Future Trends: Which Companies to Invest in 2021 and Beyond

This article originated from my blog: Investing Beanstock

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2020 was an amazing year for the stock market, period.

Stock market has long detached from the real economy

With QE infinity (unlimited money printing) pushing the market higher, providing lifeline and liquidity for the stock market, it is no wonder we see the market going higher and higher despite what is happening in reality.

The stock market is always forward looking, and every news you’ve seen, every good news or bad news (Jack Ma/Alibaba/Capitol/US riots) will be priced in by the market. Mr Market will never be able to decide which direction to go, because it has bipolar disorder swinging between extreme greed and extreme fear, so no one can ever predict it.

However, in the long run, sentiments won’t be what drive markets but rather the fundamentals. This is a fact because the stock market has been on an uptrend since its inception, because businesses grow and so will their stock.

Stocks are ownerships of companies and I hope everyone view them as being a shareholder of a company instead of treating it like a lottery ticket, thinking short term about which stock will go up another 500%, 1000% or 5000%, which is simply not sustainable and unrealistic.

While you may be lucky for 1 or 2 years, stocks always revert back to its mean towards their intrinsic value.

Okay, enough of investing mindsets, so how will the future be like? What do we look out for?

From now till 2023, it will be a period of easy money (Bullish Sentiments)

In the near future, till at least 2023, I believe that it will be a consistent uptrend where we see a bull run because of the macro economy backdrop of low interest rates and the Fed continuing to prop up the markets with QE infinity.

What does that mean? Basically, money will be easy because nobody will be incentivised to save and would rather borrow and pile into assets such as equities and cryptocurrencies at least in the near future.

Growth stocks will continue to break all time highs, see some short term pullbacks as the stock market takes a short break before continuing climbing higher. (In essence, valuations are out of the tables and we are relying on the market momentums.)

My own predictions for future trends in 2021 onwards are:

1. SaaS (Digitisation)

2. Clean Energy

3. Mainstream Blockchain and Cryptocurrency Adoption

For each of the trends, I will list down a few recommendations for you to further research on.

Saas (Software-As-A-Service)

SaaS is a software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted.

They are companies that hosts an application and makes it available to customers over the internet. Remote working as a result of the pandemic has sped up the adoption of such a business model across every sector and industry.

SaaS companies wants to improve the productivity of companies and to automate business models and streamline the entire organisation. So what are some stocks/ETFs you can look out for to better position your portfolio towards SaaS companies?

1. Salesforce

2. Fastly

3. Twilio

4. Crowdstrike

5. Zoom

6. WCLD (Cloud Computing ETF)

I am not going to go in depth into each stock/ETF because that would be way too long. Personally, these stocks are positioned for the future and their network effects are particularly extensive.

Most of the companies here are B2Bs so you may not have heard of them before. But Zoom, Twilio and Fastly for example, are all enhancing parts of the products we use daily: Zoom Video (School/Meetings/Webinars), Fastly(Spotify music relies on their infrastructure), Twilio (Netflix, Airbnb relies on their software).

As for Crowdstrike and Salesforce, they are B2Bs with the former focusing on protecting company software from hackers through the incorporation of artificial intelligence and the latter improving customer relationship management.

All these companies have one thing in common: They have a recurring, subscription based model which can generate free cash flow year in year out, and their software becomes better and more efficient over time as they collect more data and improve their artificial intelligence or software capabilities.

If you are not interested to research in depth, you can expose to these companies through WCLD (Cloud Computing ETF).

Clean Energy

With Biden’s victory, while climate change continues to worsen around the world, there is faster and wider adoption of clean and renewable energy for the potential of cost reductions, benefits and the rise of electric vehicles (EV).

Biden’s policies are skewed towards providing more subsidies for the clean energy sector. If you look at stock market action on 6 January, it is clear that investors expect Biden and Congress to do a lot for companies producing clean energy, or developing technology and services to enable other companies to do so.

Here are some stocks which are personally on my watchlist to expose into the clean energy sector:

1. ICLN (Global Clean Energy ETF)

2. TAN (Solar ETF)

3. LIT (Lithium Battery ETF)

4. Tesla

5. BYD

Tesla needs no introduction. Elon Musk is now the world’s richest man and he did not get there by luck. He saw the future before everyone did so he’s duly rewarded for taking the leap of faith while no one was looking. Tesla, is not just a car company, because they have advanced software with superior data collection, artificial intelligence, industry leading battery technology and a solar panels producer.

This is the same for Chinese company BYD, which is the EV pick of Warren Buffett. BYD likewise is not just a car company, but involved in multiple different product lines way before competitors like Nio, XPeng or Li Auto entered the EV space in China.

LIT is a play on leading lithium battery technologies or battery producers, which are the backbone of electric vehicles if you think logically and it is to further diversify the portfolio (this ETF has both Tesla and BYD inside.)

ICLN and TAN are diversified ETF which focuses on the clean energy space which saw incredible gains in 2020. While ARK stole the spotlight, there were many more ETFs which performed just as impressive as ARK.

Mainstream Blockchain and Crypto Adoption

While the topic of Bitcoin and cryptocurrencies continue to be the hot topic of 2021, it is without a doubt cryptocurrency has earned a spot in the institutional space and slowly being seen as a viable asset class that has a store of value and a form of inflation hedge.

While people can argue that Bitcoin is a scam, that it will crash, that it is used by criminals, there are also people that advocate that Bitcoin is a store of value, that it can help improve banking efficiency and prevent centralisation of power.

While both sides have some valid arguments, blockchain, as a matter of fact, is the way forward especially for financial transactions.

While majority of Initial Coin Offering(ICO) projects end up becoming nothing, there are alt coins that have proved their worth and continues to be adopted slowly but surely.

As blockchain continues burgeoning across industries and sectors, eventually it will become a part of our daily lives just like how we broke away from the Gold standard back in 1971 after the end of the Bretton Woods system, eventually fiat currencies prevailed all the way till today.

No matter what happens to the future of money, whether fiat currencies continue to be the medium of exchange or cryptocurrencies, one thing is certain: Blockchain is disrupting the traditional banking system, and with widespread digitisation, it definitely improve the efficiency of the blockchain as more users go online and stop queuing at physical banks for simple transaction needs.

For this, here are some things you can look at:

1. Square

2. Paypal

3. Bitcoin

4. Ethereum

Square and Paypal are the clear leaders when it comes to the fintech space. They both made massive purchases in Bitcoin in 2020 so that they can distribute it to their customers as a medium of transaction.

They are riding on the rise of digitisation as more people perform transactions, banking and more through their apps. Since they rely on network effect, the more people that use their platform, the better it gets.

As for Bitcoin and Ethereum, to keep it brief, cryptocurrency have finally hit 1 trillion in combined market cap, making them a viable asset class for institution participation.

Bitcoin’s market cap is still a fraction that of gold, and with the continued money printing of fiat currency, it is no wonder Bitcoin is going higher and higher, breaking the $40k USD mark as more investors buy it as a store of value to protect their future purchasing power.

This is just a simplified explanation of Bitcoin and as for Ethereum, it’s value comes from the Ethereum chain, which is the backbone of many alt coins such as Chainlink, USDT, USDC and more which are ERC-20 tokens.

Without going into the complicated jargons, Ether’s value derives from the network effect that comes from all the infrastructure (smart contracts) which the chain provides.

As Ethereum slowly moves from Proof-Of-Work towards Proof-Of-Stake, I believe Ethereum’s growth has only just begun and there will be further room for Ether’s utility and value to rise.

Conclusion

In this period of low interest rates and easy money, will you be capitalising on the momentum and sentiments and ride on the wave? Or will you continue to be fearful? I leave that up to you.

For the beginners and new investors, your best bet is to dollar cost average and just consistently invest into the market.

Time in the market TRULY is better than timing the market. The market will always be hitting all time highs and it will crash from time to time.

It is futile to try and predict the market and in every market crash, the market will ALWAYS recover in the end and climb higher beyond its previous peak.

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And that’s it! Here are some trends which I am looking out for and personally, I am invested in Salesforce, Fastly, WCLD (Cloud Computing) ETF, Tesla (Through Firstrade),Bitcoin and Ethereum. (Buy through Gemini, stored in Nexo for interest)

For those interested in Cryptocurrency

For those interested to find out how you can get started on Bitcoin or Ethereum, you can check out my article here. (and get $10 USD bitcoin when you sign up and deposit 100 USD!)

I am personally using Gemini Exchange for its high level of security and Nexo Wallet to earn interest on my crypto holdings. Stay tuned as I will soon talk about the alternative asset class and Nexo as well.

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Disclaimer:

The content here is for informational purposes only and should NOT be taken as legal, business, tax, or investment advice. It does NOT constitute an offer or solicitation to purchase any investment or a recommendation to buy or sell a security. In fact, the content is not directed to any investor or potential investor and may not be used to evaluate or make any investment.

Do note that this is not financial advice. If you are in doubt as to the action you should take, please consult your stock broker or financial advisor. (Or contact me!)