When it comes to investments, just as in life itself, there are precious few certainties.
Events of the last few years have graphically demonstrated just how hard it can be to predict what might happen in financial markets, at least over the short term. In contrast, identifying ongoing and sustained population, environmental and social trends would appear to be a somewhat easier task.
Some of these so-called ‘megatrends' have, in effect, been running for several hundreds of years — or even longer! As they are phenomena that carry on with a high degree of certainty, they provide the discerning investor with plenty of opportunities over time.
On this score, the trend of the rising global population is a case in point.
According to the United Nations, there will be 40 per cent more people on the planet by 2050. This expansion will inevitably give rise to sweeping changes in several areas.
Let's take farming or water supplies as examples.
Farming yields are going to have to be doubled over the next forty years just to keep the average per capita daily intake of calories at the same levels as today.
The production of cereals, meat and other farm produce is, however, an activity that requires vast quantities of water.
Supplying fresh water to farmers, businesses and individuals is one of the most daunting challenges we face in coming years. The issue is complicated even further by the fact that demand for fresh water is climbing twice as fast as the population is expanding.
However, the shares of some companies providing solutions, services and infrastructure for the supply of water, in both the developed and emerging worlds, are looking particularly attractive.
Health care
Moving on to another area, the ageing of the population in developed nations is another ongoing trend, just like the dwindling birth rate.
As a result of this, the health care sector will have to continue being expanded. On this front, biotechnology companies and those active in manufacturing generic medicines look particularly well placed to deliver new medicines that are more effective and cheaper, respectively.
The key to success, though, lies in disciplined investment management and rigorous stock-picking when seeking to tap into any of these various plays that can be considered to be megatrends.
The writer is Senior Product Manager, PF (Lux) Global Megatrend Selection, Pictet Funds SA
