market folly

Strategist Jeff Saut recently released a slideshow from Raymond James entitled 'Gleanings' where he touches on how to invest in a slow-growth environment.  He recently held a conference call with Tom O'Halloran who runs Lord Abbett's Growth Leaders Fund and they both agree on many of the same themes.


6 Investing Themes in a Slow Growth Economy

O'Halloran outlines his 6 rivers of growth as follows:


1. Ongoing Digitization of Society - "Driving that revolution are such growth engines as e-commerce (sales over the  Internet), hosted software (the delivery of software from a site where it is hosted  on the Internet), social networks (platforms that connect individuals and  businesses), mobility, and cloud computing (a vast network of remote servers that  have added unprecedented functionality to the technology ecosystem). Meanwhile,  the Internet has enabled a mobility boom by linking itself to telecommunications  networks. This has led to a proliferation in advanced wireless devices and has  changed the way consumers and businesses communicate."


2. U.S. Mass Consumerism - "Consumer companies are helping consumers look good and feel good. These  companies also are making people’s lives much more convenient through a  growing market in at-home products and services. Rapidly growing social  networking sites are empowering individuals to take full advantage of this market.  These trends open up big new markets for "winner take most" companies.  Affected markets and products include apparel and retailing as well as a wide  variety of beauty products, ranging from cosmetic lasers to invisible braces.  Compelling approaches to basic human needs or desires, such as sleep, beauty, and  health, are also generating significant growth. "


3. Emerging Nations - "The superior growth rates of emerging nations are giving rise to a growing middle  class in these nations. The implications for increased spending are staggering. The  Organization for Economic Co-operation and Development (OECD) believes the  middle class in the Asia-Pacific region alone could spend an incremental $25  trillion by 2030. The growth in emerging nations will shift this decade toward the  consumer sector of those nations and away from the sectors tied to Chinese  industrialization. Increasing disposable incomes in these emerging nations have  particularly benefited the consumer, healthcare, and technology areas."


4. Modern Medicine - "Three areas of innovation that have fueled growth in health care include genomics,  biotechnology, and minimally invasive devices and procedures. In genomics,  significant progress in identifying genetic defects has led to breakthrough  diagnostics, targeted drug therapies, and preventive medicine. The biotechnology  industry is a major beneficiary of the greater understanding of human genetics  and physiology. Scientists at biotechnology companies have used this knowledge  to fundamentally change the drug-discovery process and develop new drugs they  believe will be more effective and/or safer than earlier treatments."


5. Manufacturing Renaissance - "U.S. exports to China alone have accelerated a whopping 583% between 2000 and  2012. Against that backdrop, there are opportunities in leading providers of  advanced technology and training that will increase industrial productivity,  flexibility, and efficiency while lowering costs and making manufacturing  competitive globally. These include: fiber lasers used in cutting and welding  applications, a producer of vision systems and surface inspection systems, and a  provider of 3-D measurement and imaging systems that speed up the design and  development process of highly engineered products. The dramatic improvements  in 3-D software and printing technology should also help fuel the growth of U.S.  manufacturing, particularly in the medical, motor vehicle, and aerospace sectors,  where faster prototyping and time to market can become a significant competitive  advantage."


6. North American Energy Revival - "Thanks to horizontal drilling and hydrofracking technology that breaks open shale  rock by pumping high-pressure fluids into the ground, shale gas is now abundantly  accessible. According to some experts, the United States alone has a 200-year  supply of this unconventional energy source. With natural gas in abundance, the  economics of high-performance, fuel-efficient internal combustion engines that  run on natural gas have become increasingly attractive to consumers. Shale  producers have been so prodigious that they have created a supply/demand  imbalance. For now, users of the cheap natural gas are the biggest beneficiaries.  These include chemical companies and companies that make equipment used to  compress and liquefy natural gas."


For more from Saut, we posted his latest market commentary here.