In early 2000, the dot-com bubble burst, leaving investors who opted for annualized returns of over 25% from 1995 to 2000, discouraged and ruined. It is no surprise the media is echoing similar concerns, as the market continues to reach new highs. At Samra Wealth Management, we believe there are reasons for concern and volatility throughout the remainder of the year, however, we do not expect a significant decline in US market valuation, with consideration to the technology sector. Unlike the dot-com bubble of 2000, a time when great ideas just didn’t make sense in the real world, in 2016 these concepts are adding value through convenience. At SWM, we have compiled a list of our top ideas based on the potential growth outlook in the industry as it relates to the market capitalization in each area.
Cyber Security: According to PwC; in 2015 the number of reported security incidents rose 48%, to approximately 118,000 per day, while organizations reporting financial losses in excess of $20m rose 92%. The increased attacks are striking both corporate balance sheets, as well as brand image. As we head towards a cashless society, with global internet penetration at an all-time high, and mobile platforms increasing in popularity, it is our opinion at Samra Wealth Management, corporations of all sizes will dedicate more resources to battle cyber attacks. The US government has taken a proactive role in committing to fill an additional 3,500 cyber security positions by January 2017.
Augmented Reality (AR): Augmented Reality, which provides a user the ability to superimpose computer-generated images and data, on the users real world view, has seen recent advancements, with regards to optics and 3D mapping abilities. These innovations are creating real world applications, and we expect to see further usage in the following areas:
- Aviation & Aeronautics
- Military & Law Enforcement
- Education & Training
Organizations able to capitalize on AR technology are already experiencing brand recognition, and increased market capitalization. The Pokemon Go craze is one example of an early adopter, the technology has helped Nintendo reawaken their public image, as they double their market capitalization to $42B in just seven trading sessions since the mobile game was launched.
3D Printing: 3D printing has the capacity to cross into every other sector, and we are already seeing the benefits within areas of: technology, communications, manufacturing and robotics. We expect real world implementation within the medical and healthcare fields on larger scales as the practices becomes commonly acceptable. Siemens predicts: 3D printing will become 50% cheaper and up to 400% faster in the next five years; expected to surpass $8.3B in global market by 2023. As the automotive industry in the United States heads towards an average fuel consumption mandate of 54.5 miles per gallon, by 2025, 3D printing may be the key. According to Mallikarjun Huralikoppi of NS-3DS a 3D consultant, 3D printers are now equipped to print more than just plastic, and have been used to print materials ranging from carbon fibre to human tissue.
Drones: According to PwC; the global market for commercial application for drone technology is estimated to be $2B, and expected to grow exponentially to $127B by 2020. Although drones have started to make an impact outside of military applications, they have not penetrated mainstream markets, due to the lag on legislation overseeing unmanned aerial vehicles. Drones have become relatively inexpensive to make, and we see this trend continuing as demand for drone technology increases. As Amazon, Walmart and other retailers experiment with Drone technology, this could spell bad news for shipping and logistic companies such as FedEx and UPS, as the industry has recently seen an influx of start-ups specializing in shipping and logistics.
Digital Marketing: Given global internet penetration and mobile internet usage at an all-time high, current trends suggest digital marketing will surpass television over the next 5 years. Our belief is based on the ability to collect data about the consumer, and the quality of this data. With television and print media, there is little feedback to prove the success of the marketing campaign, whereas digital marketing allows the content creator to filter through multiple variables. Digital media comes in many forms, from pop-up advertisements, to social media. It is our opinion companies using social media effectively, by building a network of followers stand to succeed in this area.
Robotics and Automation: According to the International Federation of Robotics; in 2014 robots sales increased by 29%, with 70% of global robot sales going to 5 countries: China, Japan, United States of America, the Republic of Korea and Germany. The majority of these sales are utilized in the automotive industry, followed closely by the manufacturing of electronic devices. Given the reliability of robotics, and their negative correlation to the cost of human capital; it is in our opinion this move towards automation will continue with similar trajectory.
Mobile Internet Connectivity: Kaushik Basu, World Bank Chief Economist, recently stated “the digital revolution is transforming the world, aiding information flows, and facilitating the rise of developing nations that are able to take advantage of these new opportunities.” A perfect example was recently highlighted by the State Bank of India Chairman, Arundhati Bhatacharya, at the Consulate General of India in New York, as Bhatacharya talked about the impact investment made by SBI in rural villages, providing wi-fi access to communities, on a path towards a cashless society. Other examples supporting the growth of this segment are highlighted by increased mobile connectivity amongst all age groups, gaming, and healthcare and wellness monitoring.
Solar: Solar technology first discovered over a century ago, has seen widespread availability in residential homes over the last decade, and is currently the fastest growing segment within the energy sector. With companies from Walmart to Apple making commitments to go green, at SWM we believe companies specializing in solar technology for commercial and residential application should continue to grow at a faster pace than seen over the last decade. The rational behind this growth is focused in 2 main areas: brand recognition as a socially responsible business, and the decreasing cost of solar technology. As we continue to see technological advancements in this area, and implementation around the globe, we expect to see solar technology in areas we have not seen before, powering personal computers and electronics, to transparent solar technology placed over windows and roads, as are currently being used in the Netherlands. When power storage solutions such as home batteries have the ability to store power, we expect to see a further increase in the area of solar technology.
Autonomous Vehicles (AV): According to Mckinsey & Company; “it is unlikely that any on-road vehicles will feature fully autonomous drive technology in the short term,” however, automotive manufacturers are currently investing in driver assisted technology. Tesla (TSLA) has recently made autonomous driving a reality, and this trend is expected to continue as competitors enter the market, pushing the price level down.
Wearables: CCS Insight reports the global wearable market will reach $14B this year, and is further expected to grow to $34B by 2020. Wearables represent a segment connecting the user to health and wellness, media, retail and jewelry via technology. With Virtual Reality and gaming joining the wearables segment, this segment continues to look attractive. Once commercial applications have been integrated, and become mainstream in terms of training and simulation, we believe the wearables market will surpass previous expectations.
All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All economic and performance data is historical and not indicative of future results. All views/opinions expressed herein are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC. The information and material contained herein is of a general nature and is intended for educational purposes only. This does not constitute a recommendation or a solicitation or offer of the purchase or sale of securities. Before investing or using any strategy, individuals should consult with their tax, legal, or financial advisor
Samra Wealth Management, A Member of Advisory Services Network, LLC