Ever hear of space congestion, bots or liquid biopsy?
The phrases are a part of a group of 21 investment buzzwords identified by Goldman Sachs in its third annual buzzword edition, which identified new or emerging words and phrases that "meet the criteria of being thematically important with investment implications, good and bad," the June 16 report said.
Here is a breakdown of what each means as well as any U.S publicly traded companies highlighted in the report likely to benefit (and a few companies at risk) from each trend.
How many of these buzzwords are you familiar with?
Affected Sector: Aerospace and Defense
Space is getting crowded.
"Congestion in space is the result of more than 50 years of launches, operations, and accidents," Goldman analyst Noah Poponak wrote. "When satellites are destroyed, they litter certain orbital pathways with shrapnel that can spread and destroy other satellites, creating an exponential risk effect. Major space powers like Russia, China, and the United States have conducted antisatellite weapons tests that have created large fields of debris."
The more crowded space becomes, the more that current operational satellites will have to maneuver around this debris, "shortening their life expectations and possibly shutting the door to breakthrough new space applications," he wrote.
This leads to opportunity for aerospace and defense companies to build technologies to identify more (likely smaller) space objects as well as developing safe operational practices.
Lockheed Martin is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Cramer and Action Alerts Plus Research Director Jack Mohr wrote in a recent weekly roundup:
Although the company is well-positioned to experience an earnings inflection in 2017, we can't help but recognize that the back half of this year should prove messy as LMT finalizes the integration of the Sikorsky helicopter business it bought from United Technologies UTX. From a macro view, however, we trust management will find ways to create value amid a low-rate, low-growth and unpredictable backdrop. It has a remarkable history of returning capital via consistent dividend increases (the stock yields 2.7%) and large share repurchases.
Affected Sector: Consumer
Consumers have too much stuff.
"There have always been shifts between categories of goods, but the idea that consumers in DM (developed markets) countries may have reached peak ownership en masse of multiple physical goods is a big change from the consumption driven growth of the past 50 years," Goldman analyst Huge Scott-Gall wrote.
Instead of making purchases on cars, expensive clothes or luxury accessories, consumers are preferring to spend their money on experiences.
"As more and more physical goods become abundant in their pricing or availability, their attraction diminishes relative to experiences which are more scare," the note said.
Companies to benefit: cruise lines, theme parks, travel and live events
Companies at risk: traditional consumer retailers and auto makers
Affected Sector: Technology
Bots hit the mainstream in 2016 helped by public comments in March from Microsoft (MSFT) CEO Satya Nadella saying "bots are the new apps." In April, Facebook (FB) opened its Facebook Messenger to third-party bot development, according to Goldman Sachs.
According to recode, a bot, or chatbot, is "software that is designed to automate the kinds of tasks you would usually do on your own, like making a dinner reservation, adding an appointment to your calendar or fetching and displaying information."
Chatbots simulate conversation. Goldman says interest and innovation in artificial intelligence and an increasing use by messaging platforms has led to the rise in bots.
Facebook is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Cramer and Action Alerts Plus Research Director Jack Mohr wrote in a recent weekly roundup:
While we respect Snapchat's incredible growth and captivation of millennials in today's marketplace, they are not at the level of Facebook, which has more than 1.6 billion monthly active users along with three more subsidiary apps totaling to more than 2 billion monthly active users. Snapchat is still below the 150 million DAU (daily active users) mark, which, although impressive, is still far from Facebook's dominance. Even more impressive, it was reported this week that Facebook has upward of 43 billion connections between users and businesses, illustrating the massive reach of the platform. Facebook's business remains strong and we remain confident in the long term.
Affected Sector: Consumer
Athleisure is the cross between sportswear and fashion.
"Athleisure -- a portmanteau of the words athletic and leisure -- is a sub-category of men's and women's apparel where the aesthetic of fashion apparel and the functionality, fit, and technical fabrication of workout clothes meet," Goldman Sachs analyst Lindsay Drucker Mann wrote. "More generally, it is a multi-year fashion trend started in the U.S. in which: (1) performance-oriented clothing and technical fabrics are increasingly worn outside of the gym, and (2) workout attire is increasingly infused with elevated fashion style."
The phenomenon has expanded to include other consumer categories besides apparel, including accessories and footwear, such as leggings, casual sneakers and fitness trackers.
Affected Sector: Industrial
Mobility is the next "big thing" for robotics, even if the trend is still "nascent," said Goldman Sachs analyst Daniela Costa.
A mobot is a mobile robot, or one that is capable of changing positions autonomously. "In most cases, these can be seen as a combination of a collaborative robot (given the required sensing capabilities to work/walk safely alongside humans) and an automated guided vehicle or other means of movement (e.g., robotic legs)," Costa wrote.
Companies are generating more interest in mobots as a way to save on labor costs (particularly as technology costs fall) as well as increasing customization in products, which is driving the need for more flexible manufacturing systems, Costa added.
Industries that are taking an interest in mobots include manufacturing, the military, services, logistics and hospitals.
Alphabet is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Cramer and Action Alerts Plus Research Director Jack Mohr wrote in a recent weekly roundup:
We appreciate the company's increased transparency around business-level profitability and view it as a positive step to better understanding core Google profitability and the company's remarkable cash flow generation. We reiterate our $900 long-term price target but acknowledge that weak sentiment around the sustainability of Google's search dominance may weigh on shares in the near term.
Affected Sector: Mining/Materials
"Yield-to-worst" is a term used when evaluating bonds or credit pressures of a company.
"Yield-to-worst (YTW) is the lowest potential yield that can be received on a bond without any default from the issuer -- essentially the lower of the yield-to-maturity or the yield-to-call if the bond has pre-payment provisions," Goldman analyst Chris Jost wrote.
"Although balance sheets dropped from the front of investors' minds during the 1Q rally, the industry is still highly levered," he later wrote. "We expect key industrial metal prices to drop to cost support levels in 2H at which point leverage will likely become a theme once again. We believe YTW is a tool which should be brought from the back of the shed and dusted off to stay ahead of this trend."
Affected Sector: Technology/Electronics
The term OLED stands for organic light emitting diode, first developed by Kodak back in 1987.
Common electronics such as TVs, smartphones and tablets largely use light emitting diodes, or LEDs, today, and OLEDs are still in an early-adoption period, noted Goldman analyst Brian Lee.
"The fundamental difference between the two technologies is OLED materials emit light pixel by pixel and employ organic materials versus LCD displays that use inorganic materials in LED backlights to illuminate pixels," he wrote.
OLED technology is superior to LED technology, according to Lee. It has better color contrast, faster response times and the ability to produce flexible and/or transparent products, among other benefits. And as costs to produce the technology continue to fall, there are opportunities for OLED to "cannibalize" several electronics categories.
Apple is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Cramer and Action Alerts Plus Research Director Jack Mohr wrote in a recent weekly roundup:
Bottom line: Apple is hardly devoid of risks, yet the stock price more than reflects this with shares trading under 10x forward earnings per share against the backdrop of a high return on equity, rock-solid balance sheet, a mix shift toward its high-growth, highly recurring and high-margin Services business, and myriad of catalysts in the back half of the year and beyond, the most prominent being the iPhone 7 launch in September. Although the path to value creation inevitably will take time, we continue to view Apple as a stock that should be owned, not traded.
Affected Sector: Manufacturing/Industrial
Machine vision refers to imaging-based automatic inspection and is becoming an important part of the manufacturing process in many industries, including food and beverage, auto and pharmaceutical, among others.
"Applications range from complementing manual inspection (e.g. ensuring product quality on a factory line) to process control (e.g. reading bar codes to ensure parts are in the right area) to industrial robot guidance (e.g. helping to determine the orientation/position of a robot)," Goldman analyst Joe Ritchie wrote. "As a result, machine vision can help detect defects, produce items at higher speeds, and reduce cost."
Affected Sector: Technology, Telecom
The next generation in wireless technology is 5G, which will advance exiting 4G/LTE technology. While exact standards and specifications are still two to three years away, the technology will be far superior on three aspects, wrote Goldman analyst Simona Jankowski.
"5G should provide 100x faster wireless with typical 5G speeds of 1Gbps compared to typical 4G speed of 10Mbps. 5G targets latency as low as 1 millisecond, which is 50x lower than that of a 4G network. Finally, from a scalability perspective, 5G architecture should be able to support 100x more devices," the analyst wrote. "Driven by these improvements, we expect 5G to be a key enabler of Internet of Things (IoT), much like 4G was a key enabler of mainstream smartphone adoption."
Companies to benefit: Verizon (VZ) , Sprint (S) , AT&T T, T-Mobile (TMUS) , Qualcomm (QCOM) , Cisco (CSCO) , Broadcom (AVGO) , Murata (MRAAY) , Intel (INTC) , Crown Castle (CCI) , Zayo (ZAYO) , China Mobile (CHL)
Cisco is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Cramer and Action Alerts Plus Research Director Jack Mohr wrote in a recent weekly roundup:
This week, CSCO announced a new Tetration Analytics Platform, which essentially will serve as a big data platform for data centers. The product should enhance CSCO's security offerings by helping customers gain complete visibility across everything in the data center in real time and providing the ability to act. CSCO noted in its impressive presentation that security starts with visibility, as it provides the ability to seamlessly identify and contain threats that break through cracks in the network. While it is too early to tell, the platform promises to be a key contributor over the long term and continues CSCO's divergence from what people believe is an old-tech company. Its innovation remains impressive and we believe it is undervalued.
Affected Sector: Utilities/Energy
Net metering is the state-by-state policy on how to compensate U.S. rooftop solar owners for excess power. The issue is in flux after an "eventful" six months, according to Goldman analysts Brian Lee and Michael Lapides.
Solar energy represents just 1% of the overall energy generation in the U.S., but the 30% year-over-year growth of distributed solar in the past few years has gotten the attention of regulators -- specifically "how to fairly compensate solar customers for excess power sold back to the grid," the analysts wrote.
Currently 44 states and the District of Columbia have policies related to net metering, where customers only have to pay for the electricity used. However, earlier this year, the issue was "thrust into the spotlight after different state utility commissions came to contrasting decisions," the note said.
California "left net metering intact until 2018, after a two-year comprehensive proceeding, while (Nevada) instituted a gradual change to lower reimbursement rate and higher fixed fees that wipe out the economics of switching to solar -for not only new solar customers, but also existing solar customers. The decision in NV surprised industry participants and drove negative sentiment, despite CA's greater importance," the note said.
Following the negative press surrounding the Nevada news, "feedback suggests investors are reluctant to step into the stocks with an uncertain playing field ahead of them," the note said. "Furthermore, recent negative developments in the debate in AZ and CO have outweighed the positive developments in MA/NY, where a compromise has been reached/proposed between the utilities and solar advocates."
Affected Sector: Technology/Electronics
The eSports trend is heating up.
"Remember your last time at a stadium watching your favourite football team or tennis act playing against their rival? Now imagine that, instead of football players, you are watching video gamers competing against each other," Goldman European analysts led by Lisa Yang wrote. "That is what eSports is about, organised, competitive computer gaming turned into a mainstream spectator event (online or at an arena) and becoming a big business. You'll find professional/amateur gamers playing for teams, competing in regional/national/ international leagues, with a number of events and tournaments organised around the world which can gather millions of dedicated fans."
Alphabet is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Cramer and Jack Mohr, Action Alerts Plus Research Director said in a recent weekly roundup:
Shares traded lower this week on little material news. Earlier this week Google released research showing YouTube's strength relative to TV in a bid to steal ad dollars, according toBusiness Insider. The latest study concludes that YouTube reaches more 18- to 34-year-olds in the U.K. on mobile alone than any commercial TV channel (according to comScore data). In addition, an online survey of 16-to 34-year-olds in the U.K. showed that 41% of those surveyed would pick YouTube over TV, video subscription services or streaming sites. Other findings include 58% agreeing that they're more likely to find content they're passionate about on YouTube versus TV, and only 21% of respondents saying that they watch programs in the traditional linear way. We view this shift in viewing behavior among younger demographics as a positive tailwind for YouTube, and Alphabet more broadly, over time.
Affected Sector: Health Care
Liquid biopsy is a "blood-based diagnostic test that seeks genetic mutations associated with cancer," Goldman analyst Isaac Ro wrote.
As opposed to tissue biopsies, the test can be valuable for detecting cancer by being a more affordable and effective test at the genetic level since "cancer is a disease rooted in genetics and therapeutic options are increasingly focused on targeting specific genetic markers," Ro wrote.
"By giving physicians routine access to how cancer develops at the genetic level, liquid biopsy has the potential to catch disease progression much earlier and therefore yield far better patient outcomes," he wrote.
As well, over time the test could also be used in other fields such as population screening, tumor profiling, minimal residual disease testing and remission testing. Ro estimates the total addressable market for liquid biopsies to be $14 billion by 2025.
Affected Sector: Consumer
In the luxury consumer space, "See now, buy now" has become a hot trend. The term means that fashion clothes on the runway are also immediately available in stores and online vs. a six-to-nine-month wait traditionally.
The trend was started by Burberry in February at the London Fashion Week when it announced that its collection seen on the cat walk was already available in stores for customers.
"Technology has democratized fashion and luxury. Purchasing decisions are no longer made in the VIP rooms of large stores by the few, but by a growing base of aspirational middle class consumers, interacting with brands through multiple channels," Goldman European analyst Carl Hazeley wrote. "These changes in consumer behavior are catalyzing profound changes from the luxury and fashion industry, building pressure on traditional operating models to convert the 'buzz' from expensive fashion shows into sales and potentially faster fashion cycles."
Companies to benefit: luxury apparel
Affected Sector: Consumer
The huge craft movement fueled by Millennials is most commonly seen in the changing face of beer offerings, but it can also encompass other beverages including cider, soda and distilled liquor. It correlates with the farm-to-table restaurant movement, according to the note.
"Craft offerings are viewed as artisanal products typically made in small batches that often support local communities and provide an authentic experience through premium ingredients, unique flavors and higher perceived quality," Goldman analyst Judy Hong wrote.
Craft beer represented 10% of the total volume share of beer (19% of dollar share) in 2015, Hong wrote.
"Millennials, who represent the largest age cohort in the U.S., are more experimental, seek bolder flavors, and have a high propensity for things that are perceived to be more 'authentic,'" Hong added. "As such, the 'craft' phenomenon provides interesting insights into competitive dynamics within industries that are characterized by a high number of smaller, unique offerings, and has important implications for larger incumbents who need to adapt or face greater consequences."
Affected Sector: Consumer Staples
As other consumer companies, the consumer staples industry is undergoing a dramatic shift as e-commerce platforms offer a key competitive advantage that stores cannot: range.
"While the term 'infinite shelf' could be applied to many categories, we have typically applied it to those which are sold through grocery retailers, many of which are produced by consumer staples companies. For these categories, we see the move online as the most fundamental shift since the advent of the supermarket in the 1930s," Goldman European analyst Mitch Collett wrote.
But grocery categories differ widely from those that have been able to make the transition online and those that have yet to do so. Beauty, personal care and pet-related items have been the categories most able to penetrate global e-commerce.
Companies at risk: Unilever (UL)
Affected Sector: Technology
Virtual reality has put the concept of immersion or immersive storytelling front and center.
"We define immersion as the perception of being physically present in in alternative virtual or real world environment," Goldman analyst Heather Bellini and Shateel Alam wrote.
"Essentially, virtual reality can transport you to an entirely different world, from taking you courtside at an NBA game to a fantastical video game. Virtual reality can add the effects of audio, visual, and even touch to make a user feel immersed in an environment. In our view, the level of immersion is one of the key points of appeal of virtual reality," they wrote.
Emerging areas where immersion can be used include videogames, live events, journalism, video entertainment and education, they said.
Facebook is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio.
Affected Sector: Health Care/Biotech
Synthetic biology refers to the process of "engineering cells and organisms to create new function. The applications are vast and address a wide range of industries that include healthcare, food, and energy," according to Goldman analyst Isaac Ro.
Ro listed examples including creating apples that don't brown when bruised, breeding salmon that grow to maturity at double the normal growth rate and adapting yeast to produce rose oil for perfumes.
"There is a new group of emerging companies applying traditional engineering principles to cells and organisms," Ro wrote. "Designing cells for new functionality presents the opportunity to re-shape manufacturing-based business models in a variety of fields with cheaper and faster organic processes. As synthetic biology technologies mature, we believe the economic impact to healthcare, food, and energy industries is potentially significant."
Companies to benefit: Intrexon (XON)
Affected Sector: Auto Manufacturers/Auto Supplies
Moving into the world of connected cars, the term V2X refers to vehicle-to-vehicle or vehicle-to-infrastructure technology. The wireless technology allows "vehicles to communicate with other road users and roadside units placed on street lights, buildings, other pieces of infrastructure, or even on pedestrians and cyclists," Goldman analyst Patrick Archambault wrote.
The benefits of such technology are many, in both a traditional vehicle controlled by a driver as well as an autonomous vehicle. "We believe that while V2X technology could be used in a variety of instances, such as wireless toll and parking payments, the main benefit still lies in safety and enabling safer autonomous driving by essentially allowing vehicles to 'see' more than what the human eye could physically perceive," he wrote.
Affected Sector: Consumer Staples
India's yoga guru Baba Ramdev is taking his country by storm and giving big consumer multinationals such as Unilever, Nestle and Colgate a run for their money by introducing products based on Ayurveda.
"Ayurveda is a system of medicine originating in India, which has evolved for over 2,000 years. The inherent trust in Ayurveda-based remedies by the Indian consumer has allowed Patanjali to overcome the 'trust deficit' faced by new entrants. Patanjali now sells over 500 products ranging from toothpaste to consumer healthcare," Goldman Asia Pacific analysts Aditya Soman and Anita Yiu wrote.
Ramdev is the face of Patanjali Aurved Limited. While the company is not the first to launch a line of products that are Ayurveda-based, Patanjali is growing quickly, aided by lower prices (helped by the recent softness in commodity prices), loyalty to "nationalistic" products against the big multinationals and greater awareness helped by social media, the note said.
Affected Sector: Energy
Goldman China analysts Tian Liu and Jacqueline Du laid out the case for "Internet of Energy," or "IoE," as China, the world's largest energy market and the biggest investor in renewable energy, struggles to get energy to users as it grapples with outdated infrastructure.
Internet of Energy "involves upgrading, digitalizing and automating existing electricity infrastructure, leveraging both advanced hardware (such as electrical electronics, sensors, batteries) and software (such as automation and big data analytics)," they wrote.
"Put simply, China needs to invest in better hardware and software that has become much smarter than ever before," the analysts wrote, adding that there are opportunities in the country for Ultra High Voltage transmission, distribution automation, electric vehicle charging and energy storage.
No U.S. companies mentioned along with this buzzword.
Even though Swiss voters recently rejected a proposal that would introduce basic income -- a monthly stipend -- to all adults, it's still a buzzword to know, said Goldman analyst Sumana Manohar.
Basic income is supposed to be an answer for reducing inequality and making the welfare system more efficient, particularly in the face of high youth unemployment and increasing automation of labor, Manohar wrote. Critics say the income would be a disincentive to work and the plausibility of funding such a program.
"While Switzerland is the first country to hold a referendum on an unconditional basic income, it is an idea that is being considered in other parts of the world," Manohar wrote. "The Finnish government is planning a pilot project, to provide a basic income to a small community, while Utrecht in the Netherlands also experimented with it last year. It is not a new idea either; it was suggested by Thomas Paine at the end of the 18th century."
No U.S. companies mentioned along with this buzzword.