Howard Lindzon, Mish Schneider and Joe Kunkle reveal the trends they’re watching in 2021

This year is already sizing up to be an interesting one for investors, with many of the trends that accelerated in 2020 continuing to build momentum. In addition, there are several areas investors might also look to for new opportunities, as the world continues to adapt to the ever-present threat of COVID-19 and global economies aim to recover.

With the future far from clear and the investment landscape hard to navigate, Opto spoke with three market experts about the investing themes they have their eyes on in 2021. Howard Lindzon, co-founder of StockTwits, co-founder of Social Leverage and an early investor in companies such as Robinhood and Koyfin; Michele ‘Mish’ Schneider, director of trading education at marketgauge.com; and Joe Kunkle, head research analyst at Relativity Capital and founder of Options Hawk have all offered their insight.

From the preventative medical products that could assist a surge in the health and technology theme to the continued rise of big tech stocks and the intersection of fashion and the digital world, these experts have considered the themes they will be watching in the coming months.

Joe Kunkle

Which theme do you think will outperform in 2021, or which theme do you think will surprise investors this year? 

A key theme I see outperforming, not just in 2021 but for many years, is the intersection of health and technology, as a stronger focus is put into preventative healthcare to counter soaring costs. Over the past few years, we have seen major advancements in growth themes that remain strong like robotic surgery, patient monitoring, fitness and health wearables and gene therapy. Still, there are even more exciting advancements that are in the very nascent stages of growth. 

"A key theme I see outperforming, not just in 2021 but for many years, is the intersection of health and technology" - Joe Kunkle

What are the key innovations driving growth in this theme?

Innovations from machine learning and artificial intelligence (AI) are allowing for a significant expansion of the amount of data that can be processed, as well as the speed at which it can be processed. Technology will allow for unbiased, results-driven analysis to make every aspect of patient care more efficient and effective. 

Which industry or sector is this theme disrupting, and how?

The focus is on the healthcare industry, with several emerging themes such as precision medicine, proteomics [the study of proteins], genomics, drug discovery platforms and diagnostics the key beneficiaries of rapidly expanding technology.

What is the size of the opportunity? 

The healthcare sector is expected to reach $7trn by 2027 and account for around 20% of GDP, so the opportunity is massive. Each of the aforementioned themes have very large total addressable markets with low penetration currently.

Finally, which stocks are best placed to capitalise on this theme? Which stocks are you backing, and what are your price targets/2021 outlooks for these stocks?

There are many exciting growth names, and with these themes the pie is large enough for many winners to emerge. There are near unlimited ways to participate. When looking at bio-pharma technology, simulation software stocks such as Schrödinger [SDGR], Certara [CERT] and Simulations Plus [SLP] are all positioned to grow strongly. In genomics, you have Illumina [ILMN], 10X Genomics [TXG], Pacific Biosciences [PACB] and Twist Bioscience [TWST]. The proteomics company Seer [SEER] is a new issue, and one of the most exciting names I have come across in years.

The diagnostics group has so many incredible growth stories — one of the newest finds is Biodesix [BDSX], which focuses on diagnosing lung diseases. Progyny [PGNY] is disrupting the fertility industry. Nuance Communications [NUAN] has software for doctors that transcribes medical notes from patient visits. Teladoc Health [TDOC] is a leader in telehealth, while Ontrak [OTRK] is a smaller play on that theme and utilises AI technology. Accolade [ACCD] offers a cloud platform for healthcare workers and their workplace benefits, and it recently bought a telehealth start-up (Innovation Specialists). 

"The diagnostics group has so many incredible growth stories" - Joe Kunkle

There’s an almost an endless list of names just starting to scale businesses that will disrupt massive legacy providers.

 

Mish Schneider

Which theme do you think will outperform in 2021, or which theme do you think will surprise investors this year?

Our major focus for this year is the continuation of what we saw emerge in 2020. New technology stocks or newer issues along with special-purpose acquisition companies (SPACs) should continue to outperform. Of course, certain areas will do better than others. We have broken new tech into 10 different categories, from manufacturing to electric vehicles (EVs), healthcare and cryptocurrencies. The surprise for investors in 2021 will be the agricultural sector, particularly food, soft [technology] and agricultural technology. 

What are the key innovations driving growth in this theme?

As well as social distancing and conducting business from home, the coronavirus pandemic has caused the world to think about eating, recreating, attending to one’s health and shopping differently. The newer tech companies are great innovators, making it easier to remain productive yet apart. As for megatrends, the rise in EVs resulting from climate change and paired with autonomous driving has created innovative tech along with SPACs. 

"The newer tech companies are great innovators" - Mish Schneider

Which industry or sector is this theme disrupting, and how?

The areas most disrupted are traditional oil and gas, and classic transportation. Furthermore, big tech such as Amazon [AMZN], Microsoft [MSFT] and Nvidia [NVDA], although up with the overall market, have grossly underperformed as a result of all the new innovations.

What is the size of the opportunity? 

With SPACs, the idea is that blank-cheque companies do not have the constraints of typical restructuring. They offer tremendous growth opportunities. As we saw in 2020, IPOs that strike the heart of innovative and new technology raise millions of dollars (sometimes billions) and open with huge valuations. As this theme took flight in 2020 amid the pandemic, we expect this theme to continue to grow exponentially throughout 2021, and perhaps beyond. One caveat we always feel necessary to add is that some kind of liquidity crisis impacts everything negatively. 

"IPOs that strike the heart of innovative and new technology raise millions of dollars (sometimes billions) and open with huge valuations" - Mish Schneider

Finally, which stocks are best placed to capitalise on this theme? What stocks are you backing, and what are your price targets/outlooks for 2021 for these stocks?

We currently have a long position on Palantir Technologies [PLTR], with an initial target of around $40-$45. Datadog [DDOG] is another long position as is Teladoc. The target for Origin Agritech [SEED] is $30-$40. 

See our watchlist below for our other positions and recommendations.

The following all have tremendous potential:

Manufacturing/industrial:

Snowflake [SNOW] — cloud-based data warehousing

ServiceNow [NOW] — technical management support
 

Big data:

Palantir [PLTR] — software

Datadog [DDOG] — data collection

Agricultural:

Origin Agritech [SEED] — crop seed breeding

Deere & Company [DE] — agricultural machinery

Retail/consumer-based:

Zendesk [ZEN] — software

AI:

Fastly [FSLY] — cloud platform

Cloudflare [NET] — web infrastructure

Twilio [TWLO] — cloud comms

Space frontier:

Procure Space ETF [UFO] — space-themed ETF

Virgin Galactic [SPCE] — spaceflight company

Medical or biotech:

Beam Therapeutics [BEAM] — biotech firm

Teladoc [TDOC] — telemedicine

EVs:

QuantumScape [QS] — solid-state batteries for EVs SPAC

Luminar Technologies [LAZR] — autonomous vehicle sensors

Cybersecurity:

Telos [TLS] — security solutions

Leidos [LDOS] — defence

Financial:

Square [SQ] — financial services

Riot Blockchain [RIOT] — bitcoin miner

SPAC (overlaps into above areas):

XL Fleet [XL] — retrofitting existing cars into plug-ins (co already exists)

Foley Trasimene Acquisition Corp II [BFT] — online wallet

Howard Lindzon

Which investment trend do you think will outperform in 2021?

The simple theme continues to be fashology — where fashion meets technology — which I say every year. [This includes businesses such as] Restoration Hardware [RH], Nike [NKE], Lululemon Athletica [LULU] and Peloton Interactive [PTON]. The idea is that technology companies are not fashion companies, but partner in many ways with fashion. Whether it’s Lululemon, with their fancy materials for sweat, or Apple [AAPL].

Apple is one of two main crossover fashion companies. It is technology that people love and whose designs people crave. The second company is Peloton. Everybody has pretty much the same bike in their house, so it's like a fashion item, but it really is a piece of technology too. People keep it in their living room — it's a status symbol and it's not ugly. It's a piece of technology, but it looks like a sculpture. I think this whole fashology trend will continue.

"Everybody has pretty much the same [Peloton] bike in their house, so it's like a fashion item, but it really is a piece of technology too" - Howard Lindzon

What are the key innovations driving growth in this theme?

Design and tech, and also the leisure economy. Because of COVID-19 tailwinds, I think people are going to invest more money in themselves, and with that comes fashion. If they’re investing in themselves, they want to feel good about the brands they wear, and because of Instagram, TikTok and Snapchat there are going to be thousands of new brands.

Fashion meeting technology is really what it's all about. It's not that I wear glasses, it’s what do they do? It's not that I wear workout clothing, what does it do while I'm wearing it? It's going to be a whole new category.

How is this disrupting the retail sector?

To me, Restoration Hardware [RH] is a fashion and technology company because it's a bit exclusive. They have this beautiful experience where you can go shop in their five-level stores, and they’re not hard-selling you anything.

The furniture is like Peloton. It kind of looks the same and everybody's buying the same stuff, but it's all a little bit different, too. They take a lot of risks. The company has to build furniture that’s liked by millions of people across many different wealth classes, from the ultra-rich to regular people. [It has mass appeal] because of the whole experience of fashion and technology. Then obviously, Lululemon, Nike and Apple again. Farfetch [FTCH] is a new fashion and technology company that I'm thinking about because they're a platform for very high-end designers.

What is the size of the opportunity?

It’s a trillion-dollar global industry.

"It's a trillion-dollar global industry" - Howard Lindzon

Finally, which stocks are best placed to capitalise on this theme?

The companies on my list [on Koyfin] include stocks like Farfetch, Lululemon, Nike, Peloton, RH, Apple and a company called Anta Sports Products [ANPDF] — which is the Chinese version of Lululemon. You’ve also got a lot of new companies, but right now there are not a lot of huge globally recognised companies that I would include in this.