Category Archives: Sustainable Food

Thematic Reads: May 24, 2021

Thematic Reads: May 24, 2021

Thematic Reads

Each week Team Tematica consumes an immense quantity and range of content as we look to stay on top of the latest data and mine it for tailwind and headwind signals for our investment themes and indices.

Cleaner Living
Growing demand for items that claim to be better for you and the planet:

“Ford’s first electric pickup truck is here—and it’s ready to prove that anybody can own a battery-powered truck without sacrificing the important features that make a vehicle like this useful in everyday life. The 2022 F-150 Lightning amps up the utilitarian nature of a pickup, adding features like a unique front trunk and vehicle-to-home charging that make the ride unlike anything else on the market.”
The Ford F-150 Lightning is an electric vehicle for truck lovers

“Renewable power generation grew at the fastest rate for two decades in 2020 according to a new report from the International Energy Agency. 278 gigawatts of capacity was added last year, a 45 percent jump and the largest year-over-year increase since 1999. The growth was even more impressive given that it occurred in the midst of pandemic-induced supply chain challenges and construction delays.”
Renewable Energy Boomed In 2020

“California’s clean air regulator on Thursday adopted rules to mandate that nearly all trips on Uber’s and Lyft’s ride-hailing platforms have to be in electric vehicles over the next few years, the first such regulation by a U.S. state.”
California regulator adopts EV mandate for Uber, Lyft ride-hail fleets

Cyber Security & Data Privacy
Securing individuals and organizations against cyber threats and privacy violations:

“Ransomware especially has been in the spotlight recently and data from our own Unit 42 shows that the average ransom paid in 2020 tripled from 2019 and in 2021 it’s more than doubled again. The highest demand we’ve seen is $50 million, up from $30 million in 2020, with organized groups with near nation state discipline perpetrating coordinated attacks. The targets are not only corporations where healthcare and pharma is a focus with the pandemic, but also government organizations and shared infrastructure.
Palo Alto Networks (PANW) earnings conference call (May 20, 2021)

“CNA Financial, one of the largest US insurance companies, paid $40 million to free itself from a ransomware attack that occurred in March, according to a report from Bloomberg. The hackers reportedly demanded $60 million when negotiations started about a week after some of CNA’s systems were encrypted, and the insurance company paid the lower sum a week later.”
One of the US’s largest insurance companies reportedly paid $40 million to ransomware hackers

“To defend against these cyberassaults, more companies are going into the cloud. Per the Tracker, “Cloud systems do not provide ATO immunity, but they do offer some advantages. Four out of five survey respondents said that their cloud systems offered better visibility into attacks that bypass firewalls or other external security measures, allowing them to catch fraudsters in the act. Respondents’ biggest fraud-fighting frustration was the amount of time needed to manage security solutions, however.”
Hardening Merchants’ Digital Defenses Against Incursions From The Dark Web

“Stolen credentials play a major role in retail data breaches, according to the 2021 Verizon Data Breach Investigations Report. Study results indicate that the top cyberattack patterns found in the retail sector stem from system intrusion, social engineering (such as phishing), and basic web application attacks. Of the data compromised in 165 incidents with confirmed data disclosure, 42% of the breaches reported involved payment data (42%), followed closely by personal data (41%). Credentials (33%) and other data types (16%) made up the rest of the confirmed data breaches.”
Stolen credentials are a retail hacker’s best friend

“The audacious ransomware attack that shut down a major fuel pipeline and sent Americans scrambling for gasoline in the Southeast this week was not the first time hackers have disrupted America’s aging, vulnerable energy infrastructure. And it’s unlikely to be the last.”
Pipeline Hack Points to Growing Cybersecurity Risk for Energy System

Digital Infrastructure & Connectivity
The Buildout and upgrading of our Networks, Data Storage Facilities, and Equipment:

“When we think about the general consensus from third-party research, you’re at about $1 trillion of semiconductor revenues by 2030. The demand driving that is broad-based. You’re seeing a handoff from consumer-oriented devices to something that’s far larger and more substantive around this fourth wave of compute, the data economy. By 2025, machines will generate 99% of the data. Humans will generate 1%. You’re seeing a decoupling of semiconductor demand for the first time in the industry’s history from population and population growth in consumer behavior.”
Applied Materials (AMAT) earnings conference call (May 20, 2021)

“… we’re expecting a really healthy environment, you know, 5G, being one of the big drivers, and also for us, you know, with 5G comes content growth, you know, in it – in a 4G phone, DRAM, there’s 3 gigs to 4 gigs of DRAM in a 5G phone to get the 5G experience. A minimum of 6 gigs, and we’ve seen skews at 8, 10, or 12, at even 16 gigs. So, you know, this will be a great content story for us this year in an environment where I think 5G has a really good demand environment just at the end unit level. So, you know, for us the outlook looks great.”
Micron (MU) CFO David Zinsner at the 2021 Barclays Americas Select Franchise Virtual Conference (May 19, 2021)

“Radio component revenue reached an all-time high in 2020, according to Strategy Analytics, which expects revenue to grow through 2025.”
5G growing rapidly despite component shortages

“We are also seeing early momentum in the ramping of key technology cycles that are long-term growth drivers for our business, such as 5G, 400 gig and Edge… In our Webscale business, we delivered our sixth consecutive quarter of strong order growth, which increased over 25% in the quarter, and over 50% on a trailing 12-month basis. Our Webscale customers are starting their 400 gig upgrade cycles and aggressively pursuing long-haul build-outs while our Carrier customers are exploring new architectures to realize the full potential of 5G.
Cisco Systems (CSCO) earnings conference call (May 19, 2021)

Digital Payments & FinTech
Companies leveraging technology to disrupt and improve the financial services and payments industries:

“Several big American banks, including JPMorgan Chase, are signed up for a government-backed pilot using alternative data to get credit to people with low or no credit scores, according to the Wall Street Journal. About 53 million American adults do not have regular credit scores, says the firm behind Fico scores. The problem disproportionately affects Black and Hispanic people, according to the CFPB.”
US banks to pilot credit for people with no credit score

“NatWest is now allowing customers to set their own daily digital bank transfer limits – a move designed to reduce the damage done by APP scams. NatWest, Royal Bank of Scotland and Ulster Bank currently set a default bank transfer limit of £20,000 per day but this will be reduced to £5000 per day.
NatWest lets customers set daily bank transfer limits

“Visa research shows that enabling tap to pay on transit systems like these can be good for economic recovery, bringing more than a 15% lift in transactions from merchants in surrounding neighborhoods. MST is the fifth transit agency in the US to accept tap to pay for fares, following Chicago, Miami, New York and Portland, OR. MST is also the first public transit system in the country that is located outside of a large urban area to introduce tap to pay fares – demonstrating contactless payments as a good fit for any size agency looking to enhance the customer experience.”
Contactless Bus Payments Introduced in California by Monterey-Salinas Transit

“The financial crisis of a decade ago catalyzed many secular changes in the U.S. banking system, but few are starker than the collapse in new bank charters. According to data from the Federal Deposit Insurance Corporation (FDIC), between 2000 and 2008, well over 100 new bank charters were granted each year on average. A drought followed the financial crisis, however; between 2011 and 2016, just two charters were awarded in aggregate. Since 2017, the average number of charters granted has ticked up slightly but remains an order of magnitude shy of pre-crisis norms. Yet despite the broad disinterest in bank charters, we are seeing a surge of interest from an interesting source: fintech.
Banking On Fintech

Sustainable Future of Food
Companies addressing the challenge of providing healthy, affordable and nutritious food to a growing global population amid dwindling natural resources:

“Food manufacturer OsomeFood has debuted what it claims to be the world’s first nutrition-focused and plant-based hard-boiled egg, in an effort to provide consumers superfoods without the need of harming animals or compromising on health immunity benefits.”
Singapore Manufacturer OsomeFood Says It Has Created The World’s First Plant-Based Hard-Boiled Egg

“Spiking commodities costs are stirring up fears about food sustainability, and the trickle-down impact of higher prices on everything from cereal to peanut butter and chicken — which Cheerios (GIS), Skippy Peanut Butter (HRL) and Tyson (TSN) have all addressed recently. Still, interest in alternative foods is surging, with one vegan restaurant owner saying plant-based eating is ‘here to stay.’”
Plant-based protein is the ‘new wave’ after COVID-19

“In the scramble for a healthy alternative to cow’s milk that doesn’t cost the earth, a Singapore startup has developed a new type of dairy substitute made from microalgae. A claimed world-first, the algae-based milk is comparable in nutritional value to cow’s milk, but is made using a fraction of the energy, land and water.”
In the race for planet-friendly milk, Singapore startup substitutes dairy with algae

“We are seeing continued adoption on the precision ag front as you think about things like tractors, for example, with command center and premium activation. That’s grown pretty significantly this year, which is a positive trend. And we would expect as we move forward and we’re bringing out new products that, that trend would continue. Things like ExactRate, which will be coming through the early order program, See & Spray Select coming out as well.
Deere & Co. (DE) quarterly earnings conference call (May 21, 2021)

 

Tematica Research Indices

 

Vertical Farming – Will it Take Us into the Next Century?

Vertical Farming – Will it Take Us into the Next Century?

As the Global Food industry continues to evolve is it time for agriculture to embrace this next wave of technology?

Hydroponics, or growing plants in nutrient rich-water without using soil, is a practice that has been around for decades but has only been used in relatively small-scale applications. This is beginning to change.

Source: World Reimagined: Can Hydroponics Become the Next Big Thing in Agriculture?

Thematic Reads: May 10, 2021

Thematic Reads: May 10, 2021

Thematic Reads

Each week Team Tematica consumes an immense quantity and range of content as we look to stay on top of the latest data and mine it for tailwind and headwind signals for our investment themes and indices.

Cleaner Living
Growing demand for items that claim to be better for you and the planet:

The clean movement is probably definitely the biggest thing to happen to the beauty industry in a long, long time. Just take a look around the next time you head to a major beauty retailer like Sephora, Ulta, or Target: Whole entire sections—both IRL and virtual—are now dedicated to showcasing the best skin, hair, and makeup products in the clean space.
Everything you need to know about the Clean Beauty movement.

Consumer habits are evolving, people have started to be concerned about what they are putting into their bodies, which in turn initiated a clean eating movement across the world. Now the emphasis pivots to what they are putting on their face. While commercial beauty brands are restructuring their beauty strategy, natural beauty products such as Tata Harper are feeding the needs of the new green consumer.
– The Rise In Clean Beauty Brands

House Democratic leaders are lining up behind a White House push to allocate $8 billion in taxpayer funding for the latest iteration of mail truck, paving the way for a fully electric fleet instead of the piecemeal strategy U.S. Postal Service leaders have been pursuing.
Push to electrify mail trucks gains wide support, an unlikely win for both DeJoy and Biden

Synergy Flavors (part of Carbery Group) has acquired savory flavor and ingredient supplier, Innova Flavors, from Griffith Foods Worldwide, ramping up its savory product development of plant-based alternatives.
Synergy Flavors acquires Innova Flavors fueling plant-based food and beverage product development.

Mercedes-Benz is giving a sneak peek of an electric van that’s among the models broadening its battery-powered range over the next year. The electric iteration of the Mercedes T-Class, dubbed EQT, will accommodate as many as seven passengers and launch in 2022, Daimler AG’s main division said Monday. It will flank the Citan commercial van due to be introduced later this year, a version of which will be battery-electric.
– Mercedes Unveils Electric Van for Growing Battery-Powered Lineup

 

Cyber Security & Data Privacy
Securing individuals and organizations against cyber threats and privacy violations:

A text-message scam that infects Android phones is spreading across the UK, experts have warned. The message – which pretends to be from a package delivery firm, prompts users to install a tracking app – but is actually a malicious piece of spyware.
Flubot: Warning over major Android ‘package delivery’ scam

Top U.S. fuel pipeline operator Colonial Pipeline has shut its entire network after a cyber attack, the company said in a statement on Friday. Colonial’s network supplies fuel from U.S refiners on the Gulf Coast to the populous eastern and southern United States. The company transports 2.5 million barrels per day of gasoline, diesel, jet fuel and other refined products through 5,500 miles (8,850 km) of pipelines. Colonial Pipeline says it transports 45% of East Coast fuel supply.
– U.S. pipeline operator that transports 45% of East Coast fuel shuts entire network after cyberattack

Researchers on Thursday reported that despite a 50% increase in mobile device management (MDM) adoption during the past year, average quarterly exposure to phishing attacks on mobile devices in the financial sector rose by 125% – and malware and app risk exposure increased by more than five times.
– Financial sector saw a 125% increase in mobile phishing attacks during 2020

Apple (AAPL) recently rolled out its highly anticipated App Tracking Transparency feature with iOS 14.5, which lets users decide whether apps track their activity for targeted advertising. Overwhelmingly, users seem happy to leave app tracking disabled. Just 4% of iPhone users in the U.S. have agreed to app tracking after updating their device, according to the latest data from Verizon-owned analytics firm Flurry.
– Too Bad, Zuck: Just 4% of U.S. iPhone Users Let Apps Track Them After iOS Update

“Identity Security is at the center of every major industry tailwind, including digital transformation, zero trust, hacker innovation, and compliance. Digital transformation and the explosion of technologies applications and automation tools are not only blurring the line between a privileged user and a workforce user, but also between human users, applications and bots.”
CyberArk Software (CYBR) earnings conference call (May 5, 2021)


Digital Infrastructure & Connectivity

The Buildout and upgrading of our Networks, Data Storage Facilities, and Equipment:

This week I want to talk digital infrastructure, again. I say again because my most recent Financial Times column focused on the topic. In that column I probably was not as explicit as I should have been about why I think investors need to have some exposure to digital infrastructure. I am going to pass over the obvious demand drivers – you’d have to be in a cave not to understand what’s going on with the internet, digitalisation, 5G etc.
Stevenson: Put 10-20% of your assets in digital infrastructure

Cristiano Amon, the CEO-elect of mobile-phone chip maker Qualcomm (QCOM), rubs his hands in glee when you ask him to talk about 5G. And for good reason: The speedy new wireless standard is creating boom times for his San Diego–based company, which reported 52% revenue growth in its latest quarter.
Qualcomm Is a 5G Winner. Here’s Why the Company’s New CEO Is So Bullish on the Future.

The world’s digital connections are about to become broader and faster, providing a platform for every industry to boost productivity and innovation. We have identified hundreds of use cases across more than 17 commercial domains that can run on an enhanced digital backbone. This research focuses on four of them: mobility, healthcare, manufacturing, and retail.
– Connected world: An evolution in connectivity beyond the 5G revolution

“Globally, 5G deployment is still in an early stage given that less than 20% of the global operators that currently use LTE have deployed 5G. The U.S. and Northeast Asia markets continue to deploy 5G aggressively for both public and private networks.”
PC-Tel (PCTI) earnings conference call (May 9, 2021)

 

Digital Payments & FinTech
Companies leveraging technology to disrupt and improve the financial services and payments industries:

The pandemic has not only altered consumers’ shopping behaviors, but it’s also changed how they pay for goods and services. A significant number of people in the US were already using proximity mobile payments regularly before the pandemic—about 72 million in 2019, according to our estimates. As more consumers experimented with different forms of payment in 2020, however, the number of proximity mobile payment users in the US rose by 29.0% year over year to 92.3 million. We expect the user base to surpass 100 million this year and growth to continue steadily through the end of our forecast period in 2025.
– More than 100 million Americans will use proximity mobile payments in 2021

The Mastercard (MA) New Payments Index shows 95% of Middle East and North Africa (MENA) consumers will consider using at least one emerging payment method, such as cryptocurrency, biometrics, contactless, or QR code, in the next year. Over two-thirds of respondents (65%) agree they have tried a new payment method they would not have tried under normal circumstances, but the pandemic has galvanised people to try flexible new payment options to get what they want, when they want it.
– Mastercard’s Payment Index Shows 95% Of MENA Consumers Want To Try New Digital Payment Methods

The Monetary Authority of Singapore (MAS) and the Bank of Thailand (BOT) today launched the linkage of Singapore’s PayNow and Thailand’s PromptPay real-time retail payment systems. The first of its kind globally, the linkage is the culmination of several years of extensive collaboration between MAS and BOT, both countries’ payment system operators, bankers’ associations, and participating banks.
– Singapore and Thailand Launch World’s First Linkage of Real-time Payment Systems

The adoption of digitisation in trade finance has been something of a “slow burn” as practices have historically relied on the transfer of paper documents between involved parties and largely manual processes. This vitally important area of financial services has trailed behind the digitisation progress that has been made, especially in the last decade, in consumer and retail banking.
– Digitising trade finance: the next frontier for financial services innovation


Thematic Dividend All-Star
Combining the power of rising dividends and thematics.

The first quarter’s uptick in interest rates has some investors concerned about the potential for stock market headwinds. But unlike bonds, stocks often rise in value when interest rates increase. Dividend growth strategies that focus on companies with the longest track records of consistent dividend growth tend to be all-weather strategies that have performed well during a variety of interest rate environments.
– When Interest Rates Are Rising, Your Dividends Need To Be Growing


Sustainable Future of Food
Companies addressing the challenge of providing healthy, affordable and nutritious food to a growing global population amid dwindling natural resources.

Wunda is a ‘fully versatile’ milk alternative for baking, cooking, frothing, and drinking either hot or cold, according to Nestlé, who is rolling out the new brand in France, Portugal, and the Netherlands.
Nestlé develops pea-based alt milk with “neutral taste” for versatility

Tyson Foods is expanding its plant-based protein line Raised & Rooted into hamburger patties and grounds, bratwurst and Italian sausages.
– Tyson expands Raised & Rooted offerings further into competitive plant-based market

Two-thirds (67%) of consumers consider it important that the products they buy are in recyclable packaging, and the same percentage consider themselves environmentally aware — the same share as before the pandemic, according to Trivium Packaging’s 2021 Global Buying Green Report.
– Consumer demand for sustainable packaging holds despite pandemic

During the past 50 years, the world’s population has grown about 2.1 times, and consumption has grown more; for some goods, much more. Between 1968 and 2018 (the most recent year for which we have global data), production of both primary energy and of steel rose 3.4 times, that of meat grew 3.5 times, and that of grain grew 2.6 times. The total number of cars on the world’s roads rose sixfold, and the number of revenue-generating passenger-kilometers flown (an industry metric) grew by about 24 times. But the rise in aquacultural production beats them all.
– The Fabulous Growth in Aquaculture

 

Tematica Research Indices

 

Thematic Reads: April 26, 2021

Thematic Reads: April 26, 2021

Thematic Reads

Each week Team Tematica consumes an immense quantity and range of content as we look to stay on top of the latest data and mine it for tailwind and headwind signals for our investment themes and indices.

Cleaner Living
Growing demand for items that claim to be better for you and the planet:

 Volvo AB (VOLVF), the world’s second-largest truck-maker, is looking to generate half of its sales in Europe from electric vehicles by 2030. The company recently announced three new heavy-duty electric trucks designed for intercity regional transport and urban construction. Production of the trucks is expected to start in the latter half of 2022.

Toyota Motor (TM) introduced the Toyota bZ4X Concept, the first of a global series of battery-electric vehiclesto be launched under the “Toyota bZ” brand umbrella.

German automotive company Daimler (DDAIF) shared it will create 1,000 new jobs for software programmers at its S-Class production facility to develop its planned operating system for electric vehicles. Daimler’s MBOS system, which will run electric-only vehicles, is expected to hit the market in 2024.

The Oprah Winfrey-backed oat-milk maker Oatly Group AB (OTLY) has filed to go public in the US and intends to raise at least $100 million.

Nestlé SA (NSRGY) is in talks to buy the maker of Nature’s Bounty vitamins for a price in the mid-single-digit billions, according to people familiar with the matter, as the Swiss food giant pushes further into nutritional offerings… In addition to Nature’s Bounty vitamins, Bountiful’s brands include Pure Protein, which makes protein bars, Osteo Bi-Flex joint-care supplements and Puritan’s Pride vitamins and supplements.
Nestlé Looks to Buy Maker of Nature’s Bounty Vitamins


Cyber Security & Data Privacy

Securing individuals and organizations against cyber threats and privacy violations:

The Biden administration is buckling down on cyber threats to the U.S. power infrastructure. The Department of Energy (DOE) announced a 100-day plan to help shore up the U.S. electric power system against cyber threats. The plan, rolled out with the private sector and the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA), is meant to help owners and operators develop more comprehensive approaches to detection, mitigation and forensic capabilities, according to the National Security Council.
Biden administration unveils plan to defend electric sector from cyberattacks

An ongoing phishing campaign is impersonating Michael Page consultants to push Ursnif data-stealing malware capable of harvesting credentials and sensitive data from infected computers.
Phishing impersonates global recruitment firm to push malware

Costco Wholesale (COST) warned American internet users to be wary of more than a dozen digital scams targeting its customer base. On its website, the American multinational corporation has published screenshots of 14 “prominent fraudulent emails, texts, and posts” in which cyber-criminals are impersonating Costco.
Costco Issues Scam Warning

Check Point reported March quarter results that topped top and bottom-line expectations. Exiting the quarter, deferred revenues were $1.46 billion, up 8% YoY. Per the company, “The cyber threat landscape is reaching new levels of risk and requires a holistic security architecture to prevent the next cyber pandemic.”
Checkpoint Software (CHKP), April 26, 2021


Digital Infrastructure & Connectivity

The Buildout and upgrading of our Networks, Data Storage Facilities, and Equipment:

“Several factors are at play in driving this robust wafer front end growth. First, secular tailwinds such as AI, 5G, and IoT continue to strengthen. And over the past year, COVID-19-related impacts like work and learn from home have accelerated adoption of these technologies.”
Lam Research (LRCX), April 21, 2021

“Compared to three months ago, we are seeing a significant increase in demand across all market segments and our product portfolio. The build-up of the digital infrastructure with secular growth drivers such as 5G, AI and High- Performance Computing solutions fuels demand for advanced and mature nodes in Logic as well as Memory. We now expect revenue growth towards 30% in 2021 compared to last year.”
ASML Holding (ASML), April 21, 2021

“In data center, we believe revenue bottomed in Q1 and will increase in Q2 as cloud digestion impacts begin to subside, and enterprise and government momentum continues.”
Intel (INTC), April 23, 2021

“We have partnered with leading brands across diverse verticals, such as Honda to innovate connected and autonomous driving; Deloitte and SAP to create a 5G and edge computing retail digital platform that will provide retailers with real-time operations data; and Dreamscape and Arizona State University to build and commercialize immersive learning and training.”
Verizon (VZ), April 21, 2021

“…the latest slew of UK government broadband funding, which has largely been based on clear and unambiguous objectives: providing gigabit-speed connections to 85 per cent of the country by 2025, be that through FTTP or 5G, or any other sufficiently-capable technology.”
Maybe high-speed internet is infrastructure after all, say US Republicans in proposal to spend $65bn over five years


Digital Lifestyle

The increasingly digital landscape that now underpins the entire consumer experience:

Walt Disney (DIS) and Sony’s (SNE) Sony Pictures Entertainment announced a multi-year content licensing agreement for US streaming and TV rights to Sony Pictures’ new theatrical releases across Disney+ and Hulu, as well as ABC, Disney Channels, Freeform, FX and National Geographic.

Digital Payments & FinTech
Companies leveraging technology to disrupt and improve the financial services and payments industries:

PayPal (PYPL) announced the launch of crypto on Venmo, a new way for Venmo’s more than 70 million customers to buy, hold and sell cryptocurrency directly within the Venmo app.

Amazon (AMZN) is expanding Amazon One, its palm-scanning payment system to a Whole Foods store in Seattle, the first of many planned rollouts at other locations.

Juniper’s Digital Money Transfer & Remittances whitepaper says mobile transactions will represent an 89 per cent per cent share of total transaction value by 2025. The report also found that with shifting customer expectations, existing money transfer models face an increasing threat from instant payments, with domestic instant payment transaction values forecast to grow from $524billion in 2020, to $2trillion in 2025.
Mobile Transactions Will See Digital Money Transfers Soar to $3.4 trillion


Thematic Dividend All-Star
Combining the power of rising dividends and thematics.

 “The historical evidence strongly suggests that expected future earnings growth is fastest when current payout ratios are high and slowest when payout ratios are low.”
Does Dividend Policy Foretell Earnings Growth?


Sustainable Future of Food
Companies addressing the challenge of providing healthy, affordable and nutritious food to a growing global population amid dwindling natural resources.

Trimble (TRMB) and HORSCH announced a collaboration focused on developing solutions that enable autonomy in agriculture with the goal of building a future for autonomous machines and workflows in the industry.

Raven Industries (RAVN) purchased all of the intellectual property and patents of Jaybridge Robotics, an early developer of automated agriculture technology. Raven will leverage the portfolio with its continued development of Driverless Ag Technology — including integration of the technology into the company’s AutoCart platform.

Bear Flag Robotics tractors provide growers increased command and control to take control of any situation in the field, higher levels of safety for farmers and the machines and path generation technology to give operators total control
Bear Flag Robotics Autonomous Tractor

Tematica Research Indices

 

Thematics Make Outsized Returns in 2020

Thematics Make Outsized Returns in 2020

To say 2020 was a year unlike any other is an understatement on several fronts but despite all of it, equities finished the year higher and once again the major indices were bested by several of Tematica Research’s thematic indices. That includes several of them topping the outsized (but fairly narrowly driven) 43.6% return for 2020 registered by the Nasdaq Composite Index.

Investing between February 19th and March 23rd was a clear example of “catching a falling knife” as the uncertainty of the impact of an unfolding global pandemic set in. While that uncertainty lingered well into the 2nd quarter, some trends started to emerge that forced changes in both consumer behavior and company business models. Going into the 3rd quarter, equities recovered as economic data and earnings were somewhere between better than expected and not as bad a feared. There were some setbacks in September and October as Covid case counts surged, but stocks were once again surging in early November due to a fresh shot of hopium following positive vaccine developments and the conclusion of the presidential election. 

The bulk of the 2020 gains for the Dow Jones Industrial Average and the S&P 500 came during the fourth quarter, despite the year-end haggling over the pandemic relief bill. The same was true with the small-cap heavy Russell 2000, which climbed 31% in the fourth quarter, outpacing the other major market barometers and enabled its positive return for all of 2020. By comparison, the Nasdaq Composite Index, which closed up more than 40% in 2020, benefited from a number of factors, including the pandemic inspired accelerated shift to digital shopping, work from home and learn from home. That pull-forward in both data consumption and data creation fueled incremental network capacity additions and set up the launch of 5G networks and devices in the second half of the year. The same shift, however, led to a year over year uptick in cyberattacks culminating with the Solar Winds attacks that compromised not just federal institutions and large companies, but also platforms of Microsoft (MSFT) and FireEye (FEYE). Those catalysts in particular led to the strong December quarter showing for Tematica’s Digital Infrastructure & Connectivity and Cybersecurity & Data Privacy investing themes.

What’s to come in 2021?

It’s great to enjoy the wins, but as we all know, the stock market is a forward-looking animal and that means not taking too much time to pat ourselves on the back, but rather preparing for what lies ahead. Even as the COVID-19 vaccine is being administered, it will take months before vaccines are readily available to all who need them. Then, and only then will many politicians feel comfortable fully reopening their economies. On January 4, for example, UK Prime Minister Boris Johnson just ordered a third national lockdown to be in place through mid-February. Yes, there is a light at the end of the tunnel, but we continue to see some economic speed bumps to be had — at least at the outset of the March quarter. 

In the coming weeks, President-elect Joe Biden will be sworn into office, and despite the lawsuits, promises of legislative (and other) disruptions, the machinery of government continues to move forward. Perhaps Capitol Hill will hammer out an infrastructure spending bill that will finally address the nation’s crumbling roads, bridges, ports, airports and highways. The ongoing trade issues with China will also need to be addressed, as well as President Biden’s own agenda items.

Before Biden takes the Oval Office, two known items that we’ll contend with are the CES 2021 tech conference and the start of the December-quarter earnings season. Much like other conferences and trade shows held during the pandemic, CES will be a virtual-only event for the first time in its history. It will still feature a number of keynotes that will prognosticate on what we are likely to expect in the coming year on the technology front and “virtual” vendor booths.  

In recent weeks we’ve seen GDP expectations for the start of 2021 drift lower as the pandemic has once again presented a headwind to the economy and efforts to contain it have expanded. We’re also learning of a new strain of Covid-19 that “spreads more efficiently” but “does not seem to evade the protection that’s afforded by vaccines that are currently being used,” according to Dr. Anthony Fauci. At the same time, the distribution of vaccines in the U.S. has gotten off to a slower-than-expected start. Expectations are that vaccine activity will increase in the coming weeks and we’ll be sure to keep tabs on vaccine-related data published on the CDC COVID Data Tracker website. As the number inoculated rises in the coming months, the closer we will be to the economy returning to normal. 

The issue is it will take some time to walk down this path, which to suggests things won’t begin to normalize until the second half of 2021. We also continue to think consensus expectations run the risk of an economic and earnings speed bump in 2021. Supporting that view is the retreat in the Citibank Economic Surprise Index in recent months, and also the slowing growth reported in the IHS Markit December Flash U.S. Composite PMI data. Part of that was due to the fall in new export sales, as renewed lockdowns in key export markets dampened foreign demand.

All of this is summed up rather well by Chris Williamson, Chief Business Economist at IHS Markit who said, “… December has seen companies rein in their expectations, given the higher virus case numbers and tougher lockdown stances adopted in some states. Lockdowns in other countries were meanwhile reported to have hit exports. While vaccine developments mean some of the clouds caused by the pandemic should lift as we head through 2021, rising case numbers continue to darken the near-term outlook.” 

Normally, there tends to be some step down in economic activity from the December quarter to the March one, as consumer spending wanes in comparison to the year-end holiday shopping season. The start of 2021 is expected to see a somewhat larger step down in GDP — to 1.9% during the March quarter vs. the expected 4.1% in the December 2020 quarter, according to data published by The Wall Street Journal’s Economic Forecasting Survey. That same survey goes on to forecast GDP of 3.7% for all of 2021, which means its expectation for the other three quarters of 2021 hover around 4.0%. 

While recent COVID-19 new cases have waned some in aggregate across the U.S., hot spots remain — and that has prompted the extension of virus-fighting measures even as a new strain of the virus that spreads quicker has been found inside the U.S. Similar to what we saw after Thanksgiving, odds are we will see a post-holiday rise in new case counts in early January. Should this come to pass, in all likelihood it will mean more restrictions that will be a headwind to the economy and corporate earnings.

Earnings expectations ahead

On the December-quarter earnings front, data from FactSet shows that so far in the quarter, more S&P 500 companies issued positive earnings guidance than average. More than 80 companies in the index have issued EPS guidance for the December quarter so far and of them, roughly 30 issued negative EPS guidance and more than 55 issued positive EPS guidance. That puts the percentage of companies issuing positive EPS guidance at more than 65%, well above the five-year average of 33%. This sounds positive, but keep in mind that the total number of companies issuing guidance remains well below the five- year average for the quarter and consensus expectation for December quarter EPS is still a year-over-year decline of around 10%.

Digging into the data, we see the S&P sectors that are driving that year-over-year decline for the December quarter.

But again, the stock market is a forward-looking animal, and current expectations call for a 22.7% rebound in S&P 500 EPS during 2021 vs. 2020, as well as a 4.1% increase compared to 2019.

Circling back to the Tematica Research indices that we shared at the outset, their EPS prospects over the 2019-2021 period are multiples greater than for the S&P 500. We attribute this to the pronounced tailwinds that are powering both each of those themes as well as the revenue, EPS and cash flow of the aggregated constituents. One rule of thumb on Wall Street is that faster EPS growth tends to spur multiple expansion, which is a pretty powerful one-two combination for stock prices and index constituents. Reflecting on the below data, it looks like 2021 will be another year of outperformance for several Tematica Research themes and indices.

Hershey Accused of Skirting Sustainability Program

Hershey Accused of Skirting Sustainability Program

How do you buy cocoa without buying cocoa? Apparently, through utilizing the cocoa futures market. Hershey seems to step out of some warm milk and into some hot water with its latest approach to procuring cocoa.

Ivory Coast and Ghana are cancelling all cocoa sustainability schemes that U.S.-based Hershey runs in their countries, accusing the chocolate maker of trying to avoid paying a cocoa premium aimed at combating farmer poverty.

Source: Ivory Coast, Ghana cancel cocoa sustainability schemes run by Hershey

Unilever targets $1.2 billion sales target for meat and dairy alternatives but it’s simply not good enough

Unilever targets $1.2 billion sales target for meat and dairy alternatives but it’s simply not good enough

The plant-based meat market is expected to grow enormously in the coming years given the shift in consumer preferences for sustainable. Barclays predicting the market will grow by more than 1,000% over the next 10 years to reach $140 billion by 2029. It comes as no surprise to us then that companies would look to capture that tailwind to drive revenues, profits and cash flow.

Recently Unilever (UL) announced plans to dramatically increase sales of plant-based meat and dairy alternatives as part of a new sustainability program designed to shrink the environmental footprint of its food brands. While the company targets $1.2 billion of plant-based foods and dairy alternatives over the next five to seven years, consensus revenue forecasts put the company’s 2023 revenue near $64.4 billion.

Despite Unilever’s good intentions, that context means less than 2% of its revenue in the coming years would be derived from plant-based foods and dairy alternatives. Under the Tematica scoring system that barely gives the company a low-level “1” score for our Sustainable Future of Food investing theme and index with Foxberry.

The Anglo-Dutch consumer goods giant said last week that it plans to sell more than $1.2 billion worth of plant-based foods and dairy alternatives within the next five to seven years, largely by boosting sales from its The Vegetarian Butcher brand and increasing the number of vegan alternatives across its extensive portfolio.

Unilever acquired plant-based meat company The Vegetarian Butcher in late 2018 and since has expanded the brand into more than 30 countries and secured a major supply deal for the firm’s vegan patties and nuggets with Burger King. In the same time frame, it has launched a number of vegan products for its most high profile brands, including Hellman’s, Magnum and Ben & Jerry’s.

“As one of the world’s largest food companies, we have a critical role to play in helping to transform the global food system,” said Hanneke Faber, president of Unilever’s food and refreshment division. “It’s not up to us to decide for people what they want to eat, but it is up to us to make healthier and plant-based options accessible to all. These are bold, stretching targets which demonstrate our commitment to being a force for good.”

 

Source: Unilever sets $1.2B sales target for meat and dairy alternatives | Greenbiz

Be The Change You Want to Eat?

Be The Change You Want to Eat?

After over 920 years, Oxford University has been prompted to make a bold step forward in making menu changes that will not only benefit the environment (assuming more institutions follow suit) but also help their students lean towards a healthier diet. No word on the fate of the “traditional English breakfast” – yet.

BURGERS and lamb chops may soon be off the menu after Oxford students voted to ban meat from the university.

Source: Students vote to ban meat from university

The Future of Agriculture is Now!

The Future of Agriculture is Now!

In as much as hydroponic farming was an agriculture curiosity in the 1980’s (and quickly relegated to growing “Hydro Weed”) that technology coupled with some clever algorithms and space planning has given rise to crop yields that would make Thomas Malthus himself throw up his hands in frustration.

95% less water. 99% less land. 400X more yield.

Source: This 2-Acre Vertical Farm Out-Produces 720 Acre ‘Flat Farms’

Thematics outperform the broader equity markets in October

Thematics outperform the broader equity markets in October

A confluence of factors weighed on equities in October including the resurgence of the coronavirus that resulted in fresh restrictions late in the month, scuttled fiscal stimulus talks in Washington, renewed US-China trade tensions, the continuation of Brexit talks, and the lead up to the final innings of the contentious 2020 US presidential election. The end result saw the major market indices record their worst month in several with the S&P 500 shedding 2.8%, which added to its September losses and left it up 1.2% through the first 10 months of 2020. The Dow Jones Industrial Average fell 4.6% in October, leaving it down 7.1% with two months left to go in 2020. In comparison, all six of Tematica Research’s thematic indices outperformed both of those major market barometers in October, once again confirming that only by thinking differently can investors hope to outperform.

With Election Day 2020 having finally arrived, investors are anxiously waiting for the presidential results and those for the U.S. Senate, which will determine its political composition for the next few years. There is chatter of a potential Blue Wave, but we are likely in for a nail biter of an evening.

Barring a landslide victory by either Trump or Biden, which, depending on your view of potential swing states is either highly probable or wishful thinking, the probability is high the next president will not be declared quickly. Indeed, we would not be surprised if a contested election emerges. When that happened in 2000, it took five weeks, complete with recounts and court rulings, to know the outcome of the presidential race, and in that time volatility was a recurring factor for U.S. equity markets.

If we get a split decision — a president from one party with the other party a majority in the Senate — odds are we are in for four years where little will get done in Washington. It wouldn’t be the first time.

Stepping back we have to ask: will a changing of the guard have a demonstrative impact on our investment themes and indices?

Will the shift to digital shopping slow in the near-term? Probably not, especially given what is unfolding with the COVID-19 pandemic.

Will people stop streaming video content? Not likely. Even Walt Disney (DIS) now refers to its box office facing business as a legacy one as it focuses on its Disney+ streaming service.

Are people going to stop looking for food and other products that have cleaner ingredients and environmentally friendly packaging? Will farmers stop buying agricultural equipment that will help drive crop yields and productivity? Doubtful on both counts.

Will the deployment of 5G networks and 5G smartphones come to a grinding halt? Again not likely.

And so on…

Yes, the players in Washington may change and during that process, there will be some immediate to short-term volatility but the structural changes that power Tematica’ investment themes will continue on. That said, we’ll be sure to watch policy changes and regulatory mandates in the coming quarters to identify any potential headwinds as well as new tailwinds that could further entrench the structural changes that underpin our investment themes and indices.