What will the next decade in investing look like? Strategists at Merrill Lynch and Bank of America Private Bank (BAML) have helpfully reassigned the letters of the tech sector’s hard-used acronym (Facebook, Amazon, Apple, Netflix & Google) and come up with FAANG 2.0.
The new acronym stands for the high-rates, high-inflation, and low-growth era. And I’ve looked to see if there’s merit in there, and found some assets that can help you invest in it.
The Russian-Ukraine conflict has raised new concerns about energy security. Tensions between the two countries, constrained supplies, underinvestment in oil and gas production, and continued strong demand are likely to keep energy prices high for some time.
The energy sector has been a bit of an investment pariah of late, as funds have shifted away to more sustainable assets.
The high cost of capital associated with environmental, social, and governance (ESG) factors has resulted in years of underinvestment in oil production.
Warren Buffett is a fan of the oil sector, having accumulated huge stakes in two of the largest oil producers – Chevron (CVX) and Occidental (OXY).
You can invest in the energy sector by buying individual stocks, or, for broader exposure, you could consider the iShares U.S. Oil & Gas Exploration & Production ETF (IEO, expense ratio: 0.39%) or the iShares Global Energy ETF (IXC, expense ratio: 0.40%).
Shorting longer-term via CFDs is also an option if you are not looking for more complicated options solutions. Alternatively, you can be sure we will work some of the assumptions into our discretionary trading via Portfolio ECS.
As tensions rise globally, defense budgets are on the rise as well. Russia’s invasion of Ukraine has led to increased military spending in countries across Europe. China & US tension over Taiwan also has increased the military spending in the region.
It’s unlikely that you’ll see an immediate boost to revenues from defense projects, since they tend to have multi-year timetables. However, you’ll likely get greater stability and visibility on medium-term earnings.
As wars increasingly move online, defense spending is no longer just for battleships and tanks. Instead, governments and industries are investing more in cybersecurity.
|iShares U.S. Aerospace & Defense ETF||ITA|
|Invesco Aerospace & Defense ETF||PPA|
|SPDR S&P Aerospace & Defense ETF||XAR|
|SPDR S&P Kensho Future Security ETF||FITE|
There won’t be enough food to feed everyone. According to the World Resources Institute, food production will need to increase by 69% by 2035 to feed the growing population and expanding middle class.
We need to start thinking about how we’re going to produce enough food to feed everyone.
The agriculture industry is vast, including agricultural machinery, fertilizers, chemical pesticides, crop producers, and high-end seed producers.
Different people along the food value chain will benefit differently from increased demand and higher prices. So, if you’re looking to invest in this area, it makes sense to consider parts of the value chain that have high barriers to entry and that can help improve food yields the most – seed producers, for example.
There is also an emerging trend in “vertical farming” Interesting picks across these spaces are:
|Bowery Farming||Not Public Yet|
|Plenty, Crop One||Not Public Yet|
|Kalera||Not Public Yet|
|Agricool||Not Public Yet|
|Infarm||Not Public Yet|
As we have already pointed out, Elon Musk & Warren Buffet are big on this sector, and not for nothing, nuclear is arguably seeing a resurgence this year. Both nuclear energy and renewables are critical in helping nations meet the UN climate goals.
They are both carbon-free, which is essential in the fight against climate change. It’s no wonder many EU states are reconsidering their plans to shut down power plants.
Europe is facing an energy crisis as Russia cuts gas supplies to the bloc. To fill its storage tanks and supplement its needs, Europe is turning to other energy sources, such as liquified natural gas (LNG). However, buying pricey LNG from the US is not a long-term solution.
|Sprott Physical Uranium Trust||SRUUF|
Gold is seen as a safe haven asset by investors who want to hold it for security during difficult times. However, there are other reasons to invest in minerals. The transition to electric vehicles, for example, will be mineral intensive.
The IEA reports that EVs require six times the amount of minerals than ICE cars, with copper, nickel, manganese, cobalt, rare earth elements, lithium, and graphite being the most important.
As you might have guessed, we respect Buffer here, but despite Warren not being a fan of this asset class, short to mid-term, we believe there could be value to extract from the situation. If you are not too big on fancy ETFs, buying a GOLD via a CFD broker like Key To Markets or Exness (if you are trading outside of Europe) is a way to go.
Other, more intricate way to invest in Gold and minerals are via ETFs:
|SPDR Gold Shares||GLD|
|iShares Gold Trust ETF||IAU|
|VanEck Rare Earth/Strategic Metals||REMX|
If FAANG 2.0 doesn’t sound as appealing as the original acronym (focused on tech giants – growth stocks) , it’s for a reason, these are defensive plays, and mostly concentrate across value, seasonal and dividend opportunities.
But, with FAANG 2.0, you can take a more diversified and defensive approach to investing, with low beta, low volatility exposure through aerospace and defense, agriculture, and gold.
It might take more patience to see themes in aerospace and defense, agriculture, nuclear and renewables, and gold play out – they can take years.
If you think the world is going to get more volatile, then investing in FAANG 2.0 might be the approach for you.
This is because the companies that make up FAANG 2.0 are well-positioned to weather increased geopolitical tensions and inflationary pressures brought on by climate change.
For more risky endeavors, you can always count on our actively managed solutions and automated trading that strives during moderate volatility (regardless of the trends).
Team of Elite CurrenSea 🇺🇦❤️