From FAANGs to CRAABs - the era of investment in new technology
SPONSORED CONTENT Within ten years the FAANGs could well have been replaced by a portfolio of CRAABs – cryptocurrency, robotics, artificial intelligence, automation and biotech companies.
At the end of September 2008, just one of the five largest companies in the world by market capitalisation was a technology company Microsoft. Fast forward 10 years and only one of the five largest Berkshire Hathaway isn'ta tech company. Microsoft has been joined by three of the FAANGs Apple, Amazon and Alphabet (Google's parent company).
Within 10 years the FAANGs could well have been replaced by a portfolio of CRAABs cryptocurrency, robotics, artificial intelligence, automation and biotech companies.
Do tech companies offer good investor opportunities?
The fortunes of individual tech companies rise and fall with remarkable speed:
- Nokia once boasted a market cap of US$250bn today, it is pretty much an irrelevance in the broader tech industry
- In contrast, eSports was a US$493m market in 2016; it is forecast to reach US$80bn by 2025.
How does CGWM feel about tech investing in 2019 and beyond?
We believe that the greatest investment potential for 2019 lies in companies which are likely to be involved in the next generation of technological developments.
We don't know which companies will dominate the market leaderboard in 10 years' time; we do know it's dangerous to pay too much attention to short-term, transient factors when making long-term allocations. That's why we try to put the increasing noise around issues such as regulatory pressures and digital services taxes into their proper context, and doubt that such issues will derail our thematic positioning to technology.
Envisaging the extraordinary
Rapid technological innovation is propelling changes in all industries. Take robot cells created at Massachusetts Institute of Technology (MIT), which can assemble themselves into different shapes and patterns. Such adaptability has numerous potential uses: they might be deployed for search and rescue purposes for example, deconstructing themselves in order to squeeze into previously inaccessible areas.
Robotics in medicine is particularly exciting. In future people may undergo surgery with no incision, no risk of infection, and no pain thanks to an ingestible origami robot.
In the security sector, robots can already act as autonomous units, carrying multiple visual and thermal cameras, two-way communication systems and more.
What about developments outside robotics?
It would be wrong to focus on robotics alone. Greater computing power allows companies to examine large amounts of data and spot hidden patterns, correlations and insights which previously might have gone unrecognised. The benefits include healthcare, where medical researchers can use data to find treatments with the highest rates of success. The analysis of huge data sets allowed researchers to discover unexpectedly that the anti-depressant Desipramine can help cure certain types of lung cancer.
Will cryptocurrencies provide investment opportunities in 2019?
There is, quite rightly, huge scepticism about cryptocurrencies. However, the underlying blockchain technology is less controversial. It's still in its infancy and no-one is yet sure what its ultimate uses might be. Could the Apple of 2028, or 2038, be a blockchain-enabled company that hasn't even been contemplated yet?
"Prediction is very difficult, especially if it's about the future" is a quote attributed to Niels Bohr, the Nobel-winning physicist. While we might not know which tech companies will dominate the market in 10 years' time, we are confident that new technology will be a key investment theme in 2019, and will probably recur for years into the future. It will contribute significantly to client portfolios over the long term as well as hopefully enhancing our health and longevity.
• For more of our investment ideas for 2019, visit our website.
Investment involves risk. The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested. Past performance is not a reliable indicator of future performance.
The information provided is not to be treated as specific advice. It has no regard for the specific investment objectives, financial situation or needs of any specific person or entity.
The information contained herein is based on materials and sources that we believe to be reliable, however, Canaccord Genuity Wealth Management makes no representation or warranty, either expressed or implied, in relation to the accuracy, completeness or reliability of the information contained herein. All opinions and estimates included in this document are subject to change without notice and Canaccord Genuity Wealth Management is under no obligation to update the information contained herein.
Justin provides direct assistance to the Chief Investment Officer in maintaining responsibility for the investment philosophy, process and methodology of Canaccord Genuity Wealth Management, and acts as the alternate to the CIO. He is Chairman of Canaccord Genuity Wealth Management's Portfolio Construction Committee, a member of the Asset Allocation and Fund Selection committees and manages several of Canaccord Genuity Wealth Management's Select range of funds. Justin is a Chartered Fellow of the CISI and is a former President of the Guernsey Branch of the Institute.