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The big US technology stocks – Alphabet, Amazon, Apple, Facebook and Microsoft – have been leading world stock markets seemingly ever-upwards. Whether they will continue to do so is a matter of daily debate, but meanwhile, a wave of powerful and innovative technologies look set to revolutionise the way businesses operate and individual citizens arrange their lives. At Dolfin, we see this as an investment opportunity offering significant long-term growth.
Electric vehicles and battery technology
Interest in electric vehicles (EVs) seems to have reached a turning point, not just for consumers but also for companies investing heavily for the future. The focus is no longer only on Tesla, but now encompasses all major multinational car makers, that are increasingly committing to growing production of EVs over the coming years. While this is exciting in itself, at the same time the regulatory push is quite substantial, with the UK and France among countries that have committed to a ban on diesel and petrol cars by 2040, and China regulating heavily to promote the use of EVs.
Alongside these big promises, production costs are falling fast. The cost of EV batteries has come down considerably and their efficiency is improving in leaps and bounds.
Consequently, our portfolio includes listed stocks from across the global EV and battery eco-system. Examples include miners, directly linked to lithium and other relevant commodities, but also battery producers, car and car-part manufacturers and utility companies, involved in the charging-infrastructure that shall fuel this new breed of EVs. This is the first of our key technology investment themes.
Robotics and AI
Industrial robots have been around for some time. However, their complexity is increasing and one of the most exciting things we see is the rise of ‘cobots’ aka collaborative robots. When combining robotics with artificial intelligence (AI), which allows robots to be programmed to do increasingly complex tasks not only in factories but also in the home, I see a long-term theme emerging.
If we want to see what the future for these technologies could look like, we need to look to South Korea. There, industrial robot density, measured as the number of robots per 100,000 manufacturing employees, averaged 631 in 2016. Globally, the comparable number is 74. This highlights the huge potential for growth we can expect as other nations seek to expand their use of robots in the workplace.
So I think the first part of this investment trend will be in the manufacturing and industrial space. The second will be in the home. This has yet to play out in a major way but may well do so in the not-too-distant future. Our focus, therefore, is on the supply chain among the relatively few listed companies that are developing robotic and AI technologies. We take a global view, and our stock selection spans businesses from Europe and North America as well as Japan, Korea and Taiwan. This is the second of Dolfin’s key technology investment themes.
Every week, we seem to hear about some audacious new hack. Cyber attacks are growing in both complexity and maliciousness, and they’re also becoming increasingly political. Moreover, they’re aiming at a much wider range of targets. We saw last year, for example, how the WannaCry ransomware struck the UK’s National Health Service and the Bangladeshi government as well as commercial companies. Everyone is becoming a cyber target.
The targets, however, are grossly under-prepared for attacks. This means they need to spend far more on cyber security, and there is only a relatively small number of publicly listed companies that are able to benefit from such increased investment. Hacking is front-of-mind for many people, and so we think this points to a long-term investment theme. Our investment portfolio aims to capture the theme of rising cyber security spending, with broad geographical exposure and a combination of large security vendors and emerging players in the space.
In summary, new technologies offer some highly attractive investment opportunities. They are global as well as uncorrelated to today’s major technology stocks. We believe they are likely to outperform the major high-riding stock market indices over the medium to long term.