Almost everyone will be happy to see the curtain close on 2020 and hope to enjoy a much better year in 2021. For investors, that means looking for new growth opportunities.
While technology will likely remain attractive going forward, it’s probably best to look beyond some of the usual suspects, like the FAANGs and Tesla TSLA, who already have steep valuations . Here are three tech trends to watch over the coming year.
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BATTERIES
Now that Tesla has succeeded in promoting sustainable transportation, all other car companies face a tangible threat if they don’t start playing catch-up. This is why some of the biggest names in the industry are investing so much in this area. But competitors still have a lot of work to do, having already been wrapped up by Tesla.
Tesla Co-founder and CEO Elon Musk (Photo by FREDERIC J. BROWN / AFP) (Photo by FREDERIC J … [+]
AFP via Getty Images
That gives Elon Musk the luxury of being aggressive in his other lines of business. The one with the most upside is batteries. Tesla has already developed a battery cell that is not only many times more powerful than anything on the market but has the potential to be much more cost efficient.
If the company continues to make progress with its battery technology, it will be a game changer, for its current line of cars and a host of sustainable energy products. However, it would not be unrealistic to expect Tesla stock to continue to grow at the same rate as it did since late last year – it would be foolish.
So, consider companies that will ride its overcoat, including other battery and EV manufacturers, as well as battery technology-related commodity and chemical companies that will serve the company’s competitors.
Many such companies are based in Asia. Domestic investors can access them through the Global X Lithium & Battery Tech ETF, which includes high-potential companies such as LG Chem of Korea; Chinese battery makers CATL and WORLD (the latter also makes EVs); Panasonic in Japan and chemical manufacturer Albemarle in the US.
CHALLENGES TO A BIG TECH
Not so much that FAANG stocks will collapse, but the ongoing attack on Big Tech, by competitors and governments pursuing anti-trust suits, will open up investment opportunities with other companies. What’s more, individuals can only focus on one technology platform at a time, and there are now more attractive new platforms than ever before.
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Many people, for example, have started using Twitter to search for news instead of Google GOOG and Facebook is struggling to stop the rise of TikTok as the social media channel for young people. Meanwhile, Disney Plus and HBO Max are shaping up as worthy enemies for Netflix NFLX in the streaming wars.
Beyond that, video games are increasingly becoming social media platforms. If Epic Games can win in its ongoing battle with Apple AAPL over gatekeeper fees, it could have a profound impact on how we access mobile-based software-as-a-service businesses.
Even Amazon AMZN is vulnerable. Walmart WMT, the world’s largest retailer, has made real progress in its digital efforts with the successful launch of its Walmart + offering this year.
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Chewy.com has also emerged as an e-commerce leader in pet-focused retail goods, while consumers shopping online for luxury furniture can find better items that buy direct from RH (formerly Hardware Restoration). And Shopify allows more small stores to sell online without relying on Amazon, which competes with such brands.
BITCOIN
Bitcoin has spiked again this year, up over 200%. For the first time, big financial firms are validating it, while many large institutional investors are starting to take the cryptocurrency more seriously than ever before. The CEO of BlackRock BLK, the world’s largest asset manager, recently said that Bitcoin could one day evolve into a global market asset.
Payment companies such as Square SQ and PayPal PYPL have implemented protections to compensate for the inherent risks associated with acquiring an asset that has historically suffered volatile price fluctuations and traded on exchanges that have suffered embarrassing cybersecurity breaches. Square may have the most potential, thanks to its relationships with thousands of traders, as well as the over 20 million who use its Cash App, where consumers can now buy Bitcoin.
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This sets the stage for Amazon and Shopify to follow suit and ultimately allow Bitcoin transactions. When that happens, it will create a clearer path towards a real economic system that revolves around Bitcoin.
All of this will lead to increased prices and more stable prices. The truth is that Bitcoin, as a long-term portfolio diversifier, finally makes sense for many investors.
CAVEATS
It cannot be denied that 2020 brought the unexpected, to say the least. So while I am a very strong believer in battery technology, Bitcoin and challengers to the FAANGs, I also recognize that literally anything could happen in 2021.
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What we do know is that disturbances caused by the coronavirus have spawned a great deal of innovation, seeding a crop of new leaders in technology that have not just survived – they have thrived. So while we hope by the end of 2021 that we will have some semblance from our previous lives back, many of the technological advances they have spawned are here to stay.
Ross Gerber is CEO and President of Santa Monica, Gerber Kawasaki Inc. of California, an SEC-registered investment adviser with approximately $ 1.5 billion in assets under management as of 12/15/2020. Gerber Kawasaki’s clients, company and employees own Apple, amazon, Shopify, Global X Lithium ETF, PayPal, Square amazon, Walmart and Tesla positions. Seek guidance from an investment adviser before making any investment. All investments carry risk and may not be suitable for your situation. Follow Twitter: @gerberkawasaki Website: Gerberkawasaki.com