Long term investment opportunities and trends in how businesses and individuals are likely to behave in the future have been brought into stark focus by the Covid crisis.
And it is all centred around disruption which, far from being a bad thing, is finding favour with stock pickers.
We are essentially talking innovation – automation, artificial intelligence, brand strategy, digitalisation, environmental, science & healthcare, and platform models.
James Dowey, who runs the Liontrust Global Equity Fund, spotlights the speed of change.
While it took 46 years for electricity to be adopted by 25 per cent of the US population and 26 years for television, it took just 16 years for PCs in the 1970s and early 1980s and just two years for tablet devices in the 2010s.
He told Trustnet Magazine: “Back in 1960, the average lifespan of an S&P 500 company was 60 years. Today, it’s just 20 years.
“Disruption is the most powerful driver of shareholder returns out there. If you look at $1 of revenue generated by a company in any way other than disruption – so growing your share within the current product range, expanding into an existing market or acquiring another business – it tends to generate far less than $1 of shareholder value.
“But $1 of revenue growth generated by a company through disruption – so attacking a market with a new product or business model – tends to generate nearly $2 of shareholder value.
“You’ve got to get it right. But if you do, the returns are potentially very powerful.”
He added: “Innovation is the pipeline for disruption and it’s absolutely booming.
“We see artificial intelligence as a game changer. When innovations like this come along, it’s important to recognise they do really big things to economic growth.”
Marcus Morris-Eyton, portfolio manager at Allianz Global Investors, is another disruption enthusiast.
Speaking to Investment Week, he noted: “Covid-19 will profoundly alter the way we live and work. It has taken the level of technological disruption to a pace quicker than any of us could have imagined, which creates both opportunities and risks for investors alike.
“As more of us increasingly rely on our digital infrastructure to work, communicate and automate processes, we are witnessing a growing divide between those companies who have invested in their technological capabilities and those whose business models look increasingly outdated.
“Those with digital mind-sets have been able to benefit from the crisis through their agility, speed, and data driven processes to take market share off weaker peers. It should therefore be seen as no coincidence that the past few months has seen huge performance dispersion between the perceived winners and losers.”
He cites the payments field as an obvious example where many retailers have switched to card only, with cash usage declining by about 80 per cent.
“Companies are being forced to respond to these changes, which is likely to trigger an acceleration of investment in the wider IT infrastructure. This ranges from the semiconductor companies whose chips power much of this innovation, to the software, and cloud behind the scenes, and the IT service companies implementing this.”
Andy Acker, of Janus Henderson Investors, highlights innovation in biotech, improving sentiment toward the biopharma industry and accelerating demand for telemedicine.
He states: “In the past, drug discovery and development could take years, but amid the current outbreak some vaccine candidates have been able to enter clinical trials in a matter of months. This accelerated timeline is made possible by advances over the past decade in genetic sequencing, structure-based drug design and molecular research tools.”
Perhaps never has the epithet ‘innovate or die’ been more pertinent.