Themes for the Next 5 Years

Episode Transcript

Speaker 1 (00:00):
This is straight Talk from the House with certified financial
Planner Tracy Aton here on thirteen ten wui b A.
Of course, Tracy comes to us from Tanton Investment House,
a fee only to do shary with offices right in Middleton.
We talk about you know, we do the show each
and every week with Tracy and talk about a lot
of really important things, really vital things, and Tracy provides
that information to you free of charge, and it's really

(00:22):
good also to share that information kind of a little
gift to your friends and family as well. If you
want to listen back to this previous shows podcast, head
on over to Tanton Investment House dot com. You can
do just that. You can also read some great articles
and some other great stuff. Podcast also available up at
wiva dot com and the iHeartRadio app. The telephone number
six oh eight five zero one fifteen forty nine. That's

(00:42):
six oh eight five zero one, fifteen forty nine. And
enjoining us this morning is certified Financial Planner Tracy Andton. Tracy,
how you doing this week?

Speaker 2 (00:49):
I'm doing great? How are you?

Speaker 1 (00:51):
I'm doing really really well? And I kind of I
kind of I was telling you before the show. One
of the things I love about doing the show with
you is getting those little nuggets of knowledge thinking about
things that I had in the past thought about. And
I think for a lot of us we sometimes whether
it's you know, we we dread the unknown or those
type of things we kind of think of the future.

(01:12):
Sometimes having some roadmaps of things to expect can really
be helpful. And that that's kind of what we're gonna
be talking about this week, can't we, Tracy abou kind
of what to expect in the future.

Speaker 2 (01:21):
Yeah, you know, I find it. I'm pretty blessed because
I have privy to information that and maybe you can
even go on here and google it. But it's like,
because I'm associated with some of the mutual fund companies,
and you know, we're in an independent shop, right, we
could use any anything out there, and we've used plenty
of ETFs. But some of the literature that comes through

(01:44):
some of these mutual fund companies it's really inspiring, I think,
because it's written from people that are, you know, in
the trenches, and they're looking at all kinds of different
sectors and industries and so they're able to say, you know,
what is trending right now? For example, in the medical
field or industrials or you know, what's happening and what

(02:05):
do they see out there in the in the investment landscape.
And as you know, a person in my field, I'm
more of a you know, sit down and talk to
the person and put them in awesome investments, I think, right,
but also planning and all you know, those kinds of
detail work that I'm more front facing with the client.
But these people are in the trenches doing the the

(02:27):
the stock picking, and so it's so it's so great
to be able to read their commentary about what they're
what themes they're seeing. So today we're going to talk
about five growth themes for the next five years. And
we've had, you know, an tremendous five years. We've had
a tremendous decade. It's been wonderful for stock investing. So

(02:49):
I think we've all been really blessed with that. But
it's like, okay, well what does the next five years bright?
You know, we always want to know, right, what's the
next five years? So this is to me. I always
like to bring the inspiration to the table, and this
is what they're saying is five growth themes for the
next five years. And it was written on October fifteenth
by the three One was an equity portfolio manager at

(03:13):
American Funds, and actually two of them are equity portfolio
managers and another equity investment director. So you know, again
the people that are in the trenches picking the stocks
and what are they seeing. So I thought it's a
great it's a great, great topic to talk about today.

Speaker 1 (03:28):
Should be some great insight. As we talked with certified
financial planner Tracy Anton here on thirteen ten, Wi b
A menched the website t Anton investment House dot com.
That's t A N t O N investment house dot com.
So Tracy, let's start off at step one. What can
we expect to see then in the future.

Speaker 2 (03:44):
Well, they're early signs right now sean of a market
shift because they're moving from a focus on small a
small group of gross stock leaders that we had talked about,
like the Magnificent seven, to a broader range of companies,
which is a blessing, right we want we want the
market to be extremely healthy and have a broad range
of companies that are doing well. So while investors, they're

(04:06):
not abandoning the big tech. But there is a growing
concern about the concentration, risk and overall reliance. And these
companies within market cap weighted indexes, you know, are they
getting too big? Are they getting too expensive? So that
is extremely understandable. And if anybody asked me, well, what
keeps me up at night, it would be okay, you know,
is there a bubble here? Is there a bubble? So

(04:28):
that's that's why we kind of look to pitching portfolios
toward value. Now, we have plenty of growth in the
portfolio as well. Numbers are great, but what's what's reassuring
I think here is that there's value is coming on board,
and there's investors are benefiting from exposure to obviously tech

(04:49):
companies that have fueled much of this growth economies growth,
but there they should also consider a wider variety of
companies and industries with strong business models and long term
growth piotential that are outside these big tech companies.

Speaker 1 (05:03):
Fascinating stuff. So as we look at that and kind
of get that good news about where things are kind
of trending or where things are going, where are we
then going to start see that growth?

Speaker 2 (05:12):
Well, the big tech companies are getting bigger, right, So
traditionally what's interesting is that large scale has been a
barrier to growth typically, but this really hasn't been held
true for the big tech companies, which have managed to
generate returns with minimal additional investments, and their capital spending
is often focused on hardware and software, which are fixed costs,

(05:35):
and so as these companies grow, their profit margins can
expand alongside increasing sales. For example, Meta provided a clear
example of this this last year they cut its workforce
while boosting revenue. In the second quarter of twenty twenty four,
Meta reported the thirty nine billion in revenue, up twenty
two percent from the previous year, right with its operating

(05:56):
margins rising from twenty nine to thirty eight percent. So
idiot was also they exemplify this trend as well, expanding
its gaming semiconductor business into AI and that's a rapidly
growing market without significant extra investments. So you know, in general,
skill typically offers advantages for these megacap companies and as

(06:20):
a physicist and author Jeffrey West he noted that larger
entities are often more energy efficient. It's kind of like
a large animal that you conserves energy, right, or biggest
cities that gate efficiencies and reduce costs per unit produce.
So the same holds for big tech, which has shown
that businesses can be conducted in ways that are more

(06:42):
virtual and less reliant on physical capital and labor. So
I guess the bigger getting bigger, and you know, maybe
that's okay, that's what they're saying there.

Speaker 1 (06:52):
Talking this morning with certified financial planner Tracy Anton here
at thirteen ten wi BA. Don't forget if you miss
any part of the show, you want to share the
program or listen back to previous just head on over
to Tanton investment House dot com. That's t A N
t O N investment House dot com. So, Tracey, as
we talk about these tech stocks, what benefits have we
seen from them?

Speaker 2 (07:10):
So the impressive success of this Magnificent seven and other
large cap companies is clear with these businesses continue to
accumulate value and reaching market caps and the trillions, but
profit growth outside the Magnificent seven stacks has also perked up. Okay,
So beyond these companies lies a broader ecosystem of suppliers

(07:32):
and infrastructure providers that are essential really to the success
of the megacap firms. So these supporting companies often offer
more stable and potentially lasting growth opportunities, creating additional ways
to tap into the growth linked to the big tech expansion. Also, additionally,
companies involved in expanding data centers and energy supply, like

(07:54):
utility providers, may stand to benefit from this growth. And
on another front, early adopters of AI, especially in areas
like drug innovation, are also gaining investor attention. You know,
pharma companies like Asta, Zenica and Roach are holding how
are showing that AI can enhance drug discovery and streamline

(08:15):
supply chain management as well. So lots, you know, lots
are lots are happening. But the earnings you know, obviously
drives the growth, right, you know, it drives the prices,
and so we're seeing a perk up here in these
companies that are associated with the benefit of the big
meg tech. And again, a broader market is a healthier market,

(08:35):
and that's great to see.

Speaker 1 (08:36):
Talk about how revolutionary AI has been as well. What
an amazing tool that is for sure. As we talked
this week with certified financial planner Tracy Anton talking about
five growth themes for the next five years, you definitely
going want to take notes on the program, DOKA. If
you miss any part of the show, you can always
listen back at WIBA dot com. On your iHeartRadio app,
you can ask your smart speaker to play straight talk
from now certified financial planner Tracy Anton, or even better

(08:59):
to send on over the Tanton Investment House dot com.
That's t A N t Ninvestment House dot com. So Tracy,
let's kind of break down some of those other areas
where we may be seeing a higher areas of growth potential.

Speaker 2 (09:11):
Well outside the tech sector Sean industrials actually with strong
molds or high barriers to entry, unique assets and growing
demand are also really appealing. So the industrial sector is
broad and diverse, and many companies within it are strengthening
their dominance in areas promising long term growth potential. And
industrials are benefiting from several major trends, so the energy

(09:35):
transition in the US and also energy security initiatives in Europe,
reshoring of the supply chains, and increased defense spending. So
these long term shifts are setting the stage for a
major capital investment cycle that could open up opportunities across
the sector. And again, the US has committed billions to
infrastructure and renewable energy. Take Eton, it's our US based

(09:59):
company that produces a wide range of electrical products and
services for data centers, utility projects, industrials, and commercial buildings,
as well as fuel efficient systems and safety components for
commercial aircraft. So in the second quarter of twenty twenty four,
Eaton's electrical division had a back log of eleven point

(10:20):
four billion, which was up from two point eight billion
in the four fourth quarter of twenty nineteen. Similarly, another company,
Schneider Electric, which focuses on making commercial buildings more energy efficient,
is projecting a seven to ten percent annual growth through
twenty twenty seven. Now I'm not giving you these good
stacks as say, oh you should invest in them. I'm

(10:41):
just trying to give you a sense of you know,
where are they seeing some growth potential. It's in industrials.
Other examples here, renewable energy companies like AEES and Extra
are already ahead due to their extensive power infrastructure. Both
are developing next generation energy efficiency solutions to make global

(11:01):
energy needs and will play a major role in supporting
or at least an important role in AI driven data centers.
And I mean that's always the big push, like where
are we going to get all this energy? Right? So,
I mean there's going to be a lot of changes
that AI is driven it and as of course it's
all you know, it's it is a lot to solve, right,
but it's also exciting because AI can is such a

(11:24):
game changer. And then aerospace and defense is another industrial
sector sean that could see short term benefits from government
contracts and ongoing geopolitical tensions. Countries like the UK, France
and Germany have increased their defense spending, which could drive
technological advancements in A and D related products and global

(11:46):
military spending roles for the ninth consecutive year in twenty
twenty three, reaching two point four to four trillion, a
six point eight percent increase market the biggest year on
year rise in two thousand and nine. So companies such
as Lockheed, Martin Raytheon Bay Systems are likely to be
key beneficiars of this trend. And so again I just say,
you know, internationally, those you know stocks haven't gone as well,

(12:09):
and it's it's a great time to be investing there
because there is opportunity in a global sense as well,
So there are more reasonably priced and that they have
a lot of growth potential, a.

Speaker 1 (12:21):
Lot of fascinating options to be thinking about this morning,
as we talk with certified financial planner Tracy Anton, talking
this week about five growth themes for the next five years.
We'll talk about some of the other sectors that are
expected to see some growth in the next five years
with the details from Tracy. We will do that next
as straight Talk from the House with certified financial planner
Tracy Anton continues right here on thirteen ten wuib A.

(12:43):
This is straight Talk from the House with certified financial
planner Tracy Anton here on thirteen ten wuib A. Talking
with Tracy this week about five growth themes for the
next five years. Don't forget if you missed any part
of the program or want to listen back to previous
shows or share the program. Of course it's available to
you in a podcast at Tea Antoninvestment House dot com.
Also all the popular podcasting platforms, including the iHeartRadio app

(13:05):
tel for number for the office right in Middleton sixto'h
eight five zero one fifteen forty nine. That's six h
eight five zero one fifteen four to nine. So, Tracy,
what are some of the other sectors that will see
growth within the next five years.

Speaker 2 (13:17):
Well, I think healthcare sector, has having a really strong
growth potential. It's an industry that long term investors can't
really overlook in my opinion. In twenty twenty two, healthcare
spending in the US reached four point five trillion, or
seventeen point three percent of the GDP, according to Centers
for Medicare and Medicaid Services. Advances in technology, which is

(13:39):
a really cool, improved connectivity and AI are accelerating the
development development of new therapies. Very cool. Now we are
also entering the early stages of a third wave of
innovation and biotech and drug discovery. The first wave involved
traditional chemical companies treating diseases, while the second wave brought
about protein based therapies that we're more targeted and harness

(14:03):
the immune system to fight disease. And this third wave,
SEWAN is focused on genetics. So thanks to insights from genetics,
sequency and the ability to process large amounts of data faster,
healthcare companies are now able to develop more precise ways
to intervene in the disease process. So again, I think,
you know, we don't hear a lot about this, but

(14:23):
it's really cool and it's coming our way, you know,
thanks to.

Speaker 1 (14:25):
AI that's awesome, awesome news there. And we talked to
about healthcare Tracy and I know it's something that as
you just point out that the numbers are there, and
that doesn't mean they're done. There's there's some more emerging
things coming out of the healthcare industry, isn't there right?

Speaker 2 (14:41):
Another emerging technology is healthcare in our NAI therapeutics. So
RNA interference is a natural process that regulates gene expression
by blocking messenger RNA or mRNA, which carries instructions from
DNA to make proteins. So these therapies are called silent mRNA,

(15:02):
which work by silencing the genes that cause or contribute
to disease. So this technology could play a key role
in treating various diseases. Companies that you know, some of
them are like ANLOM have been pioneers in RNAi therapeutics,
leading the way in treatments for conditions like lung cancer
with potential future applications, and hypertension or high blood pressure.

(15:25):
And over the past several years, investors have poured substantial
capital into biotech and pharmaceutical sectors, driving innovations that have
led to the creation of valuable intellectual property and expertise,
and this investment will likely to further advancements, creating a
surge in new therapeutic opportunities in the coming decade.

Speaker 1 (15:45):
That is pretty amazing stuff. So we talked with certified
financial planner Tracy Andel. Like I said at the start
of the show, I always love doing the show, and
I love learning new stuff. And I had never heard
of RNA interference before, and I've got stuff to read
up on after the program speaking, I know.

Speaker 2 (15:59):
There's always have so much to learn, right, and that's
what's exciting about it. There's all kinds of innovation that
are happening in all kinds of different sectors and industries,
and you know that's that's a positive thing for all
of us.

Speaker 1 (16:10):
It is really great to see that American global innovation
pressing on. As we talked with certified financial planner Tracy
Anton here on thirteen ten WIBA speaking of getting a
great information a lot of it at Tanton Investment House
dot com. That's t A N t O N Investment
House dot com and Tracy, as we talk then through
some of these growth themes for the next five years,

(16:31):
what are some examples of industry leaders that we are
seeing right now.

Speaker 2 (16:34):
Well, many things. Themes have been seen across various industries
and involves years of consolidation, refining business models, aligning the
right product offerings, and having strong leadership. So companies that
succeed in this process can experience significant growth in both
revenue and profits. So while stax and investor sentiment may fluctuate,

(16:55):
long term investors could see considerable value over time. So
some an example that we're talking about include luxury brands
like LVMH and Hermes, whose business models for high end
goods have proven difficult to disrupt. And similarly, the semiconductor
manufacturing industry has consolidated so much shown since nineteen nineties

(17:16):
that the Taiwan TSMC now makes up eighty percent of
the world's most advanced computing chips. So I mean, and
now again I'm not saying go run out and invest
these I'm not saying that. But what I'm saying is
there is opportunities here and there's going to be some
long term trends that we're seeing due to these changes.

(17:37):
So again, looking at other industries, Caterpillar leads the heavy
industrial equipment sector, Netflix dominates online streaming, and of course
Meta and Google control the online advertising market Costco High
Shop there has become a powerhouse in the club grocery business,
successfully expanding its model into other countries. And in aviation,

(17:59):
Airbus and Boa have a duopoly on airplane frames with
a backlog of orders stretching out for years. Likewise, companies
like Gees, Saffron and Pratt and Whitney are the main
suppliers of narrow they call it narrow body aircraft engines.
So in the mining industry we have Freeport McMoRan and

(18:19):
BHP are the major players in copper mining and that's
essential resource and high demand across various industries. So again
all of this, it's important to note that the stocks
of these companies may not be good investments in all
market conditions because you have to factor in things like valuation,
regulatory issues, management changes, business challenges as such as those

(18:41):
currently phasing going and you know all these things can
impact performance.

Speaker 1 (18:45):
Right.

Speaker 2 (18:45):
So however, this is basically a themes that remain a
key focus and companies with these traits are likely to
always be on our watch list. And again this information
comes from American funds.

Speaker 1 (18:57):
Just like Santa, you want to get yourself a good gift,
put these on your lists. This would be here, You're
naughty a nice your watch list for sure and Tracy
Rounding this week's show out, let's talk about kind of
global and are we seeing anything change in other nations?

Speaker 2 (19:13):
Well, India actually is a fast growing economy with dynamic
private sector and high quality corporate management, often comparable to
world class companies, which is interesting I never heard that. However,
many sectors are still in the early stages of development,
and there are numerous small and mid sized companies whose
stock prices could see significant growth over the next decade.

(19:33):
As of and of August, small companies with market caps
between one billion and ten billion made up one third
of the one point two trillion MSCI Index India Index.
So opportunities are growing in sectors in India like manufacturing, chemicals,
consumer facing businesses. Additionally, India's expanding economy, booming housing market,

(19:56):
and improving digital infrastructure provides a strong foundation for these
all companies actually to thrive again with substantial government investment
and infrastructure that's happening in India. They are becoming emerging
as a viable alternative to China for the production of
manufactured goods like mobile phones, home appliances and computers. As

(20:16):
a result, the range of opportunities available today is much
broad broader than it was a decade ago. If you
look at the housing sector, for example, India currently has
fewer housing starts than the both the US and China,
and this represents an opportunity, particularly in housing developers focusing
on suburban areas that are being connected by improving rail systems.

(20:38):
Healthcare is another area with strong potential there. With a
population of over one point four billion, the demand for
healthcare services is immense. While government hospitals typically have served
the poor, a rapidly growing middle class is seeking and
willing to pay for quality healthcare with modern amenities. So
in financial services, new wealth management firms, mortgage lending, and

(21:01):
mobile based consumer finance platforms are emerging. So a lot
of growth potential, you know, how do you how do
you access this? You know, I say you should have
component here and these emerging markets, but a small you know,
a small percentage. You know, they're more aggressive, so you know,
but it's still exciting to see what's you know, what's
possible in the next ten years. Right, They continuously say, well,

(21:24):
global growth might slow. Well I don't know, according to
this that doesn't look so so prominent, at least that thought.

Speaker 1 (21:31):
I know what I'm doing after the show today, Tracy,
I'm listening back to this podcast.

Speaker 2 (21:36):
I know there's just so much right and I mean,
what's what again? What's nifty? Is is it? I'm just
trying to, you know, give you a once over of
you know, why do we invest Why do we invest
in these individual stocks or these mutual funds personally, like
the mutual funds are managed et ups. And it's great
because these are opportunities going forward. We all know the
Big seven, but there's opportunities and lots of different stocks.

(21:58):
And that's what the market's happening. It's broadening out and
you can see that in value stocks and international sucks
and they're all you know, we're doing. It's doing quite well.
And what's the next potential for the next five years?
There are opportunities out there.

Speaker 1 (22:10):
It's a really great time to be talking, really great data.
Start that conversation. You can learn more online the website
Tanton Investment House dot com. That's t A N T
O N Investment House dot com. Tell phone number fourteen
Anton Investment House. The office right in Middleton six oh
eight five zero one, fifteen forty nine. That's six oh
eight five zero one fifteen forty nine, Tracy, It's always
great chatting with you. He enjoyed this most fantastic of days.

Speaker 2 (22:33):
Thanks so much, sea On take care,