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May 2017

Opportunities in a digital world

Sylvie Séjournet portfolio manager of Pictet-Digital explains how the digital transition is creating investment opportunities.

Almost everybody owns a smartphone. Is there any growth potential left in the digital space?

SS. Certainly! We believe the investment potential is even greater, thanks to the high penetration of mobile devices. This means people are spending more and more time online. A lot of millennials are making great use of the new possibilities in the digital world, whether it is shopping online, booking a ride on Uber or making a reservation on Airbnb. In most industries, an ever increasing proportion of activity is moving online. And while smartphone penetration in the developed world is quite high, there is still a great deal of growth potential in developing countries. Currently, less than half of the world’s population has access to the internet1. Former Google CEO Eric Schmidt predicts that this percentage will increase to 100% by 2020.

How can investors profit from this shift to a more digital world?

SS. Many

There is a lot of room to manoeuvre by responding to various trends across a broad range of companies.

companies are benefiting from the transition to digital and we believe that this can be an interesting investment theme. Within this space, there is a lot of room to manoeuvre by responding to various trends across a broad range of companies with all kinds of business models. For example, online advertising accounts for only 30% of total advertising spending. Thanks to the rise of mobile advertising, this percentage is increasing rapidly. In other industries the potential is even greater. Technology infrastructure spendings account for $2 trillion. However, only 4% of that amount is spent on cloud services.

What can investors expect from the digital investment theme in the near future?

SS. In the last couple of years, we could observe a growing penetration of internet access and a shift to digital within a range of industries. These trends are growing in strength. For example, an increasing number of home appliances such as thermostats will have a connection to the internet. In addition, people will grow more comfortable with managing more and more of their everyday activities online. In most industries, this growth will be three to four times larger than their traditional activities. These trends are laying a solid foundation for the opportunities of the digital investment theme going forward.