Thematics our Stockhead experts are looking out for in 2018
Whatever your resolution this year, we can bet it involves getting more out of your portfolio and a few more big-baggers. Take a look at what our Stockhead experts have their eyes on going into 2018.
No big surprise here, cryptocurrencies heated up towards the end of 2017 but our experts have high hopes for them coming into the new year, especially ways to play them on the ASX.
“A lot of the major players over time will want to potentially create bitcoin desks in the same way they might trade any other future,” Edwin Bulseco of Xcel Capital.
“You haven’t seen the traditional banks go into it because of regulation and volatility but if the futures market becomes more regulated we will start seeing more traditional investors going that way.”
Businessman Albert says the cryptocurrency is the way of the future.
“The introduction of bitcoin futures will make the market more volatile but sooner or later we will see the demise of hard paper currency but until we see a sovereign government that comes out and adopts or creates their own digital currency, it will eliminate a lot of the black market,” he said.
“I’m sure it will come – people will pay everything with their phone and even credit cards will become obsolete.”
2. Augmented reality
Throw away those dorky goggles, this is year of integrated augmented reality… or so they say.
“Virtual reality was supposed to be a hit in 2017 but it didn’t take off… Augmented reality instead will have its time in the sun this year,” Niv Dagan of Peak Asset Management said.
“We’ll start to see companies leveraging off a mobile phone instead of hardware to transform the view for consumers and it will be a key tool for advertisers.”
Aussie ties to China are stronger than ever and while the throngs of tourists might have you pulling your hair out, investors in the space are making a pretty penny.
Trent McGraw from Equity story cites China’s burgeoning population, set to add as many as 850 million to its middle class by 2030.
“Australian companies who can successfully tap into and leverage the immense Chinese market should outperform in 2018,” he said.
“Doing business in China has been the undoing for many ASX listed companies, but if executed well, the rewards are worth the risk.”
Businessman Albert Wong has watched the rise of China and says its not going to slow down any time soon.
“They have a country with 1.5 billion people and while it is deemed a communist state it has really opened up in the past decade. When you have so many people that have been locked up for decades they now want everything that the western world has,” he told Stockhead.
“The Chinese want whitegoods, they want to travel – Beijing used to be filled with bicycles but they have quickly thrown them away for the motor car and they just keep wanting more.”
If Australia was built on the sheep’s back, now is not the time to forget it.
Ian Munro from CCZ Statton Equities says looking at the value end is where the big gains will be this year.
“In particular we are looking at companies that have taken advantage of the lower funding environment and re-invested in organic, earnings accretive projects that will drive FY19 EPS growth and return on capital metrics,” he said.
“Companies adding capacity in supply constrained markets or holding increasingly valuable water entitlements are a classic asset play and will be a clear benefitiary of horticulture output and export market growth.”
5. Battery metals
Elon Musk made strides for lithium and cobalt in 2017 but the wider battery market still has a long way to run according to our experts.
“Cobalt and lithium have been key drivers this year and it doesn’t look like they are settling down any time soon,” Edwin Bulseco said.
“There will be more scrutiny going forward because the exploration process will be more advanced going forward… now investors are looking for companies to deliver a resource.”
But supply issues will sort the men from the boys.
“60-70 per cent of global supply is still driven by the Democratic Republic of Congo,” Niv Dagan of Peak Asset Management said.
“Investors will start to favour those who are deeper down in the production cycle and those where there is less geopolitical risk…. It will be a supply story rather than a demand story for electric vehicles.”
6. Ethical investing
Jiminy Cricket will be getting a work out this year as investors finally find their conscience.
Overseas trends in impact investing for social and environmental causes is set to ramp up on the ASX, spearheaded by the renewables sector.
Chief of clean energy developer Carnegie, Dr Michael Ottaviano said Australia’s nascent industry was finally reaching the public eye.
“Impact investing has been a missed opportunity and there hasn’t been a critical mass to underwrite an investment community in this space – it can’t just be one company but a movement towards these types of projects,” he said.
“Only now are we seeing dedicated impact investing funds popping up – but it’s very much a chicken and the egg type scenario.”
7. Medicinal cannabis
The ASX has had a strong whiff of cannabis euphoria this year but we ain’t seen nothing yet.
Buddingtech CEO Adam Miller says 2018 will be the year the world speaks up in favour of medical marijuana.
“In late December the World Health Organisation made a statement that CBD shouldn’t be scheduled, a move that would change the cannabis industry overnight,” he said.
“It would mean it can be bought over the counter and would allow for the medical industry to strive as well as food supplements and neutraceuticals.”
Not to be confused with your old VCRs, video is back in 2018 but not as we know it.
“The combination of Artificial Intelligence and video search will take off in 2018,” Marc Kennis from TMT Analytics said.
“Combining AI with this type of granular video search opens up many new application areas, such as in Security & Defence or personalised advertising on TV… and that’s not even mentioning how vast the market for mobile video streams will be for autonomous cars.”
9. Data centres and telcos
Telcos have traditionally been dominated by the big guys, but the smaller end will come out to play this year, according to Cube Capital’s Hani Iskander.
“Demand in Australia will keep data centres vibrant and providers like TPG will leapfrog NBN by offering very cheap mobile data that’s faster than most NBN services,” he said.
“Investors will have to pick and choose, as not all players will rise in value. TPG bought bandwidth and I predict they will disrupt the traditional internet access model. Both lower prices and faster access. For many reasons, Telstra will not be a player in this game.”
Digital banks have been touted as the future but they might not be as far away as you think.
Millennials are driving the charge for frictionless transactions and on-demand service without even leaving their lounge rooms.
“The continual integration of technology and finance ‘fintech’ will provide vast opportunities for cleverly positioned players,” Cyan’s Dean Fergie said.
“It’s all about user-friendly platforms that can provide better service to the customer and give lenders more confidence with respect to credit risk.”
11. Advice tech
Robots managing your investment portfolios? It is not far off. Planners be warned.
“New players are emerging in the investment platform space as new technology is taking market share from the big four banks. The bank’s tech has been slowly superseded, largely due to their size and the difficulty in making wide-scale changes to the backbone of their tech,” said Pengana’s Ed Prendergast.
“Small guys coming into the space have much more modern architecture and are able to be much more agile with what they can offer… There is huge room for growth as they take a large proportion of incremental flows into the platform market as planners realise the benefits.”