From FAANGs to CRAABs - the era of investment in new technology
You may have heard the terms FAANGs and CRAABs and wondered how on earth these terms relate to investment management.
FAANGs refers to the technology titans of the US, namely Facebook, Amazon, Apple, Netflix and Alphabet (formerly known as Google).
CRAABs refers to cryptocurrency (or bitcoins), robotics, artificial intelligence, automation and biotech companies - and is a new acronym that has emerged as investors consider the future of investing in technology.
Will CRAABs replace FAANGs for investors over the next 10 years?
The fortunes of individual tech companies rise and fall with remarkable speed:
- Nokia once boasted a market cap of US$250bn – today, it is pretty much an irrelevance in the broader tech industry
- In contrast, eSports was a US$493m market in 2016; it is forecast to reach US$80bn by 2025.
Amongst all the confusion and market volatility of 2020, tech companies achieved stellar performances as we worked from home and used tech to communicate with friends and family. Tech remains a powerful secular trend, so of course it has to be included in our clients’ discretionary investment portfolios. And while we certainly can’t ignore the FAANGs, there could be plenty of opportunities to go fishing for CRAABs and take a look at smaller companies in different areas of technology that provide interesting opportunities.
Do CRAABs offer the greatest investment potential?
We believe that the greatest investment potential lies in companies which are likely to be involved in the next generation of technological developments.
While we don’t know which companies will dominate the market leader board in 10 years’ time, we do know it's dangerous to pay too much attention to short-term, transient factors when making long-term investment asset allocations. That's why we try to put the increasing noise around issues such as regulatory pressures and digital services taxes into their proper context, and doubt that such issues will derail our thematic positioning to technology.
Look at the ‘R for robotics’ in CRAABs
Rapid technological innovation is propelling changes in all industries. Take robot cells created at Massachusetts Institute of Technology (MIT), which can assemble themselves into different shapes and patterns. Such adaptability has numerous potential uses: they might be deployed for search and rescue purposes for example, deconstructing themselves in order to squeeze into previously inaccessible areas.
Robotics in medicine is particularly exciting. In future people may undergo surgery with no incision, no risk of infection, and no pain – thanks to an ingestible origami robot.
In the security sector, robots can already act as autonomous units, carrying multiple visual and thermal cameras, two-way communication systems and more.
What about the ‘A for artificial intelligence’ in CRAABs?
It would be wrong to focus on robotics alone. Greater computing power allows companies to examine large amounts of data and spot hidden patterns, correlations and insights which previously might have gone unrecognised. The benefits include healthcare, where medical researchers can use data to find treatments with the highest rates of success. The analysis of huge data sets allowed researchers to discover unexpectedly that the anti-depressant Desipramine can help cure certain types of lung cancer.
Should we be sceptical about the ‘C for cryptocurrencies’ in CRAABs?
There is, quite rightly, huge scepticism about cryptocurrencies and in our blog ‘Bitcoin – valid investment or criminally insane?’ we discuss this in more detail.
However, the underlying blockchain technology is less controversial. It's still in its infancy and no-one is yet sure what its ultimate uses might be. Could the Apple of 2028, or 2038, be a blockchain-enabled company that hasn’t even been contemplated yet?
Could CRAABs replace FAANGs in your investment portfolio?
“Prediction is very difficult, especially if it’s about the future” is a quote attributed to Niels Bohr, the Nobel-winning physicist. While we might not know which tech companies will dominate the market in 10 years’ time, we are confident that new technology will be a key investment theme that will probably recur for years into the future. It will contribute significantly to client portfolios over the long term – as well as hopefully enhancing our health and longevity.
Speak to one of our experts
If you would like to speak to one of our experts about investing in technology – whether FAANGs or CRAABs, and lots of other interesting investment ideas, please get in touch.
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Interested and want to read more?
- Technology investments in 2021
- Interest rates: the hunt for investment income
- Politically motivated – how politics and investments work together
- How COVID-19 is impacting the world of investment.
- Investing in technology in 2020
- Tomorrow's world – six key investment trends after COVID-19
- Bitcoin – valid investment or criminally insane?
- Investing in artificial intelligence companies
- The expert view on healthcare investments in a new age
Investment involves risk. The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested. Past performance is not a reliable indicator of future performance.
The information provided is not to be treated as specific advice. It has no regard for the specific investment objectives, financial situation or needs of any specific person or entity.
The information contained herein is based on materials and sources that we believe to be reliable, however, Canaccord Genuity Wealth Management makes no representation or warranty, either expressed or implied, in relation to the accuracy, completeness or reliability of the information contained herein. All opinions and estimates included in this document are subject to change without notice and Canaccord Genuity Wealth Management is under no obligation to update the information contained herein.
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IMPORTANT: Investment involves risk. The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested. Past performance is not a reliable indicator of future performance.