5 top investment themes for the next decade

As long-term investors here at The Motley Fool, it’s natural for us to think about possible future investment themes in terms of years and decades.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

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“Time in the market” is one of our favourite sayings here at The Motley Fool. It’s one of the reasons we recommend investors look at future investment themes by many years, rather than solely what’s happening in the here and now.

So without further ado…

Agricultural evolution

By Zaven Boyrazian. While often overlooked, the agricultural sector plays a critical role in the survival of the global population. Yet, it’s plagued with problems that need to be urgently solved.

  • Methane emission from cattle is accelerating global warming.
  • Increasingly volatile weather is resulting in higher levels of crop failure.
  • Vast quantities of water consumption are driving up costs.

These are just some of the countless issues starting to emerge. However, new businesses are developing potential solutions, creating new opportunities for investors. Plant-based proteins, genetic seed modification, vertical farming, drone mapping, and even laser beams are being deployed to help farmers across the planet increase yield while reducing the environmental impact.

The Agtech revolution is kicking off slowly. But with the survival of the human species at stake, investor interest is quietly ramping up, creating a new investment theme covering a wide range of industries beyond agriculture, including biotech, robotics, AI, semiconductors, energy, and utilities.

Stocks like Trimble, AppHarvest, and Beyond Meat already allow investors to invest in this rising theme from multiple angles. But with Agtech adoption still highly fragmented, the level of risk is still high. Nevertheless, getting in early could allow investors to reap monumental returns over the next decade, in my opinion.

Zaven Boyrazian does not own shares in Trimble, AppHarvest, or Beyond Meat.

Base metal demand

By Paul Summers: Commodity investing, specifically in base metals, often gets a bad rap due to prices being so volatile. This part of the market is also about as cyclical as you can get. Generally speaking, recessions are not a great time to be engaged in mining exploration or production.

Nevertheless, I think base metal demand will be a key theme going forward.

My reasoning for this is simple. The drive to produce cleaner forms of energy depends greatly on the availability of, for example, copper and nickel. Whether it’s electric vehicles, wind turbines, or some other ‘green solution’, all require more stuff to be dug out of the ground.

The problem is that underinvestment in the past means there aren’t many viable new projects around the world. This could eventually lead to supply issues, which in turn pushes up prices. That would be great news for established UK-listed behemoths like Rio Tinto – already a rich source of dividends for investors.

An arguably less risky approach would be to buy stock in a fund like Blackrock World Mining Trust. Management fees aside, this would spread my money around all the big players while still generating passive income.

Paul Summers has no position in any of the shares mentioned

Digital transformation

By Edward Sheldon, CFA. Looking out over the next decade, there are lots of investment themes I’m excited about. The theme I’m most bullish on, however, is digital transformation.

Digital transformation is the process of using technology to enhance the way an organisation operates. Its aim is to improve processes and productivity, lower costs, and create better customer and employee experiences.

Now, there are many different ways to play this theme. One of the best strategies, in my view, is to invest in companies that specialise in helping other organisations get their IT up to speed. Some examples here include Kainos and Softcat, both of which are listed on the London Stock Exchange.  

Another idea is to invest in companies that offer software designed to help organisations become more efficient. A good example here is Sage. It offers accounting and payroll software that can help businesses automate processes.

A third approach is to invest in cloud computing companies such as Amazon, Microsoft, and Alphabet. Today, businesses of all shapes and sizes are moving their operations to the cloud in order to enhance their agility. 

Of course, as with any investment theme, there are risks to be aware of. One here is that a deep recession could slow corporate spending on new technology.

However, with the global digital transformation market projected to grow from $1.8trn in 2022 to $6.8trn in 2029, I think the theme has significant long-term potential.

Edward Sheldon owns shares in Kainos, Softcat, London Stock Exchange Group, Sage, Amazon, Microsoft, and Alphabet.

Full steam ahead for the energy transition

By Charlie Keough. The push to a greener world in the last few years has been monumental. And that’s why the energy transition is my top investment theme for the next decade.  

The inevitable shift to a net zero world will impact every business and industry. And while admittedly it may be a while before traditional oil and gas gives up its number one spot, there’s no denying that the clean energy revolution will continue its charge in the years ahead.   

We’ve already seen this in practice following a mass drive from governments and institutions across the globe in the past few years to promote the push for a cleaner future.  

The European Union aims to use at least 30-40% renewable energy sources by 2030. Across the pond, the Biden administration has pinpointed even loftier milestones.  

With this, nearly, if not all, firms now factor environmental implications into their business models, with many having set ambitious net zero targets. And as such there’s a host of sectors and companies that offer investor exposure to the transition.  

This ranges from electric vehicle manufacturers, such as sector leader Tesla, to pure-play renewable energy stocks. And it even includes unconventional sources such as oil and gas stalwart BP as it places greater importance on its commitment to transition.  

With all this combined, I can see the energy transition proving to be a fruitful theme in the years ahead.  

Charlie Keough has no position in any of the shares mentioned. 

Global decarbonisation

By Ben McPoland. For me, a massive investment theme for the next decade (and beyond) is the decarbonisation of the planet. While this is a contentious topic for some, consensus opinion now says that we have to fully decarbonise – reach net zero, that is — by around 2050.  

That means this trend is extremely large and long-lasting, suggesting there are many different ways to approach this from an investing angle.

There are the obvious renewable energy producers that operate solar and wind farms. Or a pure-play electric vehicle manufacturer like Tesla, which also owns a large solar installation business.

Perhaps even an investment case could be made for the likes of Shell and BP, which could one day redirect most of their large fossil fuel profits into clean energy. Though how quickly they make the switch is up in the air. 

Now, I should highlight that the renewable energy theme does occasionally fall out of favour with investors. However, that could also be seen as an opportunity. For instance, one fund that has long piqued my interest is the iShares Global Clean Energy ETF. It is down 21% since the turn of the year.

This ETF tracks the S&P Global Clean Energy index, which consists of 100 global companies focusing on renewable energy. Top stocks include First Solar and Enphase Energy.

Ben McPoland owns shares in Tesla.  

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet, Amazon.com, AppHarvest, Kainos Group Plc, Microsoft, Sage Group Plc, Softcat Plc, Tesla, and Trimble. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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