Secular Pathways to Durable Growth
May 14, 2024
Jennison Associates’ Mark Baribeau highlights compelling opportunities to monetise on the AI megatrend and other secular themes he believes offer promising growth potential.
GENERATIVE AI OPPORTUNITIES ACROSS INDUSTRIES
After a strong comeback in 2023, growth stocks extended their rally in the first quarter of 2024, with investor sentiment and company fundamentals trending better than expected. Enthusiasm over AI continued to garner investor attention, contributing to strong gains in the technology sector.
The generative AI-driven technological transformation will likely be substantial and long-lasting as use cases and applications spread from technology providers and developers to a wide range of industries in the coming years. Meanwhile, many technology companies without material AI exposure are still recovering from the COVID-related disruptions.
FOCUS ON SECULAR DRIVERS THROUGH UNEVEN RECOVERY
The economic environment is healthy overall, with interest rates likely to remain elevated for a while. Still, the market may be bumpy since not all companies are recovering at the same rate amid the global post-COVID rebound. We believe that the best way to navigate this uneven market backdrop is to focus on secular growth companies with visible earnings and solid fundamentals that are benefiting from strong structural growth.
SEIZING SECULAR GROWTH OPPORTUNITIES
We remain focused on finding the best secular growth opportunities around the world. Our focus on finding innovative companies naturally uncovers disruptive themes over time. Below are secular themes we see offering compelling growth opportunities based on our bottom-up research.
- Advanced technologies. AI and cloud computing continue to revolutionise industries, amplifying demand for increasingly intelligent software and infrastructure. Emerging new developments in generative AI will be a leading structural driver within technology as productivity-enhancing business applications impact our daily lives, including how we work, consume, and interact digitally.
- Global consumer. As large, younger demographic populations with healthy disposable incomes reshape consumption patterns and generate persistent demand for luxury goods, we continue to favour strong, global consumer brands that have direct-to-consumer business models, omni-channel distribution networks, and proficient control of their own inventory.
- Industrial automation. A boom in manufacturing and high-tech facilities leveraging AI is fueling advanced automation of industrial processes to enhance efficiencies. We expect U.S. manufacturing capacity growth to continue to accelerate, driven by the U.S. CHIPS Act. A large group of industrial, factory automation, and semiconductor companies are poised to benefit from the megatrend of AI-enabling infrastructure expansion over the next several years.
- Healthcare innovations. An innovation cycle marked by advanced research capabilities, game-changing therapies, and digital supply chains is fostering demand for more integrated healthcare ecosystems. We continue to see strong potential in leading-edge treatments for diabetes, obesity, and rare diseases.
- Fintech platforms. Consumers are rapidly embracing powerful financial technology platforms, particularly in regions where sophisticated financial systems are limited. Our focus remains on emerging markets technology platforms that facilitate financial services and enhance consumer access to products and services.
Mark Baribeau, CFA
Managing Director, Head of Global Equity, Jennison Associates
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