As we come out of the pandemic, we are identifying numerous structural-growth opportunities in several key areas. This comes as governments deploy sizeable fiscal stimuli to support the economic recovery.
These target global infrastructure programmes, which could create attractive long-term opportunities in sectors such as green infrastructure, robotics and automation, and healthcare infrastructure. Green infrastructure developments focus on renewable energy, electric transportation, energy efficiency and greener buildings.
Robotics and automation trends should accelerate, with companies making their manufacturing capacities and supply chains more resilient. Healthcare infrastructure is likely to be channelled into upgrading physical care facilities and extending digitalisation to improve patient care.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The latter implies more remote patient monitoring and virtual care. We seek out firms with sustainable franchises, strong pricing power, low risk of disruption, high returns on invested capital (a key gauge of profitability) and strong balance sheets.
The fifth utility
Sweden’s Atlas Copco (Stockholm: ATCOA) is a global leader in vacuum and air-compressor technologies. Its high market share permits the company to maintain a pricing premium. Atlas Copco is very well run and has shown resilience despite being exposed to cyclical end-markets. What’s more, historically it has managed to cover its cost of capital even during severe recessions.
The group sells to a broad range of customers. Air compressors are known as the “fifth utility’” as they are crucial in sectors such as cars, construction and semiconductors. Atlas Copco is well-placed to harness global infrastructure growth through exposure to green-building construction, renewable energy and infrastructure developments for electric transportation, as well as to 5G and healthcare infrastructure.
Another Swedish company we hold is digital industrial-equipment specialist Hexagon (Stockholm: HEXAB). It focuses on enabling firms to augment their robotics and automation throughout their production lines.
This also has the benefit of helping companies reduce their carbon footprints over time. Hexagon is especially exposed to the structural-growth opportunity from the emergence of “digital twin” assets, which are the digital representations of physical objects such as manufacturing sites.
These digital representations are then used to monitor and improve the performance of the equivalent physical asset. We see several markets moving towards the convergence of digital and physical assets, which bodes well for Hexagon’s revenue growth and profitability over the long term.
Software for bespoke healthcare
US-based Veeva Systems (NYSE: VEEV) is at the forefront of bringing tailored software to drug development: it offers cloud-based solutions for the global life-sciences industry. Veeva’s market opportunity is growing thanks to the trend towards more complex and personalised healthcare. Veeva serves a regulated market with products that provide high barriers to entry against potential competitors, thus giving it the ability to sustain a long period of strong growth and profitability.
-
Which UK region has the most in savings? Average savings by areaThe amount people have in their savings differs from region to region in the UK. How does your nest egg compare to those living nearby?
-
Doug and Mary Perkins: Specsavers’ clear-sighted foundersHelped by the deregulation of the sector in the 1980s and brilliant advertising, Mary Perkins and her husband Doug have taken Specsavers to the top of the optometry market
-
Investment opportunities in the world of Coca-ColaThere is far more to Coca-Cola than just one giant firm. The companies that bottle and distribute the ubiquitous soft drink are promising investments in their own right.
-
Streaming services are the new magic money tree for investors – but for how long?Opinion Streaming services are in full bloom and laden with profits, but beware – winter is coming, warns Matthew Lynn
-
Trainline: a cheap cash machine for investorsOpinion Trainline’s shares have slumped owing to concerns about growth, but the sell-off seems overdone
-
Look to British stocks to lead the charge as the Magnificent Seven falterOpinion Gervais Williams, fund manager, The Diverse Income Trust, picks three British stocks where he'd put his money
-
'Pension funds shouldn't be pushed into private equity sector'Opinion The private-equity party is over, so don't push pension funds into the sector, says Merryn Somerset Webb.
-
Greg Abel: Warren Buffett’s heir takes the throneGreg Abel is considered a safe pair of hands as he takes centre stage at Berkshire Hathaway. But he arrives after one of the hardest acts to follow in investment history, Warren Buffett. Can he thrive?
-
Who will be the next Warren Buffett?Opinion There won’t be another Warren Buffett. Times have changed, and the opportunities are no longer there, says Matthew Lynn.
-
Will Comstock crash – or soar?Opinion The upside for Comstock, a solar panel-recycling and biomass-refining group, dwarfs the downside, says Dominic Frisby.
