Real Estate
The headlines highlighting the rise of housing markets are as common as the “SOLD” signs on lawns in neighborhoods throughout the United States.
“Despite COVID-19, Philadelphia’s real estate market is booming.”
“Pandemic pushing Cape Cod real estate sales, driving prices up.”
But, who moves in the middle of a pandemic? Apparently, lots of people.
The world looks much different today than it did at the beginning of the year. Since the arrival of the coronavirus to the United States in January, people have adapted their lives and recalibrated their plans significantly. For many, that has included planning a move.
So, for all of the lost jobs and unknowns about how the economy will recover, the real estate industry is holding its own. Here’s what investors should know.
What’s Happening with Real Estate?
NYC real estate sales fell by 54 percent in the second quarter of 2020, amounting to the largest decline in 30 years, according to a report by Miller Samuel and Douglas Elliman. Orange County, California reported its biggest price decline since 2009, 5.2 percent. In other words, more and more people are saying goodbye to city living.
But, things in the suburbs are booming. After an initial dip in April, May showed strong market interest, according to realtor.com.With all of the uncertainty surrounding the pandemic, what is it that has moved people to start considering a move?
“Quarantine was the greatest accidental PR campaign for the value of real estate that I’ve ever witnessed. Now, people have been inspired to invest more into their homes and push their budgets just a little bit further,” according to Forbes real estate writer Ryan Serhant.
No doubt, after just a few months, people have new housing needs. Remote work is looking like the new norm. Outdoor space feels less optional. And suddenly many families with kids need to find space to not only work remotely, but also facilitate virtual learning for their kids. Welcome to 2020.
“Housing is a basic need, and the decision to buy one is usually prompted by entering a new stage of life,” according to housing website Curbed.
Add strong interest and new needs to attractively low rates, and the sales started. The average for 30-year fixed mortgages fell below 3 percent for the first time on record in June, prompting more people to consider buying. And so, the headlines and the “SOLD” signs followed.
So, If Everyone Is Working at Home, What’s Happening to Office Space?
For corporations, office space can account for the second largest expense following payroll. Companies know that. Moreover, these same companies realize that their offices are currently sitting largely unoccupied.
Companies are anticipated to reduce office space over the next three years, according to a report by CNBC. Similarly, a Reuters analysis of 25 large companies indicates that they plan to reduce office space over the next year.
According to a May report by Moody’s Analytics, “As employers have been compelled to execute remote working policies, national vacancies may break the 20% mark by 2021, and effective rents in some markets like New York may fall by close to 25%.”
But, not every business is turning in their notice just yet. Most office leases run from three to five to seven or 10 years, so some businesses are just stuck with the space.
That’s good news for investors, who aren’t feeling the pain.
According to Reuters, “concerns about declining office space use have not hurt commercial mortgaged-backed securities, with the iShares CMBS ETF up 4.4% for the year to date.”
Why the continued success?
Offices are useful for everything from building work relationships to expressing organizational values and aspirations, according to the Harvard Business Review. Companies, especially those with a nearly all-remote workforce at the minute, know that better than anyone. And so, commercial offices are probably not going away in their entirety. They will, however, emerge on the other side of the pandemic and are likely to look much different.
For one, office spaces might simultaneously scale down and become more dispersed, with flexibility to locate near clients and foster high-quality connections between staff, according to the Harvard Business Review.
Moreover, space will increasingly become mixed-use, extending its hours of life beyond the 9-5. This means offices that have retail, dining, and other features that invite community members, keeping the space busy beyond the workday hustle.
But, don’t expect a boom of new office space in the near future.
The Detroit Free Press reported in June about ongoing office space construction that might be at risk. In addition to the unknowns about the need for new, Class A spaces in the short term, the supply chains that delivers building materials have been impacted by the virus.
Part of the question is: will businesses decide to keep more remote work arrangements permanently, relocate their offices to less-expensive suburbs, or will they keep with the status quo?
Still, Real Estate Investment Is on the Uptick.
Despite all of the uncertainty, according to a Gallup poll, real estate remains a top investment choice for Americans. As the stock market looks more uncertain, real estate looks safer. Not to mention the historically low interest rates that have helped families move into new homes.
Roofstock, a platform for investors to buy and sell single-family rental properties, has experienced substantially increased web traffic since the coronavirus arrived, indicating that global investors are on the lookout for less volatile investment options.
The bottom line: real estate sales and investment is on the rise. The informed investor can find ways to invest in both residential and commercial real estate in unique ways.
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Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.
The information and data are as of the September 3, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi. This material is provided for informational purposes only and should not be construed as individualized investment advice or an offer or solicitation to buy or sell securities tailored to your needs. This information covers investment and market activity, industry or sector trends, or other broad-based economic or market conditions and should not be construed as investment research or advice. Investors are urged to consult with their financial advisors before buying or selling any securities. Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. Past performance is no guarantee of future results. This content may not be reproduced or distributed to any person in whole or in part without the prior written consent of Magnifi. As a technology company, Magnifi provides access to tools and will be compensated for providing such access.Magnifi does not provide broker-dealer or custodial services.
Electric Vehicles
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What was once (not too long ago) a niche sideshow in the automotive market is poised to take over the whole thing, with electric vehicles anticipated to dominate car sales by 2040, according to BloombergNEF’s Electric Vehicle Outlook 2020.
But is the mass adoption of electric vehicles really as far off as 2030, when some projections anticipate that battery-powered cars will start to outsell conventional combustion engines? Or, is the electric vehicle revolution already here?
Right now, the prices of electric vehicle stocks are jumping. Tesla, which is expected to announce new battery technology in September, jumped 13% in one morning in June to an all time high of $1,746.69. Now, it’s as high as $1,835.64 and looking at the next milestone of $1,900.
Workhorse, a maker of electric vans, also jumped after it cleared the next hurdle to participation in California’s zero-emission subsidy program. These, in addition to a jump for the Chinese electric vehicle maker NIO, the Chinese electric scooter maker Niu, show the enthusiasm for the EV market.
And there should be. Here’s why.
What Are Electric Vehicles?
All-electric vehicles (EVs) are cars and trucks equipped with an electric motor rather than a traditional internal combustion engine. The electric motor is powered by a large traction battery pack which requires a charging station or wall outlet to charge.
Because EVs are powered by electricity, they don’t have the tailpipe that emits exhaust as is typical of internal combustion engines. EVs also do not require liquid fuel components, including a fuel pump, fuel line, or fuel tank. Hybrid vehicles, however, still do have these components, as they typically switch over to an internal combustion engine when the electric battery becomes depleted.
Why Invest in Electric Vehicles?
Simply put, electricity is the future of transportation.
EVs have the potential to help slash carbon emissions and lower costs for drivers, which is why public utilities such as Xcel Energy are pushing to get 1.5 million electric cars on the road by 2030.
When investing in EVs, it’s more than a matter of purchasing pricey Tesla stock or not. Lots of companies stand to benefit from the adoption of electric vehicles, from battery manufacturers to companies thinking creatively about how to charge electric vehicles.
These companies are trying to solve the biggest challenges for electric vehicles that have been stumbling blocks to their mass adoption. Namely, the production of batteries that hold a greater charging capacity for a longer period and the accessibility of charging opportunities.
For example, a new type of battery—solid-state electrolyte— is scheduled to enter the commercial market in 2023. Solid-state batteries are generating major excitement for electric vehicle makers. The solid version of the battery can hold three times more energy than its traditionally liquid counterpart, not to mention it can hold that energy more efficiently and ultimately last longer. Battery prices are expected to fall as their energy density improves, making electric vehicles increasingly more affordable.
EVs continue to become more mainstream as they become more affordable and charging equipment becomes more widely available. Blink Charging, for example, designs, manufactures, and operates an electronic vehicle charging network that is managed by cloud software. According to the company, its EV charging equipment sales increased by more than 350% and its revenues for just the first six months of 2020 surpassed its total revenues for all of 2019.
But, there’s more to all-electric vehicles than batteries and charging stations.
Specifically, the list of key components in electric cars is long. In addition to the usual wheels and tires, you also need:
- A charging port
- A DC/DC converter
- An electric traction motor to drives the wheels
- An onboard charger that accepts energy from the charge port and converts it to charge the battery
- A power electronics controller to “manage the flow of electrical energy delivered by the traction battery”
- A thermal system to maintain an appropriate temperature range
- A traction battery pack to store electricity for the motor
- An electric transmission
- And more…
In other words, a shift from conventional combustion engines to all-electric means a shift to makers of these parts for suppliers.
For example, Aptiv develops safety systems for electric vehicles. Safety systems are crucial considering the high voltage that powers electric vehicles and the “more than 8,000 connection points in a typical electric vehicle.”
Delphi offers automakers powertrain, electrical and battery management solutions for components including inverters, high-power electrical centers, high-voltage connection systems, combined inverter DC/DC converters (CIDD), high-voltage shielded cables, on-board and plug-in chargers and charging inlets.
Magna offers complete vehicle manufacturing, producing vehicles for BMW, Daimler, Jaguar Land Rover and Toyota. Magna was selected by the Beijing Automotive Group Co., Ltd. (“BAIC Group”) in 2019 to “produce up to 180,000 electric vehicles per year in China…starting in late 2020.”
Amphenol develops and supplies advanced interconnect systems, sensors, and antennas for hybrid and electric vehicles.
These and other companies are poised for growth and are ripe for investment.
How to Invest in Electric Vehicles
Electric vehicles will outnumber traditional fuel-powered cars before we know it. Now is the time to get ahead of the curve, before affordable, little known stocks rise to the heights of Tesla. A search on Magnifi indicates that there are a number of ways for investors to access this fast-growing segment via ETFs and mutual funds, rather than focusing only on individual companies.
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The information and data are as of the August 25, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Cloud Computing (SaaS)
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Software-as-a-Service is now standard, from mobile phones and laptops to business solutions for the largest of entities. It seems that there’s an app for everything, and it’s all personalized to each user’s credentials.
Is your gym closed during Covid-19? Subscribe to Truecoach to build an online training platform for customers. Need to set up an online store, especially with COVID-19 closures? Build one on Shopify. Too busy to make a baby book? Text Queepsake your baby milestones and they’ll make one for you. (Not kidding.)
The solutions are big, small, and endless.
But, it wasn’t always that way.
Cloud computing has transformed how users interact with software. Before the software-as-a-service model, users had to purchase their software, either on physical media or via direct download, and had to pay for updates or replacements as technology improved. These days, that’s not how it works.
Rather than purchase software annually or biannually, users pay for access to the software that they need on a subscription basis. They have credentials and they pay a small fee to accomplish their needs.
This model has transformed how we operate as a society, and it offers a frontier of investment opportunities as software companies strive to create solutions for the next big thing.
What Is SaaS?
Salesforce, which pioneered the software-as-a-service model in 1998 defines software-as-a-service as “a way of delivering centrally hosted applications over the internet as a service. SaaS applications are sometimes known by other names: Web-based software, On-demand software, and Hosted software”
How is this different from previous models?
Consider that hardware is the physical computer or user device. Now consider that software is the programs and apps that help users do things on the computer.
Before software-as-a-service, customers would buy software housed on a physical source, such as a compact disc. After purchasing, they would take it home, download it to their computer, and then use it. While this utilization of software was helpful, it was also exceptionally hard for companies to update.
It also wasn’t the most user friendly. For example, if someone was using a tax software before SaaS, they would purchase the software, download it, and input their information. However, every year, they would need to repeat the process in full. Knowing the autofills and recalls of today’s applications, starting from scratch seems tedious and time consuming.
Not to mention that because traditional software is so difficult to update with information, such as the annually revised tax code, for example, users would need to repurchase the software every year.
Software-as-a-service is different in that it doesn’t require customers to purchase software. Instead, users purchase access to software that’s available on the cloud.
What exactly is the cloud? It’s a “a vast network of remote servers around the globe which are hooked together and meant to operate as a single ecosystem,” according to Microsoft.
This type of infrastructure has changed the way software companies administer software, users access and use software, and multiplied the uses and ease of use of software products. For one, SaaS companies can focus on improving their product rather than dedicate energy to producing and marketing new versions. It limits distribution costs like packaging. It also does away with the hassle of administering licenses because the software can only be accessed by paying customers.
It has also changed payments from one-time to subscription-based. While subscription fees are much smaller from month-to-month than the one-time purchase fees previously were, the fees often add up to more than the cost of the software over the course of the year.
For companies, pivoting to SaaS has more perks. Because the functions of SaaS have become so familiar and house a user’s data, switching services is often a hassle despite the minimum software cost. This user data can also be leveraged by companies to test new features.
Why Invest in SaaS?
There have been many success stories in SaaS, from Salesforce to Shopify.
In 2015 at its IPO, Shopify was valued at $1.27 billion. As of spring 2020, it’s valued at $127 billion. Founded by Tobias Lütke and Scott Lake, Shopify started as an online store in 2004 to sell snowboards when they couldn’t find a platform that worked well for them. Now, its e-commerce platform is used by individual sellers and big companies like Google.
And, the industry is poised to keep growing, especially in the wake of COVID-19.
Consider the workforce shift to remote and the Zoom solution, connecting coworkers, families, and even loved ones in nursing homes. Another SaaS platform on the rise is Dynatrace, which provides software intelligence that streamlines user experience and improves business outcomes.
SaaS companies are solving problems from providing e-commerce solutions for businesses, business solutions that are making remote work scenarios work, to giving users access to platforms that help them do everything from monitoring their finances to staying fit to doing their taxes.
As the world adopts new post COVID-19 norms, these new solutions are likely to stay in one form or another.
How to Invest in SaaS
Naturally, in an industry as large and diverse as software, picking winners and losers can be challenging. However, for those investors interested in accessing the segment more broadly, there are a number of ETFs and mutual funds available to help streamline the process. A search on Magnifi suggests that there are many SaaS funds available to choose from.
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Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.
The information and data are as of the June 17, 2021 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Immunotherapy
Immunotherapy isn’t entirely new, but it’s quickly becoming a major player in the world of cancer care and treatment.
For instance, the global market for immunotherapy drugs is estimated to register a 8.9% CAGR from 2018 to 2023, and Grand View Research is predicting that it will reach nearly $127 billion annually by 2026.
While that might sound enormous, it’s just numbers compared to the impact it has in a doctor’s office when immunotherapy treatment gives a newly diagnosed cancer patient hope.
From fighting cancer to developing a COVID-19 vaccine, immunotherapy is changing the face of medicine. They are also presenting a frontier of innovative solutions that are driving growth in pharmaceutical and biotech industries.
What Is Immunotherapy?
Our immune systems are smart. A “collection of organs, special cells, and substances” that keep tabs on what’s supposed to be happening in our bodies, and what’s not.
So, for example, if it notices a germ that contains unusual proteins that is out of place, it attacks.
But what happens when normal cells start to change in a subtle way, but nothing is really out of place… until the healthy cells start to become more unusual and grow in an uncontrolled way? This is cancer, defined as “a group of diseases characterized by the uncontrolled growth and spread of abnormal cells.” And, because it starts in healthy cells, it can be so tricky for the immune system to stop it before it’s too late.
Immunotherapy is changing that.
According to the American Cancer Society, “immunotherapy is treatment that uses certain parts of a person’s immune system to fight diseases.”
It does so in one of two ways: Either by “stimulating, or boosting, the natural defenses of your immune system so it works harder or smarter to find and attack cancer cells,” or by “making substances in a lab that are just like immune system components and using them to help restore or improve how your immune system works to find and attack cancer cells.”
In other words, it helps a patient’s immune system recognize cancer and attack.
Why Invest in immunotherapy?
In 2020, there will be an estimated 1.8 million new cancer cases diagnosed, according to the American Cancer Society. Immunotherapy is changing the course of treatment for many of those diagnoses, which treatments were traditionally limited to surgery, chemotherapy, and radiation.
New immunotherapy drugs are most commonly being used to fight cancers of the lung, breast, and prostate.
And, even more exciting, they are getting in the cancer game sooner than ever. Coined immuno-oncology (IO) drugs, this subset of immunotherapy drugs give a patient’s immune system the ability to fight cancer cells at an early stage. This can make other more traditional treatments, like surgery, more effective, or potentially unnecessary all together.
Immunotherapies are becoming increasingly more complex. For example, immunotherapies are increasingly being combined in creative ways to treat GI cancers. Even more, simple blood tests have shown to identify which patients may have the most success with immunotherapies.
But, immunotherapy isn’t limited to cancer alone. It’s also being used to fight allergies.
A preventative treatment, immunotherapy for allergies can train the body to slowly become less allergic to a specific substance. Typically, an allergen is given via an allergy shot in incrementally larger doses which causes the immune system to “become less sensitive” to the allergen. Over time, small incremental doses train and change the immune system, building up a tolerance for allergens. Treatments typically happen over the course of three to five years, according to the Mayo Clinic.
It could even give us answers for COVID-19.
The Infectious Disease Research Institute has reported positive results after a clinical trial focuses on the treatment of moderate to severe COVID-19 cases. And, because “cancer behaves like a virus,” the same immunotherapy tools being used to fight cancer are also being employed in the development of COVID-19 vaccines.
If personalized medicine is the care model of the future, immunotherapy, or using a patient’s immune system to battle disease, is as personal as it gets. It’s already delivering cures, and in the race for a COVID-19 vaccine, immunotherapy tools are giving a pandemic-stricken world hope.
How to Invest in Immunotherapy
Key players in the development of new immunotherapies include companies such as: Amgen, AstraZeneca, La Roche, Bayer AG, Bristol-Myers Squibb and many more from the pharmaceuticals space. But given the wide-ranging interest in immunotherapy drug development, it can be difficult for investors to access the whole world of these treatments by investing in individual companies.
However, a search on Magnifi suggests that there are a number of ETFs and mutual funds dedicated to immunotherapy.
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Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.
The information and data are as of the August 12, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Direct Listing
Once uncharted territory, pursuing a direct listing is becoming less and less an anomaly. “An IPO is no longer a one-size-fits-all path to public,” according to the New York Stock Exchange.
A series of recent high-profile IPO failures of companies valued sky-high in the public eye have proven that a successful IPO isn’t guaranteed. Companies like Uber, Lyft, Endeavor, and Peloton all had highly anticipated IPOs that ended in failure. For example, on its first day of trading, Peloton’s stock plunged 11%. Uber’s shares dropped more than 7% on opening day in May 2019, continuing to slide. (Since then, it has recovered to nearly its introductory value.) At the eleventh hour (the day before it was scheduled), Endeavor decided not to go forward with its IPO. What was once the “only way” to go public is proving more and more not to be a foolproof step forward.
This series of public, lackluster performance seems to be a cautionary tale. And, while a direct public offering sounds fret with opportunities for things to go wrong, high-profile companies like Spotify and Slack are proving otherwise.
Here’s what you should know.
What Is a Direct Listing?
A direct listing or DPO (direct public offering) is a less conventional way to go public. What makes a direct listing so unusual? First, it allows companies to go public without raising capital, making it much different than an initial public offering (IPO).
In an initial public offering (IPO), companies establish an initial public stock price. By offering public ownership, IPOs are able to raise capital from public investors. To do so, a company will offer a certain amount of new and/or existing shares to investors.
Typically, stocks are sold by one or more banks that act as underwriters. These banks also help to market the company, including to institutional investors on a “roadshow” to the tune of millions of dollars. Institutional investors then filter the shares to the larger market, such as the NYSE, for example. In this somewhat exclusive process, only then do the shares become truly available to the public.
Following the IPO big debut, early investors are typically barred from selling their shares for 90 to 180 days, also known as a “lock-up period.” This has the potential to limit how much money those investors can make on the sale of their stock, which is determined by how the price of the stock fares in the public market.
A DPO skips the step of working with an investment bank to underwrite the issue of stock. Rather, “existing stakeholders basically sell their shares to new investors.” In other words, the company doesn’t have to go through the hoops of marketing the company or selling stock to raise cash before the stock goes public. This makes it faster and less expensive than a traditional IPO. It also equalizes the playing field because the stock is openly listed on the market, therefore accessible to everyone.
It should be stated that once a company is listed, even by way of DPO, the company then becomes subject to the “reporting and governance requirements applicable to publicly traded companies” as mandated by the Security Exchange Commission.
Why Are More and More Companies Choosing DPOs?
By using the less conventional DPO, companies can save a lot of cash— by skipping the IPO process, there is no need to pay banks huge underwriting fees.
But, even though there are major cost savings, DPOs are not ideal for every company. What happens if the stock for your little-known company arrives on public markets and no one knows what your company is?
The likelihood is, no one will buy it.
And, without the IPO process, there’s no initial price established by underwriters. For this reason, companies that pursue a DPO generally have better luck if they have “a lot of money and brand recognition.
Another major perk of a DPO is that there is no lock-up period. For early investors, including employees who may have accepted shares in the early days of a company to offset for a lower startup salary, the opportunity to sell shares right away when the stock might hold the most value is a huge perk.
To this point, because no new shares are created in advance of trading, the dilution of existing stock value is prevented.
DPOs are not without risk, however. For one, price volatility, even in the best of circumstances, can be enough to scare companies off. In a DPO, a reference price is typically established by “buy and sell orders collected by the applicable exchange from various broker-dealers.” However, without the support of underwriters who set an initial price, the stock becomes dependent on market conditions and demand.
Moreover, because the number of shares available on the market in a DPO is determined by the number of shares that employees and investors choose to list, there can be less control overall.
Consider Spotify, which successfully pursued a DPO. The stock hit the market at $165.90 in April 2018. On its introductory day, Spotify was ready with a reference price of $132. Even though it had plenty of brand recognition, there was worry that shares flooding the market without a price established by underwriters could lead to a steep fall.
On its first day on the market, it closed at $149. A little more than two years later, the stock is currently trading at $260.44.
Spotify is not alone in its DPO success, though. Slack had similar success after its direct listing in June 2019.
If an IPO seemed like the bar for startup success before, that’s no longer the case. Earlier this spring, Asana filed to go public via direct listing. Other companies that have been rumored to pursue a direct listing include DoorDash, Airbnb and GitLab. Needless to say, looking forward, it is quite possible (if not probable) that the DPO approach becomes a well-traveled path for companies aspiring to go public.
Investing in Direct Listings
For investors, there is functionally little difference between buying shares in an IPO vs. a direct listing. The difference comes in the source of those shares and the way they are priced at the start.
By converting insider ownership shares into publicly-listed stock, pricing on a direct listing can be volatile and a difficult way to access new companies. For investors looking to get into the IPO and DPO market without taking this risk, a search on Magnifi suggests that there are a number of different options in ETFs and mutual funds.
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Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.
The information and data are as of the August 4, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Asia
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“Made in China” is a phrase we all know well, but American shopping aisles bursting with “Made in China” goods are becoming more and more a thing of the past, especially as the depth and breadth of Asia’s economies develop. The truth is, this is not just a China story anymore— it’s a story of a new Asia bursting with emerging economies, high-tech industry, and a growing middle class.
Consider that the United Nations estimates that as of July 2020, Asia as a whole has a population of more than 4 billion. That amounts to about 60 percent of the world’s current population.
Asia is growing and its enormous population is buying more and more of its own stuff than ever before. It is estimated that “Asian-Pacific (APAC) countries will have seen a growth in their middle-classes by over 500 percent in the 20 years up to 2030.” This increased buying power will be nothing short of transformative, especially compared with 2 percent growth in Europe and a decline of nearly 5 percent in America over the same period.
Asia’s global output is up 26% from the early 2000s and, according to McKinsey and Company, “Asia is on track to top 50% of global GDP by 2014 and drive 40 percent of world’s consumption.”
This growth isn’t just thanks to China, but small and medium-sized countries throughout the region, as well. Asian business hubs stretch from Singapore to Jakarta, Kuala Lumpur and Manila. In fact, according to an analysis by The Financial Times, Indonesia is on pace to overtake the world’s sixth-largest economy, Russia, by 2023.
Not to mention, Asian exports are not reliant on the United States. Moreover, China’s total exports amount to 40% of the world’s consumption. Although exports to the United States fell by more than 8%, they remained about the same from 2018 to 2019. In other words, China was able to compensate for the drop in exports to the US by exporting more to the rest of the world.
Yes, the region is seeing some political instability in 2020, with protests and crackdowns roiling Hong Kong and other parts of China. But, given the growth that’s happening alongside this, it will take more than that to slow down the Asian expansion.
What’s Changing in Asia’s Markets?
China is no longer simply making the cheap plastic toys that it may have once been known for. Rather, its products are increasingly high-tech and sophisticated.
That means two things: The first is that in China, wages are on the rise. The second is that there is a new space globally for low-cost manufacturing that once belonged solely to China.
Vietnam’s exports are up 96% since 2015, a surge led by the export of low-cost textiles. (It’s worth noting that Vietnam is also home to a global manufacturing base for Samsung.)
In India, Prime Minister Narendra Modi launched the “Make in India” initiative with the goal of developing India into a manufacturing hub that is recognizable on the global scene. And it seems to be working, with India’s exports up 22.5% since 2015.
All of that manufacturing would literally go absolutely nowhere without streamlined logistics, however. “The logistics industry accounts for 15-20% of GDP in Vietnam and is expected to grow up to 12 percent in Indonesia.” In large part, this growth is thanks to both increased investment and streamlined e-commerce.
Why Invest in Asia?
Asia might be set to overcome the West as a center of trade and commerce, but it’s not there yet. And it’s not without challenges. Many countries that are home to emerging markets have also become home to the challenges of emerging countries.
Take infrastructure, as an example.
Paired with challenging geography, poor roadways can devastate supply chains. But, supply chain challenges like those found in Asia can largely be overcome by technology solutions, such as Route Optimization, Predictive Alerts, AI-based forward and reverse logistics, and smart shipment sorting. Additionally, infrastructure spending is on the rise in Southeast Asia, through the formation of institutions such as the Asian Infrastructure Investment Bank and the Japan Infrastructure Fund.
Countries like Indonesia have shown that economic growth for smaller, emerging countries is sustainable. Not only is Indonesia rich with natural resources, it is committed to specialized manufacturing including that of machinery, electronics, automotive and auto-parts. The country has slashed its “poverty rate by more than half since 1999, to 9.4% in 2019.” It’s most recent economic plan implemented in 2005 was for 20 years, broken into 5 year increments.
In all, the Asian continent, with its emerging middle class, increased focus on high-tech manufacturing, and participation by lesser-known counties, has long-term growth potential. And, with this momentum already in full swing, the future looks bright for countries across the continent.
That’s what happens when emerging markets “emerge” all the way into fully developed economies.
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Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.
The information and data are as of the July 29, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Ecommerce
Through the third quarter of 2020, consumers spent $580 billion online with U.S. retailers according to the U.S. Department of Commerce. Naturally, the fact that millions of Americans were sitting at home during the COVID-19 pandemic had a lot to do with this, but those big numbers were already trending higher. From Amazon, to Ebay, to Shopify, more people than ever are buying and selling online than ever before.
Most consumers know all too well that buying in an instant is easier than ever—from essentials like paper towels to novelties like birthday gifts to splurges like home décor and clothes. And, it seems one purchase always leads to the next, especially because of the carefully curated advertisements and reminders that are automatically triggered by online retail platforms to pop up on our screens.
Here is the short story of how the ecommerce we know on our screens today came to be in a relatively short period of time and why it’s both ever improving and here to stay.
What Is Ecommerce?
Electronic commerce, typically known as ecommerce, refers to the “buying and selling of goods, products, or services over the internet.” It extends beyond the transaction of money to funds and data. Think software subscriptions, streaming services, and data storage, to name a few.
Online shopping as we know it was later thought up by Michael Aldrich in the United Kingdom in 1979. Aldrich dreamed of buying his weekly groceries remotely (something that is all too familiar now) while on a walk with his wife. He accomplished this in a way by connecting a television to a transaction processing computer with a telephone line. He called it “teleshopping,” which referred to shopping at a distance.
Still, the first secure, official online retail transaction didn’t take place until in 1994 when a group of cyberspace entrepreneurs sold a Sting CD from one member to another. The transaction successfully utilized data encryption software to ensure data privacy, which was crucial to the adoption of online shopping.
That same year, in 1994, ecommerce giant, Amazon, launched. Since then, the “e-tailer” founded by Jeff Bezos has grown into the world’s largest online retailer; one that currently dominates B2C ecommerce. Originally selling only books, Bezos’s operation was doing $20,000 per week in sales within 30 days of launch.
Since then, the security, ease of use, and convenience, safety, and user experience of ecommerce have all improved exponentially. These improved factors have made ecommerce a viable and profitable new frontier for businesses large and small.
There are generally four types of ecommerce models. These include direct sellers, which operate similar to a physical store for customers but with transactions taking place online (Amazon and Wayfair); marketplaces, which offer platforms for buyers and sellers to connect (think Etsy); software providers, which sell subscriptions to cloud-based software; and logistics, which deliver goods (like UPS and FedEx). Within these four types, ecommerce generally happens one of six ways— Business-to-Business (B2B), Business-to-Consumer (B2C), Consumer-to-Consumer (C2C), Consumer-to-Business (C2B), Business-to-Administration (B2A) and Consumer-to-Administration (C2A).
Why Invest in Ecommerce?
Purchasing habits are changing with more Americans making purchases online than ever before. And, companies are listening by continuing to expand their technology budgets, which are up 4.2% in 2020 over 2019, in part with the shared goal to improve ecommerce sites and boost online sales.
More than ever, consumers are comfortable using their payment information in secure online platforms. According to a study by Price Waterhouse Coopers, more than half (51%) of respondents paid bills and invoices online in 2018, demonstrating an increasing comfort level with buying and completing transactions online.
Sellers aren’t shying away from the internet either, with numerous benefits for new ecommerce-based entities and traditional brick and mortar establishments alike. From the ability to be open for business and thereby make money 24/7 in an online platform, to providing an online space to accurately describe products in detail, to using SEO to attract consumers, selling online is giving retailers the opportunity to communicate better with customers, reach more people, sell more products, and be more successful.
In other words, the technology that facilitates the buying and selling of goods online, not to mention the companies selling more than ever online, offers extensive investment opportunities. Rest assured, online retail, and business generally, is poised to continue its pattern of growth and innovation.
How to Invest in Ecommerce
Naturally, in something as broad as ecommerce, investing isn’t as simple as choosing a few companies. In order to reach the full scope of this trend it’s important to invest broadly in all of the different sectors and niches that are shaping and being reshaped by this shift. Fortunately, a search on Magnifi suggests that there are a number of ETFs and mutual funds that cover ecommerce.
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The information and data are as of the July 28, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Urbanization
According to the UN, globally three million people move to cities every week.
Talk about the great migration.
And, the trend of people around the world packing up their bags to move to the city isn’t expected to change anytime soon. Current projections anticipate that 60 percent of the world’s population will be living in urban areas by 2030, according to Euromonitor.
As more and more people have turned in their rural lifestyles in exchange for crowded urban spaces and better opportunities, the massive number of people moving to cities has had a major impact on what the world looks like… not just sitting in traffic, but also from outer space.
A megacity is an urban area with a population of at least ten million people. In 1990 there were only 10 megacities, which were home to 7 percent of the world’s total urban population. As of 2018, there are now 33 according to a 2018 white paper from Euromonitor titled Megacities: Developing Country Domination. This multiplication of megacities all over the globe has had major implications on the environment.
Urbanization as a megatrend is not lost on investors. With changes happening at hyper speed, a host of opportunities for new and emerging high-growth business models are ripe for investment.
What Is Urbanization?
To say the least, urbanization at such a massive scale makes city-living much more complicated.
While increased urbanization is linked to more economic development in the form of new jobs and better productivity, it does not directly cause it: urbanization only spurs economic development in the presence of other factors including the availability of non-farm jobs, infrastructure, and public services.
These are no easy check boxes to fix when you consider that pervasive challenges in emerging urban environments include “insufficient infrastructure, inadequate urban services, rising informal settlements, poverty, urban insecurity, increasing inequality and climate change.”
In other words, poor infrastructure paired with a lack of investment in emerging cities can make or break a city’s success.
Not to mention, failure to develop sustainable growth can literally change the face of the planet. According to NASA’s Megacities Carbon Project, megacities are the largest human contribution to climate change.
While cities occupy only 0.5% of the world’s land, they “consume 75% of its natural resources and account for 80% of global greenhouse gas emissions.” When it comes to the planet, environmental implications are not distinct and separate from economic development.
While China’s has been lauded for its economic development, its poor urban air quality and water pollution costs the economy 6% GDP each year according to the World Bank. In the US, the cost is roughly $1 trillion per year.
That’s a lot of money lost, but not without notice.
The big problems that urbanization presents are being met with big investment, first in the public sector. For example, on the pollution front, NASA has a Megacities Carbon Project that develops, tests, and improves “robust methods for assessing carbon emissions and monitoring the atmospheric trends of carbon attributed to the world’s largest cities.”
The private sector is also eyeing changes and spending big money.
In 2016, PriceWaterhouseCoopers anticipated that private companies would invest $78 trillion in global infrastructure over the next ten years to support the growth of cities. Where will that money go? To smart solutions.
Why Invest in Urbanization?
More and more, notable investment firms are calling for balance as a means to long-term, sustainable urban growth. In other words, new digital and data-driven solutions should improve livability, productivity, and value, spurring further economic development.
According to global investment firm BlackRock, urbanization will usher in new infrastructure, alternatives to car ownership, new healthcare solutions, increased personal security, and more “smart” applications.
In an interview with telecrunch, Niko Bonatsos, a managing director at the venture firm General Catalyst Partners, describes two buckets when it comes to investment and urbanization: “The first is in helping cities to run more efficiently, and this is anything that’s happening in the background that you don’t notice until it breaks down – water management, parking, safety, energy stuff. The second bucket is more consumer-facing, meaning products and services that make life better, easier, and more convenient for inhabitants of dense cities.”
In other words, for investors, urbanization is a catalyst for new business models across the board—
from delivering public services to planning urban environments. Examples of smart solutions include e-hailing for shared vehicles, smart metering, e-government, and digital payments for real-time services… just to name a few.
As the world’s population moves at an unprecedented rate, so are the solutions that are helping to make urbanization more sustainable. Together, urbanization and investment is an equation for economic growth.
How to Invest in Urbanization
Naturally, in something as broad and multinational as urbanization, investing isn’t as simple as choosing a few companies. In order to reach the full scope of this trend it’s important to invest broadly in all of the different sectors and niches that are shaping and being reshaped by this shift toward urban living. Fortunately, a search on Magnifi suggests that there are a number of ETFs and mutual funds that cover urbanization.
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Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.
The information and data are as of the July 22, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Women's Leadership
Women’s leadership in the workplace is a work in progress. But for many, it’s not advancing quickly enough.
Nearly 30 percent of senior management roles were held by women in 2019, according to a report by Grant Thornton. This is the highest number ever on record, featuring an increase of five percentage points over the previous year.
Still, women only held six percent of the CEO positions at S&P 500 companies as of December 2019. Even more, in the US, women still earn almost 20 percent less than their male counterparts, according to the Forum for Sustainable and Responsible Investment Foundation’s Investing to Advance Women: A Guide for Investors.
While the slow rate of change might make progress feel impossible, investors do have some say in the matter. More than ever, investors can put their money in companies that explicitly prioritize women’s leadership, helping to advance gender equality in the workplace and beyond.
What Does It Mean to Invest in Women’s Leadership?
Financially investing in women can help to drive the growth of women in leadership roles. Moreover, it promotes gender diversity in business culture, recruitment policies, and staff retention policies. At its apex, financial investment in organizations that focus on women in leadership has the potential to create gender parity at the most senior level.
The history of formalizing a company’s commitment to women and communicating it to the public has evolved over prior decades, with each iteration more progressive than the last.
In 2004, Calvert Women’s Principles™ were developed in partnership with the United Nations Entity for Gender Equality and the Empowerment of Women (UN Women).
These principals were accepted as “the first global corporate code of conduct focused exclusively on empowering, advancing and investing in women worldwide.” They include: (1) employment and compensation, (2) work-life balance and career development, (3) health, safety, and freedom from violence, (4) management and governance, (5) business, supply chain, and marketing practices, (6) civic and community engagement, and (7) transparency and accountability. These principals were a sort of baseline for companies to say that “yes” we do this, and a temperature check to help identify where they fall short.
In 2009, the Criterion Institute, a non-profit think tank, introduced the term “gender lens investing” or using investment to promote gender equality. The Institute’s goal extends beyond linking gender to just investing, but to (as they describe it): “equipping people to participate in making the connections between gender and finance.”
In 2010, the United Nations introduced the Women’s Empowerment Principles on International Women’s Day, which it adapted from the original Calvert Women’s Principles®.
In 2016, the mission continued with the launch of the Level Panel on Women’s Economic Empowerment at the Commission on the Status of Women. The panel is still in existence today with the aim to close the gender pay gap entirely, among other goals.
Then, in 2017, Criterion introduced the Blueprint for Women’s Funds. This report sees corporate engagement as one arm of a larger toolbox. It seeks to bridge the leverage of the financial sector with diverse leaders that advocate for gender equity to have long-term impact.
All of these initiatives for gender equality further similar goals with different scopes.
Why Invest in Women?
Investors increasingly want to leverage their financial power to further social change, including gender equality in the workplace. Investing is a great way to accomplish that end.
According to the Women’s Investment Principals, investment in women is an engine for change. More and more, people are doing just that.
Fidelity Investments launched a women-focused mutual fund in 2019. The Women’s Leadership Fund invests in companies that either have a significant percentage of women in leadership positions or “meet gender diversity initiatives for hiring, retention, paid leave and promotion of women.”
Why? Despite the lagging progress for equality, we all know that women bring a lot to the table. According to research featured in the Harvard Business Review, women outscored men on 17 of the 19 key leadership capabilities.
And, there are more and more success stories of women in corporate leadership roles. In 2014, Mary Barra became the first woman CEO in the auto industry at General Motors(GM). Two years later in 2016, GM named the first female chairman in the auto industry. In 2018, GM named Dhivya Suryadevara its Chief Financial Officer. During Barra’s tenure, she was tasked with tackling the ignition switch crisis as well as other recalls. She successfully led GM to transcend the public relations crisis, gaining respect as a leader in the industry.
According to a growing body of research, female leadership is increasingly linked to improved financial returns.
According to analysis from Boston-based trading firm Quantopian, “women CEOs in the Fortune 1000 drove three times the returns as S&P 500 enterprises run predominantly by men.”
More, the 2016 Gender Report by Credit Suisse found that the higher the rate of women in leadership, the higher the returns to investors.
According to Patricia Lizarraga, managing partner at Hypatia Capital, “if every woman in the U.S. invested $100 in female business leaders this year, it’d total somewhere around $15 billion.” In other words, even small investment amounts have the potential to create some major momentum.
In the world of the “me too movement” and social change, the woman’s voice is louder than ever before. Now is the opportune time for investors to back those voices with the dollars to create change in corporate culture specifically by investing in companies that advocate for women by offering them workplace equity and leadership opportunities.
How to Invest in Women’s Leadership
Of course, investing in companies based on social issues isn’t easy, as different companies take different approaches to these concerns and often their businesses are not directly related to them. However, ETFs and mutual funds focused on women’s leadership are a good way to access this growing sector without having to invest directly in specific companies. A search on Magnifi suggests there are a few different ways to do this.
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Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.
The information and data are as of the July 13, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Infrastructure
As the economy rides out the new reality of the Coronavirus, spending on infrastructure could be an answer to the United States’ economic woes, according to a nearly $1 trillion government proposal currently in the works.
The U.S. infrastructure funding law is up for renewal on September 30th. In its absence, investors are expecting something big to happen. The news of the non-finalized proposal already sent stocks soaring. Last week, upon the announcement, Fluor Corp. surged 11% before regular U.S. trading began, while Vulcan Materials Co., another heavy infrastructure company, similarly climbed by 8.3%.
Regardless of the fate of this specific proposal, infrastructure as an agenda item isn’t going anywhere. According to a statement from White House spokesman Judd Deere, “Since he took office, President Trump has been serious about a bipartisan infrastructure package that rebuilds our crumbling roads and bridges, invests in future industries, and promotes permitting efficiency.”
In fact, infrastructure has been on the minds of lawmakers for some time now. In January, the Democratic-led house laid out a $760 billion, five-year infrastructure package. That follows another package set forth by President Trump two years prior that totaled $1.5 trillion. While neither of these proposals were the final fix, they underscore the need for improved infrastructure throughout the United States, and tangentially, a new era of government investment in the U.S.
It’s a sure bet that with the pending renewal date, the next generation of government-led investment is imminent in one form or another. Here’s what all investors need to know.
What Is Infrastructure?
Traditional infrastructure includes roads and bridges, yes. And in the U.S., ours need a lot of work. According to the American Society of Civil Engineers (ASCE), the U.S. needs to spend some $4.5 trillion by 2025 to fix the country’s roads, bridges, dams, and other infrastructure items that Americans rely on every day.
Per the same report, the 2017 Infrastructure Report Card (which is published by the ASCE every four years) many of the one million pipes that carry American drinking water have been in use for almost 100 years. Aging pipes are a serious issue when you consider that there are an estimated 240,000 water main breaks per year, not to mention issues with contamination.
And, more than 200,000 of the 614,387 bridges in the U.S. are more than 50 years old. It is estimated that these will cost as much as $123 billion to fix.
This physical infrastructure needs to be fixed.
But, amid today’s technological renaissance, our society is largely reliant on wireless technologies and networks more than ever, and that counts as infrastructure too. Accordingly, there is also a need to innovate and improve in the wireless and 5G network arenas, as well as implement better broadband access for rural areas of the country.
In other words, infrastructure today refers to both Route 66, as well as the “information superhighway.”
Why Invest in Infrastructure?
Roads and bridges are in many ways at the core of economic growth. According to the ASCE, “infrastructure brings you breakfast.” Its website follows a bagel from wheat fields in the Midwest to a bakery in the South, demonstrating how the price of the bagel is impacted by its journey along America’s infrastructure.
Traditional infrastructure provides essential services to society and benefits. They are “essential to the sustainability and growth of an economy,” according to the Royal Bank of Canada’s Global Asset Management.
Even more, because there is often little competition in regulated industries or after a government contract is established, traditional infrastructure investments tend to have sustainable cash flows and resistance to economic swings.
If the market for roads, bridges, and pipes seems pretty straightforward, consider what the new high-tech infrastructure of 5G could mean.
Given that the transition from 3G to 4G wireless communication helped usher in the era of online banking, Uber, and Snapchat, the nationwide transition from 4G to 5G could mean big changes and opportunities. 5G offers the most capable wireless infrastructure available that has the potential to be 100 times faster than 4G, with increased connection capacity.
Market intelligence firm IDC forecasts that worldwide 5G connections will reach 1.01 billion in 2023. That’s up from approximately 10.0 million from 2019. That’s good news considering that 5G is anticipated to be a driver of technological growth for years to come, supporting the “future digitization and automation of systems, connecting smart sensors with AI.”
In a world where the internet is more capable and reliable than ever before, does the wireless transmission of energy seem like a thing of science fiction?
It’s not. In fact, it’s already possible through UV rays, microwaves, electromagnetic fields, inductive coupling, and via Wi-Fi. And, even our electric toothbrushes. If applied on a large scale to the world outside of our bathrooms, the wireless transfer of energy could be transformative. It could give people without a reliable source of power, in rural areas for example, wireless access to a sustainable power supply.
The companies that make the component parts of this technology, like the makers of semiconductors that make chips for smartphones, are sure to soar with increased demand. Consider also the makers of wireless sensors, which support new gaming capabilities of 5G, and the manufacturers of fiber optic technologies that support new 5G networks.
It’s not just the makers of the hardware that will benefit. Mobile apps that require large amounts of data transfer, from Netflix to Spotify, are anticipated to see a boost from increased online capacity. Standard 5G systems are also expected to boost the speed and efficiency of cloud computing services.
The future of infrastructure is twofold — on both an improved roadway, and improved information highway. The need for investment is not a surprise to lawmakers or to the average American — but the reality of investment, especially considering the looming September 30 deadline, is imminent.
How to Invest in Infrastructure
Given the broad reach of infrastructure as an asset class, it can be challenging for investors to fully diversify their holdings. However, infrastructure-focused ETFs and mutual funds are a good way to access this sector without investing directly in individual companies. A search on Magnifi suggests there are a few different ways to do this.
Unlock a World of Investing with a Magnifi Account
Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.
The information and data are as of the July 6, 2020 (publish date) unless otherwise noted and subject to change.This blog is sponsored by Magnifi.