What is the next investment wave to ride on?

Sometimes the next wave jumps out right in front of us and sometimes it comes slowly over the horizon. The recent waves have been strongly driven by technological advances that have significantly changed the way we receive services. Providing efficiencies that we could only have been dreamed of 10 years ago.

But the side effects of the next wave is just as interesting. Uber and its disruption of the taxi industry, Amazon and its impact on bricks and mortar retail, Facebook and its impact on societal mores, the list goes on. The impact of technologies is expected to change and disrupt many, if not all industries and professions. Automation and mass implementation of technological solutions is widely expected to render the workforce as it stands, mostly obsolete in the next century.

The next wave brings new businesses and profits to the surface, but it also washes away many of those that were on the surface. As an investor, it is equally important keep away from those “solid” investments that might be inching towards the bottom of the ocean.

There is also one other interesting phenomenon that needs to be addressed about ‘next wave’ investments. At the very beginning, you don’t know which will be pets.com, and which will be Google. Which will be Facebook and which will be Myspace? Which will be Apple and which will be [insert favorite “that brand of computer we used to play pac-man on in 1984”]?

Just because you have identified the next wave, you still need to then identify which of these hi-tech businesses will be able to best carve out a niche, and create a successful, solid business. And that can be very, very challenging.

The good news is that once the sector gets going, and there is enough buzz about it, all companies will show gains, just like a tide that raises everything that floats.

So which sectors are likely to become the next big wave? According to Bill Gates, over the next decade it is likely to be clean energy, artificial intelligence and biotechnology. Since this declaration, work in AI has been furiously underway by several big companies, most notably Google (DeepMind) and IBM (Watson). Whilst it is still too early to show results, these forward thinking companies are positioning themselves well. Already adapting to this development, to grow their existing automated capabilities for further efficiencies.

Clean energy is a sector that is strongly driven by concerns about the environment, but also cost and efficiency considerations. It seems a safe bet that collective will and effort will pay big dividends and change the way the world uses energy.  

Biotechnology feels like a more mature next wave, like it has been coming for quite a while. However, recent technological advancements, particularly with data availability, has taken it to yet another new level. High R&D costs and a challenging regulatory environment has moved the industry more towards the technology end, but health will always be something for which consumers, insurance companies and governments will all happily spend.

And what about those sectors that are slowly moving towards obsolescence? In this aspect, everyone can do their own crystal ball gazing and will probably be right. The challenge is to avoid going full bear when the sky is falling in, which is admittedly hard to do. Here are two of my own for your perusal.

It is already apparent that commercial real estate, particularly offices and retail, are being hit hard by changes in purchasing and working caused by technology. Should working remotely continue to grow, this sector will see many larger properties impacted. Such a shift might necessitate transitioning empty properties into residential properties, but I think we all recall what a significant shift in supply and demand can do for this sector.

Car sharing technology has had the expected impact on taxis and the like, but add that to driverless car technology and drones and you have to ask ….. What will become of car manufacturing, car sales, courier companies, and the like?

Not to mention public transportation, toll roads, petrol stations and more. It’s tough not to think that the walls are closing in on these once great businesses, but car companies at the very least have strongly embraced the challenge and are moving with both the car sharing and driverless car waves. It will certainly be intriguing to see what will become of car ownership in the next few years.