Investable trends: Decarbonisation, cloud computing, outdoor advertising
Despite rebounding equities markets, Yarra Capital Management (YCM) says there are still opportunities in the small companies market, with money to be made in outdoor media, the move to net zero and cloud computing.
YCM co-portfolio manager, Michael Steele, said the three themes were less hamstrung by legacy businesses and earnings and that the firm saw an increase in market inefficiencies driven by the rising prominence of passively invested capital and historically low sell side coverage.
“As the world transitions to lower carbon emissions, we will need to undertake potentially the largest ever replacement of capital stock,” he said.
Steele said lithium demand would increase by at least 10 times to 2030, supported by accelerating demand for elective vehicles, while copper demand would be driven by renewables generation investment, transmission network expansion and electric vehicles (EVs).
Pilbara Minerals and 29Metals were best placed to leverage the net zero outlook, according to YCM.
While COVID-19 accelerated the shift to the cloud, YCM still saw further investable potential as businesses chased the large productivity benefits that came from shifting on-premise data storage to multiple cloud products.
“Since the volume of data and complexity of networks continues to increase exponentially as extra cloud products are added, we see Megaport, a global leader with an expanding product offer, being particularly well positioned to benefit from the continued growth in cloud products,” he said.
Steele said the outdoor media market was below its pre-COVID levels and was an attractive opportunity at this point in the cycle, opting for oOH!Media as its preferred media exposure.
“Outdoor media provides a broad cyclical exposure across the whole economy and has a positive outlook, with the current starting point below pre-COVID levels despite economic activity more than recovering,” he said.
AUTHOR
Liam Cormican
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