From swapping jeans for yoga pants to stocking up on baby formula like it’s going out of fashion – these are six megatrends that will impact your investment returns in the next 12 months, according to Wilson Asset Management (WAM).
WAM chairman Geoff Wilson and chief investment officer Chris Stott outlined key investment trends at the annual general meeting in Sydney on Tuesday. The next boom and bust hotspots will be affected by:
1. Australia’s fitness craze
For many Australians, “activewear” such as workout leggings to sports mesh tops are swiftly replacing outdated T-shirts and skinny jeans. Sales of health-tracking devices such as Fitbits have exploded, with more than 20 million units flying off the shelves at $US50 ($70) to $US350 each. For companies like activewear group Lorna Jane, revenue has spiked 30 per cent to $200 million as more Australians jump on the fitness wagon.
“It’s difficult to find stocks that have a leverage play on that but the one we own is RCG Corporation,” Mr Wilson said. RCG owns a large footwear and apparel business including The Athlete’s Foot and Dr Martens.
“You can’t get exposure from Fitbit, but they [RCG] will be benefiting from that trend.”
2. Hungry Chinese babies
It’s an unfortunate reality that many Australian mums and dads are forced to travel tens of kilometres out of their suburbs in a desperate bid to secure baby formula to feed their hungry babies. The shortage of the “white gold” can be traced back to the insatiable demand from Chinese parents, who willingly pay exorbitant prices for Australian-made products. This is thanks to recent scares about tainted Chinese infant formula, which has led to Australian brands such as Bellamy’s Organic to be the top choice for them.
“The companies that would benefit significantly are the likes of Blackmores and A2 Milk,” Mr Wilson said.
3. Starting families later
As gender equality improves and women place more emphasis on developing their careers, Australian couples are choosing to park their baby plans for a later chapter in life.
Enter companies such as Virtus Health and Monash IVF, which have dominated the Australian market after performing the majority of in vitro fertilisation procedures as older women try to conceive. The two companies control more than 70 per cent of the market, while players such as Primary Health Care are also set to benefit.
“People are looking to start a family later in life, and as a result that has increased the propensity for consumers to require fertility services such as IVF. This will continue,” Mr Stott said.
4. Darwin over Dubai
The Australian dollar has shed more than 30 per cent of its value against its US counterpart in the past year, and WAM is convinced it will further spiral lower. While this might dent Australians’ enthusiasm for a shopping trip in Dubai or a tour around Europe, it’s good news for local operators preparing for an influx of local and international tourists.
“The companies that we own in the portfolio that are leveraged to that thematic are Mantra Group and Ardent Leisure, who are clear beneficiaries of these trends, which is the increase we will see in inbound visitation from offshore tourists and in particular, China,” Mr Stott said.
5. Dodging taxi traffic jams
Ardent Leisure is set to cash in on the low dollar and the growing number of international visitors it will attract, plus all those domestic travellers who can’t afford to go overseas. Supplied
Taxis are so 2013. Australians are joining other global customers who increasingly use the app-based ride sharing company, Uber, to get from point A to B. The NSW government said it would move to regulate ride-sharing services after the ACT government allowed Uber to transport passengers in its borders.
Uber is privately owned, and mum and dad investors will struggle to get in on any direct slice of the action – but they can avoid companies such as Cabcharge whose profits will be increasingly impacted by Uber, Mr Stott said. “The taxi industry will always be around. It’s a government-created monopoly but Uber will continue to take market share off the industry over the next decade,” he said.
“We think they pose a significant threat over Cabcharge.”
6. Avoiding falling bricks and mortar
Ride-sharing services such as Uber are being legalised in a growing number of jurisdictions. It’s bad news for taxis, …
Ride-sharing services such as Uber are being legalised in a growing number of jurisdictions. It’s bad news for taxis, and Cabcharge.
The housing boom is turning bust. An overheated housing market in Sydney will cool down over the next 12 months despite record low interest rates. Morgan Stanley analysts say Australia’s housing cycle has peaked, with a tighter regulatory environment, slowing immigration and frothy prices set to blunt the powerful growth momentum for the sector.
“CSR, Boral, James Hardie… they’re the three key [companies] that will be affected,” Mr Stott said. “We think that the housing market has peaked in terms of housing starts.”