THE KEY INVESTMENT VIEW FOR 2020s
Since the financial crisis in 2008 the global economy and financial markets have been on a diet of free steroids provided by central banks and politicians pushing the pedal with fiscal and monetary stimulus. That will come to an end sooner or later.
The 2020s decade will likely be characterized by modest economic growth due to low population growth and 1-2% productivity growth. Inflation will probably be 2-3% despite being very volatile in the first couple of years in the 2020's.
AC Vision Fund was adviced from November 2018 to August 2022 using solely the investment philosophy of Nordic Investment Partners. The result after fee was this:
Nordic Investment Partners investment philosophy is focused on investing in growing, well-managed, cash flow positive businesses and using multi-factor GARP for accessment of companies and sectors. And applied into structural growth drivers such as;
Deep digitalization of almost anything. Exponential growth in data and how its collected, sorted, analysed and processed into decision making. Either by human or machine. 20% of global stock markets are assigned as 'tech in 2020'. By 2030 'digital enablers' will likely constitute more than 50% of global market cap as data/knowledge gets embedded into business daily operations. Semiconductors, software and completely new ways of doing things promise a very interesting future
Low carbon world is essential if Earth is to be inhabitable in year 2300. Humankind stand in front of the biggest investment ever made as we move energy sourcing from fossil fuels towards renewable. Electrification will power much more in the future and where electricity is not possible it will be hydrogen and ammonia. Low carbon world also include a move away from traditional foods into plantbased food ingredients.
Healthcare efficiency and disease prevention with monitoring current health and genetic health issues. Many more diseases will be curable and preventable. Diabetes, cancer, cardiovascular, Alzheimer and other large disease areas will see new prevention and better treatments in 2030. Early detection genomics and advanced individualized treatments will be more common
Global affluence with 150-200 million individuals joining the global middle class on an annual basis (that's more than 400.000 individuals every day). That creates multi-year increased demand for better food, water, electricity, transportation, communication, energy, education and health
The traditional business and inventory cycle still applies, so from period to period growth and inflation will change. However, in a world with evermore data and analytics the efficiency of eco systems will likely reduce the magnitude of economic swings as end-to-end value chains reduce slack and inefficiency. The early 2020's have learnt us a lesson about frqgile supply chains and that mistake will not be repeated, so expect much more local/regional production as less sourcing from the other side of Earth.
Risks of financial mis-allocation of capital is the same as past decades. Since 2008 crisis the biggest lenders have been governments but that cannot continue forever. And the solution for debtors is inflation, so moderate inflation is of interest of politicians.
And one last thing;
Only a few percentage points of all companies ever get to be multibaggers, but they are quite often easy to see based on clear business focus, family controlled with good and disciplined capital management and not least growing in a profitable way.