There are many reasons why people invest. The most common goals are to increase guaranteed income, and prepare for retirement, and most of all make money. It can be easy to get lost in the numbers and forget the bigger picture of investing — your investments are supporting industries and helping businesses grow and innovate. That growth, in turn, pays off in dividends back to investors.
One of the most exciting industries to watch thrive with investment is the tech industry. There is rarely a question of whether tech industry stocks will create wealth. Our modern world is powered by technology. The markets themselves run on technology these days.
The question isn’t if. It’s, “Which one?”
Here are three major tech trends investors should keep an eye on if they want to win big and grow their portfolio in 2018.
2018 Tech Investment Trend #1: BioTech Mergers & Acquisitions
It’s still pretty early in the year, but 2018 is already shaping up to be an explosive year for biotech mergers.
Celgene (CELG) and Sanofi (SNY) have both announced plans to spend $25 billion in the acquisition of three companies. For perspective, in all of 2017, $50 billion was spent in biotech deals, according to Mizuho analyst Salim Syed.
Celgene will reportedly spend $9 billion to buy the remainder of Juno Therapeutics (JUNO), and Sanofi will pay out $11.6 billion to acquire Bioverativ (BIVV) and $4.8 billion for Ablynx (ABLX). The acquisition of Juno follows Celgene’s disappointing third quarter, during which sales of drug Otezla “widely missed expectations”.
Sanofi got a taste of defeat in 2016 and 2017 with the attempted acquisitions of Medivation and Acterlion Pharma. A hostile approach is what went wrong here and is something to look out for this time around.
Because of their pasts, these companies now need to “buy growth”, something they hope to achieve with these acquisitions. But there is a price war on the horizon.
2018 Tech Investment Trend #2: BigPharma Price Wars
JMP Securities analyst Mike King expects it to be a “brutal” one. He predicts cholesterol-lowering drug producers Amgen (AMGN), Regeneron Pharmaceuticals (REGN) and Sanofi (SNY) to feel pressure from the likes of Esperion Therapeutics (ESPR), The Medicines Co. (MDCO), and Alnylam Pharmaceuticals (ALNY).
On another hand, analysts say Celgene’s anti-inflammatory competitors Eli Lilly (LLY) and Novartis (NVS) are taking market share following Otezla’s shortfall in 2017. By the same token, Gilead Sciences’ (GILD) hepatitis C drug unit’s rapid decline may be somewhat beneficial to sales of newer medicines like AbbVie’s (ABBV) Mavyret.
Big Pharma isn’t getting help from regulators. The Food and Drug Administration is continuing to increase approvals for copycat drugs, sparking competition as firms battle for the lowest price.
Among Big Pharma companies Pfizer (PFE) is expected to take the biggest hit from sales of generics.
Yet some drugs and therapies seem immune to pricing controls. These include multiple sclerosis drugs such as Teva’s (TEVA) Copaxone and Novartis’ Gilenya, as well as CAR-T drugs Kymriah and Yescarta.
According to Express Scripts (ESRX), spending on prescription drugs increased by 3.8% per person across the board, but this is still a 27% drop in growth rate from 2015’s 5.2% climb. And FBB Capital Partners analyst Mike Bailey anticipates that this trend will continue in 2018.
2018 Tech Investment Trend #3: Smart Home Automation
Another tech trends investors should watch in 2018 takes the form of automated homes.
There are 2 types of buyers of these “smart home” gadgets: do-it-yourselfers with the time and necessary technological skills and those who would rather pay to have someone else do the work.
Control4 (CTRL) is a leading provider of home automation and control systems, offering platforms for controlling music, video, lighting, temperature, security, and more.
But with a network of 5,500 professional installers, Control4 is not worried about the do-it-yourselfers forcing a decline in business. “Everything is becoming smart and we’re uniquely positioned to be able to orchestrate all of those devices that are coming into the home,” CFO Mark Novakovich says. Furthermore, Control4’s products are “things that people put into their houses and expect to last.”
With 4 customer segments, Control4 is able to cater to a broader customer base and provide whatever their buyers are in the market for. The company is striving to grow steadily and seek out “strategic acquisitions”.
Don’t Neglect the Rest of Your Portfolio
Looking for the next hot tech trends to invest in can be a thrill, but be careful not to get so swept up in the latest-and-greatest advancements that you forget about tried-and-true investments like U.S. oil.
U.S. oil data has found that November 2017’s crude production surpassed a record last set in November 1970.
The Energy Information Administration (EIA) reported November’s tally at 10.057 million barrels per day. Data for December dipped below 10 million, but the EIA’s weekly statistics for the third week of February showed production had climbed to 10.28 million barrels per day.
During that time, U.S. oil stockpiles rose by 3 million barrels and gasoline stockpiles by 2.5 million, while distillates decreased by 1 million barrels.
A poll by S&P Global Platts anticipates crude stockpiles to go up by 2.1 million barrels. The American Petroleum Institute reported that U.S. crude supplies increased by 933,000 barrels the third week of February as well.
U.S. crude declined 2.2% to $61.64 per barrel, ending the month with a 4% decrease since August.
Both the International Energy Agency and the EIA predict that U.S. production could reach beyond 11 million barrels per day in 2018. This means the U.S. could surpass Russia as the globe’s top oil producer.