Summary
- In our view, some of the most attractive equity opportunities these days are tied to several compelling megatrends that are likely to persist over the coming years in the technology, healthcare and consumer sectors.
- Over the long term, we believe that strong, well-managed companies with exposure to these exciting areas are likely to exhibit better-than-market growth and have greater prospects for capital appreciation.
On March 9. 2015, the equity bull market turned six years old. It has been one of the longest, strongest bull markets in recent memory. The Dow Jones Industrial Average has topped 18,000 more than once since late 2014, and the S&P 500 Index has been flirting with its all-time high.
Against this backdrop, many investors have become increasingly concerned about investing in equities. Among the questions they’re asking lately: Is the market due for a correction? How much longer can the bull keep running? Where are the opportunities in equities these days, if any? All are good questions, but for this purpose, let’s just focus on that last one.
Follow the Megatrends
As long-term growth investors, we always look forward, not backward. We can’t buy a stock’s performance track record — that’s done, it’s in the past. What we can buy, however, is the stock’s potential to outperform in the months and years ahead. As such, we believe there are large areas of opportunity in any market environment, including today’s.
In our view, some of the most attractive equity opportunities these days are tied to several compelling megatrends that are likely to persist over the coming years:
Technology: A connected world
- Smarter connected devices drive a wider range of applications, benefiting the semiconductor industry (Exhibit A):
- Connected car and home.
- Secure payments.
- Portables and wearables.
- More people spending more time online are driving a significant shift in advertising budgets away from traditional to digital media, benefiting online advertisers and content-rich media companies (Exhibit B).
- An aging population worldwide (Exhibit C) bodes well for the health care sector, particularly pharmaceuticals consumption.
- Modern technology and advances in medical research have helped to solve many diseases, but big challenges such as Alzheimer’s, cancer and multiple sclerosis remain and present a critical undertaking for the biotechnology and pharmaceutical industries (Exhibit D).
Consumer: Online and healthy
- E-commerce is still in its early innings of growth and continues to gain share from brick-and-mortar retail (Exhibit E).
- An accelerating trend toward health and wellness bodes well for the specialty food retailing industry (Exhibit F).
Buy the future
In our view, these long-term, secular growth trends – what we like to call “megatrends” – are not fully appreciated by most investors. Over the long haul, we believe that strong, well-managed companies with exposure to these exciting areas are likely to exhibit better-than-market growth and have greater prospects for capital appreciation.
How can individual investors potentially reap the benefits? By investing in growth-oriented, risk-aware equity strategies that, while bottom-up and fundamental in nature, are also positioned to participate in these megatrends. In so doing, equity investors can potentially invest in some of tomorrow’s leading growth companies today.
About Risk
Investments in equity securities are sensitive to stock market volatility. Equity investing involves risk, including possible loss of principal. Investments in foreign instruments or currencies can involve greater risk and volatility than U.S. investments because of adverse market, economic, political, regulatory, geopolitical or other conditions. In emerging countries, these risks may be more significant.
Past performance is no guarantee of future results.
The views expressed in this Insight are those of Lew Piantedosi and Yana Barton and are current only through the date stated at the top of this page. These views are subject to change at any time based upon market or other conditions, and Eaton Vance disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Eaton Vance are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Eaton Vance fund.
This Insight may contain statements that are not historical facts, referred to as forward-looking statements. Future results may differ significantly from those stated in forward-looking statements, depending on factors such as changes in securities or financial markets or general economic conditions.
Before investing, investors should consider carefully the investment objectives, risks, charges and expenses of a mutual fund. This and other important information is contained in the prospectus and summary prospectus, which can be obtained from a financial advisor. Prospective investors should read the prospectus carefully before investing.
©2015 Eaton Vance Distributors, Inc. | Member FINRA/SIPC | Two International Place, Boston, MA 02110 | 800.836.2414 | eatonvance.com
