It’s an incredibly exciting time to be alive as the pace of technological innovation around the world has never been faster. Scientists and entrepreneurs are coming up with new ideas every day, many of which have the potential to revolutionise our lives. From artificial intelligence to green energy and even food technology.
Capitalising on these trends requires patience. Investors need to be able to take a step back from the 24-hour news cycle and focus on long-term growth themes, as well as the companies that might stand to benefit, without getting caught up in the hype that often surrounds new ideas.
The “megatrends” of the future economy
The process of identifying the growth trends of the future, and the companies that might benefit, starts with pinpointing the challenges the world is facing today.
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Martin Currie Global Portfolio Trust has built a framework of three “Megatrends,” based on the issues the world is facing today. It believes the companies operating within the subsectors of these megatrends have multi-decade growth potential.
Demographic Change is one of the three Megatrends the investment manager has identified.
According to the International Monetary Fund (IMF), population ageing is the top global demographic trend, The world's rate of population growth has slowed notably over the past three decades, and the UN thinks this trend is only going to accelerate. Current UN projections put the number of countries experiencing annual population decline at 88 by 2050 up from 41 in 2022.
The most notable shift can be seen in China, where, according to China’s National Bureau of Statistics, the country's population declined for the first time in 2022 as the country’s birthrate slumped to a record low.
But as well as worries about an ageing population, there are also concerns about a growing population. The global population is projected to hit nearly 10bn by 2050 according to the UN.
These two themes, population growth and ageing, encompass the scale of the “Megatrends” Martin Currie Global Portfolio Trust has identified. As well as Demographic Changes, the other two trends are the Future of Technology and Resource Scarcity.
Zehrid Osmani, Portfolio Manager, Martin Currie Global Portfolio Trust, notes “Food Farming” is an example of one in the “sweet spot” where it’s captured in all of the fund manager's “megatrends.”
“Food and farming are finite resources which must feed a growing global population, and technology may help to develop new solutions.”
Finding the businesses that can manage the risks and challenges of the future, while capitalising on growth trends at the same time, is the hard part.
One company that sits in a multi-megatrend sweet spot is Linde.
The business of the future
Linde is a global leader in industrial gas production, which is exposed to the Resource Scarcity megatrend, but it also overlaps the Demographic Changes and Future of Technology themes.
Linde was established in 2018 from the merger of Germany's Linde AG with the US's Praxair and it’s a major player across the entire hydrogen value chain.
Hydrogen is widely touted as one of the key technologies the world can use to reduce its dependence on fossil fuels, but the colourless and odourless gas has far more uses than just energy storage.
It’s also used in the production of fertilizer, semiconductors and, when mixed with liquid oxygen, can be used as rocket fuel (the space sector is another growth industry altogether).
Thanks to its versatility, hydrogen has an important role to play in the future economy, and it touches all of Martin Currie’s global growth Megatrends.
This hydrogen producer has strong pricing power in its key markets Namely the Americas and emerging markets. Pricing power comes from the state of the industry. Hydrogen production is technical and building the initial infrastructure can be costly.
As such, the industry is dominated by a handful of key players, which have the size and scale to produce the resource effectively without having to invest tens of billions of dollars to do so in the first place.
What’s more, hydrogen gas tends to be a small part of the end users' costs. This makes demand relatively price inelastic, allowing the company to increase prices without having to worry about lower demand as a result.
The hydrogen revolution will drive growth
Martin Currie’s analysts believe the hydrogen energy revolution will be a key catalyst for the company's growth in the late 2020s. Global hydrogen demand is expected to rise steadily throughout the current decade as producers invest in building capacity and the demand side adjusts.
However, after 2030, hydrogen demand is expected to explode. According to PWC, hydrogen demand is expected to rise fivefold between 2030 and 2050.
To capitalise on this growth, partnerships will be key for Linde. The company is already a major player in its market with interest across the hydrogen value train, but as the demand for hydrogen accelerates, the corporation is going to have to rise to the challenge. That’s where partnerships will be key. Forming key partnerships will allow Linde to leverage its experience in the sector while splitting high capital costs.
With its strong competitive position, Linde is well-placed to capitalise on several of the megatrends Martin Currie’s team has outlined, driving the company's growth over the next few decades.
To find out more visit: martincurrieglobal.com
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