Investors are dealing with a tough economic and investment environment, but at Marriott we have identified three macro trends playing out that hold significant opportunities.
1. Rising incomes in the developing world
The gross domestic product growth of many major emerging markets is increasingly being driven by household spending as they transition from investment-led to consumption-driven economies.
Over the next five years, it is anticipated that incremental consumption growth in China and India will equate to a market about the size of Japan.
The annual consumption in emerging markets is expected to reach $30 trillion (R416trln) by 2025, while the consuming class is expected to rise from some two billion today to nearly four billion. Consumer-facing multinationals with meaningful footprints in the developing world will therefore benefit from what we believe to be a significant growth opportunity in the next decade.
2. Ageing populations in the developed world
People born in the Baby Boomer generation – those born after World War Two until the early 1960s – are reaching retirement age. By 2030, there will be a one-third increase in the number of people over the age of 60 in the developed world.
Baby Boomers are living longer – in some societies, as much as three decades longer than people did a century ago. They have higher spending power and own more assets than any other generation.
In the United States, Boomers represent 44% of the population, and in the next five years they’re projected to hold 70% of US disposable income and buy 49% of total consumer goods. Healthcare spending by Boomers is projected to rise by $1.4trln, and they are currently responsible for 80% of all luxury travel spending.
Companies that target Boomers’ consumption habits will have a ready-made market for their goods and services.
3. Technology-enabled efficiencies
Advancing technology presents investors with a major opportunity. Business is expected to benefit from long-term gains in efficiency and productivity, as well as connectivity – termed the Fourth Industrial Revolution and the Internet of Things.
It has been predicted that by 2020 there will be over 26 billion connected devices – more than three connected devices per person on the planet. Data production will increase by about 44 times by 2020. Currently, only 10% to 15% of companies globally use data efficiently to optimise performance. The upside potential of this trend is significant.
Stocks to buy and hold
Considering these trends, Marriott has identified certain stocks which we believe investors should buy and hold for the next decade. They fall into three general themes:
• Companies that own the world’s most sought-after consumer brands. P&G, Unilever, Reckitt Benckiser and Nestlé own brands such as Pampers, Dove, Dettol and Nescafé. Demand for these products is likely to increase substantially in the years ahead considering the rapid growth of the consuming class.
• World-leading pharmaceutical companies. Johnson & Johnson, Pfizer, GlaxoSmithKline and Sanofi are among the biggest pharmaceutical companies in the world and own a large percentage of the globe’s essential medicines, from vaccines to cancer treatments. As such, these four companies are likely to be major beneficiaries of ageing populations in the developed world.
• The world’s finest manufacturers. Companies such as GE and Honeywell are leading the way when it comes to connecting equipment to the internet and analysing data to optimise performance. Not only are they top-quality manufacturers, they are also leading the digital trend and are at the cutting edge of the Fourth Industrial Revolution. GE recently hired 1 000 programmers and boasts excellent dividend prospects. Honeywell is among the world’s largest providers of automation and control products.
By tapping into the trends of a rapidly growing consumer class in the developing world, an ageing developed-world population and technology-enabled efficiency and productivity gains, investors will be best positioned for future growth.
Duggan Matthews is the chief investment officer at Marriott.