Heading into the new year, there are 3 sharemarket trends I’m following closely that could provide some major share price growth: buy-now, pay-later services, electric vehicle primary metal producers and safe haven assets. These trends have been in the spotlight throughout 2019 and I believe will continue throughout 2020.
Here is a breakdown of the ASX shares I would buy to gain exposure to these trends.
Buy now pay later
Possibly the most hyped sector of 2019 is the credit-like product ‘buy-now, pay-later’ (BNPL). AfterPay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) are the current ‘gold standard’ within the industry and we saw the Afterpay share price appreciate 150% and Zip Co 210% in 2019. This trend is not going away either – there were 3 initial public offerings in 2019 within the sector: Sezzle Inc (ASX: SZL), Openpay Group Limited (ASX: OPY), and Splitit Limited (ASX: SPT).
Looking ahead for the sector, in 2020 there will be significant work with industry regulators to secure the place of BNPL products within the current array of financial products already on offer. This has been the largest risk posed to BNPL investors. In a report in the Australian Financial Review, author James Frost examines the risks of BNPL. If regulators manage to get something done this year and it is in favor of BNPL companies, we could see a dotcom-like boom due to the large de-risking of the sector.
To get onboard the BNPL hype train, I would consider buying AfterPay or Zip Co, as both of these companies have large market shares within the BNPL sector, as well as the healthiest financials.
Full disclosure, I’ve owned shares in Zip Co Ltd since November 2019.
Electric vehicle primary metal producers
Electric vehicles (EV) are all the jazz throughout the Automotive sector. Almost every mainstream car manufacturer has an EV available for purchase, or at least a hybrid, and is planning on ramping up production of these vehicles throughout this coming decade. Pressure from foreign policy makers (particularly in the Euro zone) is making automotive manufacturers race for EV market share. Of course, every EV needs a battery and batteries are made from metals mined from the ground, in particular, lithium, cobalt and nickel.
Safe haven assets
Global risk remains high by any metric and as a result, safe haven assets have done extremely well this past year, with Gold and Government Bonds showing that investors are unsure about equites. Gold has appreciated 18% in 2019 and looking like it is going to stay above $1450 USD/oz in 2020. Furthermore 2019 was a record year for reserve banks buying gold.
To capture this trend, I would be buying a mix of Gold and Bond ETFs such as the SPDR S&P/ASX Australian Bond Fund (ASX: BOND) and ETFS Physical Gold ETF (ASX: GOLD). For a bit more exposure to gold I’d also consider buying a gold producer such as Newcrest Mining Limited (ASX: NCM).
These 3 share market trends are well and truly alive and kicking and will be for some time.
BNPL is only going to see more attention this year with a large focus on the regulation of this industry. More and more electric vehicles will make their way onto roads this year, providing great opportunity for our listed battery metal producers. Finally, safe haven assets will continue to be held tightly by the big end of town until interest rates start to be lifted – which you could say with a high degree of confidence won’t be until after 2020.
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Jack Kaminski owns shares of ZIPCOLTD FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. 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.