Is your portfolio ready for the online future? Is your portfolio ready for the online future? Is your portfolio ready for the online future?

Is your portfolio ready for the online future?

Equities 4 minutes to read
Peter Garnry

Head of Saxo Strats

Summary:  COVID-19 will accelerate the online economy and digitalisation, reinforcing a trend that we've seen progress for more than a decade. Our view is that investors should have exposure to this trend and in this equity update we provide a large, inspirational list of companies that can offer just that. We've even broken down the list into different categories, so it's easier for investors to identify and gain exposure to specific industry groups.

Many commentators and influential people have spent months explaining to the public that things will never be the same after COVID-19. Sequoia Capital partner Michael Moritz said in the Financial Times recently that COVID-19 has fast forwarded the trend towards a large digital economy by maybe five years. Online businesses will thrive in the coming years compared to those that are more reliant on physical sales channels. Moritz also touches on the work-from-home switch and how this could have implications for commercial real estate in the future. If this holds, it will be a major blow to one of the best-performing asset classes in the past 50 years and something most investors would include in their portfolios in a low-interest-rate environment.

“Bosses will also be far more willing to embrace the idea that their teams don’t have to appear in an office just to demonstrate they are working. Millions have discovered the productivity boost gained from fewer social interruptions more than compensates for the loss of companionship. This doesn’t portend the end of offices, but it probably means a future in which managers are more willing to let their employees spend some time working from home. It’s easy to see how this could lead to a permanent crimp in the demand for commercial office space.” (Source: Financial Times)

Source: Bloomberg

Moritz is certainly correct about the online trend that has been under way for years. As the chart above shows, internet retailing has delivered 271% total return over five years compared to only 22.5% for global equities (MSCI World). Software and services companies have also enjoyed the tailwind delivering 135%. The media and entertainment industry group has only delivered 30%, but the historical comparison is difficult as the global equity indices saw a major classification change in late 2018, with internet companies such as Facebook and Alphabet being moved to this industry group. The media and entertainment industry group consists of: 1) media 2) entertainment and 3) interactive media & services (this is where Facebook, Alphabet and Tencent are placed), and it is especially in this third group where we’ll see future growth.

Everything related to the online economy seems to have better return on capital as the physical limits are less pronounced than for say airliners and miners. We believe the trend of digitalisation will continue over the coming decade and investors should have exposure to this trend in their portfolios. The table below provides a long list of companies offering exposure to many different sections of the online economy and increasing digitalisation. The combined market capitalisation represented on this list is $8.6trn across 69 single stocks, and we’ve also included four ETFs tracking some portion of this group for those that want a simpler way to invest in the overall trend.

TickerCompanyCountryCategoryRev. growth 1yr %EV/EBITDAYTD %Mkt. Cap (USD, mn.)
BIDU:xnasBaidu IncChinaMedia & entertainment5.06.1-25.332,672
BILI:xnasBilibili IncChinaMedia & entertainment64.2NM35.08,684
IQ:xnasiQIYI IncChinaMedia & entertainment16.017.9-22.512,002
NTES:xnasNetEase IncChinaMedia & entertainment-0.516.16.542,015
00700:xhkgTencent Holdings LtdChinaMedia & entertainment20.723.06.5492,838
UBIP:xparUbisoft Entertainment SAFranceMedia & entertainment-12.613.010.68,997
VIV:xparVivendi SAFranceMedia & entertainment14.114.0-22.325,183
ATVI:xnasActivision Blizzard IncUnited StatesMedia & entertainment-13.521.79.651,253
GOOGL:xnasAlphabet IncUnited StatesMedia & entertainment17.416.1-1.2904,440
AAPL:xnasApple IncUnited StatesMedia & entertainment3.715.20.11,270,654
EA:xnasElectronic Arts IncUnited StatesMedia & entertainment1.820.28.733,848
FB:xnasFacebook IncUnited StatesMedia & entertainment24.415.8-1.5576,288
NFLX:xnasNetflix IncUnited StatesMedia & entertainment28.858.928.3182,637
PINS:xnysPinterest IncUnited StatesMedia & entertainment51.2NM6.011,491
TWTR:xnysTwitter IncUnited StatesMedia & entertainment10.021.8-13.121,844
B2W Cia DigitalBrazilE-commerce services4.362.516.56,985
QRTEA:xnasQurate Retail IncUnited StatesE-commerce services-4.312.3-7.53,250
MELI:xnasMercadoLibre IncArgentinaOnline shopping59.5NM5.930,227
ASC:xlonASOS PLCBritainOnline shopping17.217.5-30.92,890
BOO:xlonboohoo Group PLCBritainOnline shopping44.131.27.24,635
OCDO:xlonOcado Group PLCBritainOnline shopping9.9252.131.714,712
SHOP:xnysShopify IncCanadaOnline shopping47.0NM54.371,757 IncChinaOnline shopping18.613.1-21.07,663
BABA:xnysAlibaba Group Holding LtdChinaOnline shopping41.626.8-8.3521,736 IncChinaOnline shopping24.922.617.560,772
03690:xhkgMeituan DianpingChinaOnline shopping49.570.9-1.275,668
PDD:xnasPinduoduo IncChinaOnline shopping129.7NM20.154,408
VIPS:xnysVipshop Holdings LtdChinaOnline shopping10.010.67.310,221
HFG:xetrHelloFresh SEGermanyOnline shopping41.4385.267.65,669
ZAL:xetrZalando SEGermanyOnline shopping20.330.6-4.712,140
4385:xtksMercari IncJapanOnline shopping44.5NM21.63,965
4755:xtksRakuten IncJapanOnline shopping14.7NM-2.212,276
3092:xtksZOZO IncJapanOnline shopping6.017.7-14.45,150 IncUnited StatesOnline shopping22.729.423.71,140,222
CVNA:xnysCarvana CoUnited StatesOnline shopping101.5NM-17.411,704
CHWY:xnysChewy IncUnited StatesOnline shopping37.2NM47.917,220
EBAY:xnaseBay IncUnited StatesOnline shopping-0.510.19.227,508
ETSY:xnasEtsy IncUnited StatesOnline shopping35.656.845.57,643
W:xnysWayfair IncUnited StatesOnline shopping34.6NM35.611,559
APT:xasxAfterpay LtdAustraliaPayments91.8NM23.36,180
GPN:xnysGlobal Payments IncUnited StatesPayments45.933.0-10.948,744
PYPL:xnasPayPal Holdings IncUnited StatesPayments15.037.211.5141,462
SQ:xnysSquare IncUnited StatesPayments42.9214.40.727,954
V:xnysVisa IncUnited StatesPayments10.221.5-6.4342,347
DHER:xetrDelivery Hero SEGermanyDelivery services100.1NM7.216,359
TKWY:xamsJust Eat NVNetherlandsDelivery services82.8NM9.714,660
GRUB:xnysGrubhub IncUnited StatesDelivery services30.335.7-6.54,181
LYFT:xnasLyft IncUnited StatesDelivery services67.7NM-31.29,083
UBER:xnysUber Technologies IncUnited StatesDelivery services25.5NM-4.549,038 Group LtdChinaOnline travel15.221.8-28.014,329
MMYT:xnasMakeMyTrip LtdIndiaOnline travel0.6NM-39.31,432
BKNG:xnasBooking Holdings IncUnited StatesOnline travel3.79.2-29.559,299
EXPE:xnasExpedia Group IncUnited StatesOnline travel7.56.4-37.59,420
TRIP:xnasTripAdvisor IncUnited StatesOnline travel-3.37.1-39.52,464
ABDE:xnasAdobe IncUnited StatesSoftware and services22.138.35.9168,201
AKAM:xnasAkamai Technologies IncUnited StatesSoftware and services7.214.313.015,800
CTXS:xnasCitrix Systems IncUnited StatesSoftware and services5.223.232.318,063
MSFT:xnasMicrosoft CorpUnited StatesSoftware and services13.519.713.71,356,222
ORCL:xnysOracle CorpUnited StatesSoftware and services1.011.0-1.4163,198 IncUnited StatesSoftware and services28.742.9-3.9145,143
NOW:xnysServiceNow IncUnited StatesSoftware and services32.4149.125.667,631
VMW:xnysVMware IncUnited StatesSoftware and services12.022.8-16.852,811
WDAY:xnasWorkday IncUnited StatesSoftware and services28.5NM-9.734,634
ZEN:xnysZendesk IncUnited StatesSoftware and services34.1NM-4.68,354
AVST:xlonAvast PLCBritainCyber security7.814.92.25,882
CYBR_NEW:xnasCyberArk Software LtdIsraelCyber security26.439.7-16.23,725
FTNT:xnasFortinet IncUnited StatesCyber security19.735.7-2.317,039
PANW:xnysPalo Alto Networks IncUnited StatesCyber security20.3164.8-17.019,127
SPLK:xnasSplunk IncUnited StatesCyber security30.8NM-9.921,430
IBUY:xnasAmplify Online Retail ETFUnited StatesExchange-traded FundNMNM1.5278
EMQQ:arcxEmerging Markets Internet andUnited StatesExchange-traded FundNMNM-3.1450
ONLN:arcxProshares Online Retail ETFUnited StatesExchange-traded FundNMNM12.987
Source: Bloomberg and Saxo Group

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