass, and the UK importing 80% of its timber, it was very promising. It’s been terrific, leaving other asset classes in the shade. Timber has some real tax advantages too.

Of the four ‘active’ sectors that I was pursuing, I have yet to identify suitable opportunities in two themes – ageing and water. By 2050, there will be six times more people aged 85 or over than there are now (of which I’ll be one). Our generation will need small flats or single-level houses, we will consume lots of medicine, will go on the equivalent of Saga tour holidays, and do all the other things that today’s elderly do, except in crowds.

I would steer clear of care homes – they seem to struggle to maintain the sort of standards we would like our parents to experience. But there’s no doubt that our ageing population represents an enormous future business opportunity. As for water, around 70% of the world’s population lacks access to clean water and sewage. As China, India and other countries in the ascendancy invest in their infrastructure, water and all its ancillary products will have big money spent on it; so pumps, desalination, filtration technologies and so on seem a natural investment area.

The two sectors I have invested in are waste and renewable energy. In the UK, 60% of business waste still goes to landfill. The current 500 or so landfill sites will all be full by 2020. I am chairman of SWR, a private company which approaches big, complex waste producers – such as car dealership Lookers, Inchcape, Dobbies Garden Centres and Macdonald Hotels – and helps them progress to the highest possible recycling levels and cut their waste-disposal costs substantially. Our revenue this year will be double last year’s at £7m, and our clients love us, so I am convinced we’re on to a good thing.

As for renewable energy, here I am focusing on biomass. My best option was to invest in Helius Energy, the only quoted firm in this area. I have a 19% stake and have recently joined the board. The company has consent for two sites – one in Rothes by the River Spey in Scotland that uses whisky draff (a by-product of the distilling process) to produce heat and electricity, and a 100MW site in Avonmouth that will burn waste wood and forest residue. I am also investing in a large waste-wood aggregator that will supply chips to biomass firms.

A secondary benefit of looking at the investment potential of different sectors it that it is helping my four boys to identify promising and interesting jobs. Whether it’s capital gain or career paths, looking for growth sectors on a 20-year horizon must be the right thing to do.