How to invest in the trends that are changing the world

Professional investor Jeremy Thomas looks at the global trends shaping the world to come and picks four firms that will be long-term winners.

A professional investor tells us where he'd put money. This week: Jeremy Thomas of Sarasin & Partners selects four firms that will be long-term winners.

The global financial crisis that began a decade ago and the consequent super-easy monetary-policy response is drawing to a close. Tax cuts in the US will further accelerate the move towards the end of this extended economic cycle. What does this mean for investors?

We believe global markets will begin to reflect the end of the expansion phase of the cycle in the coming year or so. Equity valuation multiples are unlikely to rise further and corporate margins in much of the developed world are peaking. Economic growth and above-average market returns will be harder to come by. Rather than relying on a rising tide to lift all boats, investors will need to actively select companies able to sail under their own wind. Furthermore, substantial unpriced risks in climate change and cybersecurity will challenge ill-prepared businesses and their investors.

Despite these risks and challenges, there are exciting and durable themes evident in the world today. A focus on the unstoppable global trends set to shape the world in the decades ahead should uncover long-term winners and sustainable investment returns.

Get exposure to IT and automation

The digitisation of the global economy is in its early stages and offers tremendous opportunities for the global investor. Stocks to watch in this area are myriad, but as cloud computing in its many forms aggressively takes a bigger share of IT budgets globally, we believe California-based experts ServiceNow (NYSE: NOW) will be among the key winners. Its penetration of large enterprise customers is increasing, and with high renewal rates and the ability to meaningfully expand its operating margins ahead, it presents a long-term sustainable investment case.

Meanwhile, automation is on the cusp of a great leap. An ageing workforce, rising labour costs in developing economies, and improving technology are driving growth in factory, logistics and process automation. Keyence (Tokyo: 6861) the leading supplier of sensors, measuring systems, laser markers, microscopes and machine-vision systems worldwide is at the forefront of factory automation. The company has a 21% market share in the vision-systems market the highest-margin, fastest-growing segment in industrial automation.

Leaders in healthcare and retirement

Consumer spending priorities are also shifting rapidly, and ageing in the developed world implies rising demand for healthcare and retirement savings. In healthcare, Fresenius Medical Care (Frankfurt: FME) is the world's largest provider of essential dialysis services and equipment. Dialysis continues to be critical to a growing group of patients with demand for diabetes treatment expected to continue rising by 6% per annum and more than half of the dialysis machines used worldwide are made by Fresenius Medical Care.

For retirement savings, AIA (Hong Kong: 1299) remains one of the highest-quality players in the Asian pensions and medical-insurance markets, with one of the best-established agency networks, and inexorable long-term demographic trends underpinning its growth. The penetration of life and savings products in Asia is currently low, and we expect growth rates to remain strong in the decades ahead.

Recommended

Share tips of the week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
17 Jan 2020
Share tips: eight stocks that should deliver robust returns
Share tips

Share tips: eight stocks that should deliver robust returns

Ryan Ermey of US publication Kiplinger’s Personal Finance chooses his favourite stocks for the next decade, which should be able to grow for years.
28 Dec 2019
Share tips of the week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
20 Dec 2019
Share tips of the week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
13 Dec 2019

Most Popular

The Bank of England should create a "Bitpound" digital currency and take the world by storm
Bitcoin

The Bank of England should create a "Bitpound" digital currency and take the world by storm

The Bank of England could win the race to create a respectable digital currency if it moves quickly, says Matthew Lynn.
18 Oct 2020
Don’t miss this bus: take a bet on National Express
Trading

Don’t miss this bus: take a bet on National Express

Bus operator National Express is cheap, robust and ideally placed to ride the recovery. Matthew Partridge explains how traders can play it.
19 Oct 2020
Three stocks that can cope with Covid-19
Share tips

Three stocks that can cope with Covid-19

Professional investor Zehrid Osmani of the Martin Currie Global Portfolio Trust, picks three stocks that he thinks should be able to weather the coron…
12 Oct 2020