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)


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About the Author

Chris Versace, Chief Investment Officer
I'm the Chief Investment Officer of Tematica Research and editor of Tematica Investing newsletter. All of that capitalizes on my near 20 years in the investment industry, nearly all of it breaking down industries and recommending stocks. In that time, I've been ranked an All Star Analyst by Zacks Investment Research and my efforts in analyzing industries, companies and equities have been recognized by both Institutional Investor and Thomson Reuters’ StarMine Monitor. In my travels, I've covered cyclicals, tech and more, which gives me a different vantage point, one that uses not only an ecosystem or food chain perspective, but one that also examines demographics, economics, psychographics and more when formulating my investment views. The question I most often get is "Are you related to…."

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