Today, let’s reach out to the fringes of the market…to the untested, novel ideas that may shape our future.
We’ll dive into several of New Zealand’s emerging markets — including cannabis, artificial intelligence, space travel, and blockchain — and we’ll evaluate whether or not they represent a buying opportunity.
And as investors, some of the best opportunities you’ll ever see are small companies in emerging trends.
Sure, you can make a buck or two off the movements of established, large-cap companies…but the return potential is far smaller. Think two-digit returns…whereas emerging businesses have recorded returns of three, four or even five digits.
Every day new trends emerge…and the savvy investor seeks to uncover them before the mainstream picks up on it.
Let’s check out four trends that could explode in the near future…
Cannabis
If you’re a long-time reader of Money Morning New Zealand, you’ll know that we’ve kept an eager eye on the budding NZ cannabis market. Why?
Because we’ve seen it mint millionaires as legalisation gives way to the brand-new industry. Canada and the US have experienced tremendous growth recently.
And in terms of a timeline, New Zealand is following their path by only a couple of years.
We believe that early investors in this cash crop could end up sitting pretty, but we’re not there yet.
At the moment, only a few players have begun making preparations for a potential legalisation in 2020.
- Helius Therapeutics
- Zeacann
- Cannasouth
- Hikurangi
…to name a few. But it hasn’t been all fun and games.
Tauranga-based Medicann recently fell into liquidation…leaving investors wondering if they’d get their money back. Even before the starting gun fires, this contender bit the dust.
At the same time, deep-pocketed Helius Therapeutics recently issued a survey that found over 80% of Kiwis support legalisation of medicinal cannabis. Even if you take that with a grain of salt (since it was a cannabis company that issued the survey after all), the sentiment towards legalisation looks optimistic…
For investors, this is a good time to study up on the industry, find out what worked in North America and what didn’t, and begin sorting out the best potential investments for when these companies start listing on the NZX.
Artificial Intelligence
The artificial intelligence (AI) space is quite undeveloped in New Zealand, especially compared to the tech mecca (tecca?) of Silicon Valley. But even so, we’re starting to see some interesting projects come out of Wellington and Auckland.
One such project is FaceMe, an AI software that incorporates a digital rendering of a real person’s face.
The technology fits a gap in the customer service realm which allows customers to work with a high-tech ‘digital human’ in a personal and realistic manner, available 24/7.
Basically, it’s the beginning of the future of customer service.
And investors have picked up on that. FaceMe’s initial capital-raising round generated over US$10 million in funds from angel investors.
You can bet we’ll be watching their story closely…
Another example is JRNY, an AI company that focuses on turning leads into buyers through a digital conversational AI tool. At the moment, they’re mainly targeting the insurance sector for their product, but it’s not hard to picture how an AI sales resource would be valuable across most markets.
And one company that’s merging the cannabis field and AI is Autogrow. Founded in Auckland and now expanding to California, the company is working on an AI-powered farmer’s assistant. This technology will use a host of sensors to measure critical data on plants being grown…and can interact with a grower to inform him of what’s going on with the plants. A truly exciting concept…
And lastly, Arria NLG is an AI-powered data processor. The company offers a unique technology that can turn raw data into language — ‘natural language generation’ they call it. Arria has been toying with the idea of listing on the NZX for some months now…and was even scheduled to do an IPO before Christmas…but compliance complications have set them back. We expect to hear an actionable update this quarter. [openx slug=inpost]
Space travel
Elon Musk’s not the only one with lofty goals of taming the final frontier. NZ-founded and US-based, Rocket Lab is making great strides. For now, Rocket Lab CEO Peter Beck has his eyes set on commercial purposes such as launching small satellites for a fee.
The company has raised nearly half a billion dollars in capital over recent years, attracting investment from folks like The Warehouse founder Sir Stephen Tindall.
Their goal is to have regular dedicated satellite deliveries each week, almost like a supply train into space.
Not far behind Rocket Lab is Kiwi/Dutch start-up Dawn Aerospace. These guys are developing ‘spaceplanes’, which are reusable rockets for satellite delivery. And they are planning to launch their first rocket this July.
What makes them unique is their determined focus on making each element of the rocket reusable —even reusable for multiple flights in one day.
At the moment, this sort of high-traffic highway to the sky seems like sci-fi, but it’s not hard to see how this industry could explode. As the high-tech modern world becomes even more interconnected, satellites become an obvious tool-of-choice. It’s great to see Kiwi companies establishing themselves in this emerging market.
Blockchain
With the brief bitcoin bubble of 2017 far in our rearview mirror, we can begin to refocus our attention on the promising technology behind it — blockchain.
We’ve covered it for a while…and have remained optimistic while the mainstream media stomped on it for the past year. Frankly, we think too many talking heads confused it with bitcoin…thinking that the death of one would surely mean the death of both.
But that’s not the case…at least, it doesn’t appear to be the case yet.
A few of the start-ups we track in this space include:
- Blockchain platform NEM, which focuses on business applications like payments, equities and escrow management.
- Charitable payment system Choice, which reduces transaction fees for retailers while also donating some of the savings to your charity of choice.
- Distributed supercomputing platform Tatau, which helps AI and machine learning technologies harness the computing power of idle machines around the world.
And I’ve heard from innovation leaders for big players like PwC, who are clearly interested in applying these nascent technologies in their large businesses. For those ‘true believers’ still left, blockchain technology is only getting started…
2019 is going to be a big year
For us at Money Morning, we’re incredibly excited to see what this year brings for innovative ideas…mainly to see how we can profit from them.
We’re big believers in frontier investing and being at the forefront of spotting new trends on the horizon and profiting from them.
Investing early in trends like these can pay off BIG TIME down the road. Imagine if you’d picked up a few shares of Amazon…or Microsoft…or Xero…before they took off. You’d be doing pretty darn good. Your kids and grandkids too.
Looking forward and unearthing new opportunities is perhaps the best way to develop a profitable portfolio…and is what we focus on here at Money Morning.
Stay tuned for more updates…
Best,
Taylor Kee
Editor, Money Morning New Zealand