Liontrust: our fund managers’ outlook for 2022 - Flipbook - Page 3
VICTORIA STEVENS, ECONOMIC ADVANTAGE TEAM
Shift to digital will loom large in 2022
Companies in most industries and sectors have been exposed to the economic frictions
that have arisen during the economic recovery from the pandemic (and the associated
lockdowns), most notably wage cost inflation and supply chain problems.
The companies in our funds have also been
affected, but we are confident that our
investment process steers us to invest in the type of company that
is most likely to withstand these issues: those with strong barriers to
competition, attractive market positions and a history of high returns.
One of the key benefits we believe durable competitive advantage
confers is that of pricing power. A company with true pricing power
can pass on some or all cost inflation rather than having to absorb
it through a reduction in profit margins, which looks set to be a key
attribute as we enter 2022.
Another key post-pandemic trend for the year ahead is likely to be an
acceleration in the digitalisation of the economy. The shift to digital
is one that affects pretty much every company in every sector, both
positively and negatively. We think this will be a tailwind to growth
for many of our smaller and micro cap companies which have
technology at the heart of their businesses.
LAURIE DON, SUSTAINABLE INVESTMENT TEAM
Gene editing and DNA sequencing are
revolutionising healthcare
Healthcare remains a huge focus as the world grapples with Covid-19 and its variants but
from a longer-term perspective, we hope the pandemic has opened people’s eyes to the
importance of getting this area right.
Our emphasis as sustainable investors is
on a cleaner and safer world but people
must be healthy enough to enjoy this. In broad terms, the key is a
more proactive stance in monitoring and preventing disease before it
occurs and we are looking for innovative companies that can enable
a step change in how particular areas of healthcare operate.
By way of context, the healthcare system will cost more because of
the ageing population and the externalities of modern life. Because
of this, we expect continuing pressure for the system to do more
with less and companies and products that fail to add value will
be weeded out.
On the positive side, science continues to move forward and our
understanding of genetics improves dramatically. We are seeing
advances across areas such as gene editing and DNA sequencing
and these are revolutionising how we think about treatment. The
traditional model has a large element of trial and error, with people
seeking help when ill and hoping whatever drug or procedure
prescribed is effective. In contrast, we are moving towards a
personalised system where we can understand how someone’s
genetic make-up makes them vulnerable to certain diseases.
Areas to watch include gene therapies – a one and done cure versus
taking pills for life – and liquid biopsy, which enables early
detection and monitoring of diseases through blood draws.
This paves the way for early diagnostics and pre-emptive
treatment, testing babies before birth and adults early and on
an ongoing basis.
We expect the price of sequencing the
genome will continue to fall, with equipment
more prevalent and testing more convenient.
Ultimately, we will see targeted vaccines: mRNA
technologies can help treat
cancer, for example, moving
healthcare beyond traditional
‘vaccinated’ areas.
Liontrust Views: Outlook for 2022 - 3