The Motley Fool

3 investing themes to watch for 2020

With reporting season done and the end of the year fast approaching, investors are turning their focus to 2020. Here are 3 promising themes I think investors should be watching in 2020.

Growing mining production

Despite operating in a cyclical sector, analysts predict that miners with exposure to iron ore, gold and coal will do well in the short term. Currently all three of the major iron ore operators in the Pilbara – BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group (ASX: FMG) – have reinvested in projects to sustain current rates of production well into 2020.

The potential for the iron ore cycle to extend its run comes from elevated construction activity and demand from China and continued constraints in supply. In addition, the gold price has a favourable outlook with analysts predicting that lower interest rates and trade wars could negatively impact global growth.  

Demand from Chinese consumers

China’s rapidly expanding middle class presents a strong theme for investors in 2020 as consumers increase their demand for premium Australian products and services. The recent takeover bid of Bellamy’s Australia Ltd (ASX: BAL) perfectly illustrates the point. In addition to milk and baby formula, vitamins, health and beauty products and even education services could experience substantial growth. Companies that would benefit from this theme include the likes of A2 Milk Company Ltd (ASX: A2M), Blackmores Limited (ASX: BKL) and Treasury Wine Estates Ltd (ASX: TWE)

With e-commerce platforms like Alibaba facilitating supply chains and distribution, Australian companies with premium goods and services could greatly benefit. Especially with the uncertainty of a trade war between China and the US, strong trade and transaction volumes could continue to strengthen in 2020.

Fintech filling the gap

Following the Royal Commission into banking and financial services, the consumer and small business financing sector presents as a key theme for 2020. Recently, many innovative fintech companies have taken advantage of changes in the sector by using technology to disrupt traditional financial services.

The companies in this emerging sector have targeted services which include buy-now, pay-later payment methods, payment authentication, wealth management and banking. Key players in this sector include Afterpay Touch Group Ltd (ASX: APT), Zip Co Ltd (ASX:Z1P) and FlexiGroup Limited (ASX:FXL).

Another example of the potential in this sector includes iSignthis Ltd (ASX: ISX), with the company’s share price soaring more than 1,000% at one stage this year before being sold down. Other potential companies to watch include those that offer wealth management platforms such as Netwealth Group Ltd (ASX: NWL), which look to replace services offered by financial advisors.

Should you buy?

Instead of trying to get ahead and start buying early, I think investors should adopt a more prudent strategy. They can do this by compiling a watchlist of promising companies and sectors and waiting for price action to confirm before deciding to invest.

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Nikhil Gangaram owns shares of ZIPCOLTD FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO, Netwealth, and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Blackmores Limited and Treasury Wine Estates Limited. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended FlexiGroup Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.