"Buy the disruptors, sell the disrupted." This was the message from Stanley Druckenmiller earlier this year at The Economic Club of New York. As the economy changes, I would reiterate what I have been saying since FATrader launched earlier this year, focus on changes in tech, healthcare and the energy systems, that is where the most disruption is.
Born out of this disruption is an emerging sustainable economy.
Fossil fuels are all in one stage or another of being phased out. Coal is on the morphine drip, oil probably has one more bull market coming that will be a selling opportunity and the future of natural gas is much less attractive than thought just a few years ago.
The tech in alternative energy continues to get better and cheaper. There are at least two new battery solutions on the horizon. The result has been that solar is among the fastest growing industries in the world. Expect First Solar $FSLR to be supported by utility spending on solar. Corporations will give a boost to SunPower $SPWR which is the leader in commercial solar. SunPower is also a strong entrant in residential solar which is finally starting to warm up on California's new construction laws that will get copied nationally soon enough. Component companies foks know about, such as, Enphase $EMPH and SolarEdge $SEDG, will continue to do well, but will start to see some competition - there's one Wisconsin company I expect to do very well.
Real estate, which has once again developed a cult investor class, is remarkably vulnerable to disruption. Commercial real estate is overbuilt. Residential rental real estate is overbuilt in the middle and luxury ends.
Offices and retail are both turning over as I type. In my recent 3000 mile drive across the midwest and northeast I can tell you there are far more "for lease" signs than a year ago. Malls are in need of billions in redevelopment, but don't try to explain those risks to owners of Simon Property Group $SPG. Rental communities are sitting less occupied due to more competition and rents are being forced down in many cities. Look no further than New York City for problems at the high-end in the condo market.
Within healthcare we are seeing a bifurcated market. Think of it this way, there is rising risk in anything that the government spends money on. There is opportunity in companies that can help contain costs and solve problems.
In tech, 5G, edge computing and the cloud are the present and future. AT&T $T, Verizon $VZ and T-Mobile $TMUS are rolling out 5G now. I saw it as I traveled back and forth from Milwaukee to the northeast. Where AT&T had upgraded to just their 5G stepping stone system, connections and speed were noticeably faster. Google $GOOG recently made a breakthrough in quantum computing. Think about what communications and computing will look like as extremely low latency communications emerge and edge computing takes hold. There will even be disruptions in the cloud.
Between now and the end of next year, I expect some significant long-term investment opportunities. I believe the economy will continue to weaken on trade conflicts and the declining effectiveness of monetary policy. I believe what Mario Draghi just said about fiscal policy needing to play more of a role in the economy is true. I don't see improvements in fiscal policy, which I don't define as more deficit spending, happening before 2021.
As long-term opportunities come, once again, I say, invest in the disruptors. Invest in sustainability. That is where the biggest trends are. Change is good if you are willing to embrace it.