Top Investment Themes for 2022
In both 1919 and 1969, a battered world looked to depart from the similar hardships of war, social upheaval and influenzas—1918’s Spanish Flu and the less discussed Hong Kong Flu of 1968— two extraordinary and related tech achievements highlighted both the beginning of a new chapter and the positive impact turbulent periods can have on entrepreneurs, individual companies, and the economy overall throughout recovery years.
In June 1919, two daring British aviators guided a modified Vickers WW1 bomber across the Atlantic to complete the first non-stop transatlantic flight in just under 72 hours. Fifty years later, in March 1969, André Turcat piloted the supersonic Concorde’s maiden Toulouse flight which lasted only 27 minutes— barely enough time for dear André to finish his Orangina.
While perhaps romanticising these two feats, they underscore a notable dynamic.
Increased levels of innovation during difficult times create an amplified economic impact and opportunity in the ensuing years. This impact may not be entirely appreciated, most especially as it relates to today.
Innovating the Tech and the Business Model too
Furthermore, an unprecedented level of tech innovation, coupled with a maniacal focus on business model innovation/rationalisation, should deliver an amplified economic, earnings and productivity impact for years to come.
A recent McKinsey report stated three out of four executives believe changes brought about from the pandemic will be a significant growth opportunity. And all executives agreed, Dolly Parton’s “Jingle Bells” rendition was “one of the greatest holiday songs ever.” Thanks for that, McKinsey!
While more efficient business models are lovely, for publicly-traded equities, some of this is already baked in, as equity valuations are pricier than a fully-refundable Concorde ticket from CDG to Rio.
Although this double scoop of innovation provides ample opportunity broadly, there is also an avalanche of irrationality and noise, especially within the uncharted crypto and NFT worlds.
To quote universally-cherished Laura Dern in genius David Lynch’s Wild at Heart: “This whole world is wild at heart and weird on top.”
So, we try to retain a soberish Warren Buffet/Cathie Woods style view on fundamentals, tangibles and execution.
Innovation to Mitigate the Flurry of 2022 Risks
As we look to deploy capital in 2022, we think this innovation-led and justified business model framework provides a grounded and reassuring logic for navigating the uncertain days ahead.
With a Royal Flush of risk (political + market + COVID + inflationary + interest rate), we are biased to deploying capital to private companies over public equities, early-stage businesses over mature, and innovators over brands. Our favourite sectors remain healthcare and technology with an affinity for companies that include unique and agile models, strong and bold operators, and underlying proprietary tech with clearly-defined adoption paths.
Last year, after investing in and later assuming the CFO role at Los Angeles-based startup Binj, a new platform that solves the “what to watch next problem”, these themes helped frame the way we operated and communicated. In telling our story and in preparing to launch the platform, we beefed up messaging around tangible strengths—a novel TV and movie discovery tool powered by a proprietary AI engine and new emotional-driven rating language—and how we would execute on thoughtfully building a community to navigate streaming content overload.
Going sector by sector, within the below, we’ve outlined our thoughts on some disjointed topics du jour and investment areas we like.
Economic Growth and Labour Reshuffle: We expect overall economic growth will be stronger than predicted with innovation’s fruit and the most dramatic reshuffling of the job market seen in a century fuelling new activity. We’re not putting a lot of weight on 2021’s final GDP % growth number though, given 2020 was oh so weak and there is a lot of noise in the numbers. Nonetheless, 2022 growth should continue at a similar cadence.
Interest Rates & Inflation: With almost every single holiday party and central bank meeting behind us, it is clear that inflation is even more serious than we previously thought. The Fed policy pivot and The Bank of England’s more dramatic and unexpected rate increase from 0.1% to 0.25% (the first increase in over three years) underscored this.
Global Equity Markets: With valuation multiples rich, equity markets will remain choppy and range-bound, especially with higher interest rates.
Deep Tech: Some of the greatest technologies have always existed courtesy of Mother Nature and some entrepreneurs are well-positioned to harness, mimic and unleash that which has always been present. Companies such as Silicon Valley-based Koniku blend the right ingredients of healthcare, technology, and biosecurity. A Shazaam for smells, the company’s central tech elegantly takes what already works amazingly well in the natural world (a dog’s sensory apparatus) and packages it into a small device that can seamlessly detect explosives, narcotics, and COVD in real-time.
Our favourite sectors remain healthcare and technology with an affinity for companies that include unique and agile models, strong and bold operators, and underlying proprietary tech with clearly-defined adoption paths.
Africa: An emerging middle class, swift mobile adoption, and green pastures for innovation and leapfrogging, yield tailwinds. We like founders who courageously collaborate with various stakeholders (employees, partners, regulators), genuinely feel the pulse of the customer and utilise tech to magnify opportunities on the ground. In particular, Nigeria-based Lifestores Healthcare (a rapidly expanding network of tech-enabled pharmacies), and Kenya-based Koa (an innovative, community FinTech platform), are well-positioned.
Preventative Health Services: The pandemic has enabled consumers to access healthcare more broadly than ever before and raised awareness on preventive care. We think companies that are empowering users with enhanced access and new types of information such as Phosphorus (a preventive genomics testing company that enables customers to optimally map their health journey based on their DNA), and Freenome (an early-stage cancer detection platform), are ahead of the curve.
FinTech: Growth will remain hot with fewer brick and mortar banks of yesteryear, increased consumer comfort around mobile banking, and new one-stop platforms that go beyond full-service legacy bank offerings. One such innovator is Pallo (an all-in-one platform designed specifically for freelancers, which helps users manage all personal and business finances, from money management to taxes).
2022 Should Be Better
Whilst history is obviously not always the best predictor of future success (Google Glass, Apple Maps, Speed II: Cruise Control) this innovation factor is objectively real and potentially more potent than in 1919 or 1969.
While in this piece, we have pointedly omitted some dramatical forces at play that are above our predictive pay grade (China’s muscle and Russia’s flex, crypto and NFT chaos, the painful $USD demise, omicron, Kristin Stewart’s portrayal of Diana in Spencer), on the simplest level we think 2022 should be markedly better than 2021 for most things but most certainly not for air travel.
About the Author
Steven Barrow Barlow serves as the CFO of BINJ and co-runs Andon Okapi Holdings, an investment firm providing financial, operational and strategic support to founders with big ideas & unique tech. After a decade as an equity analyst on Wall Street covering the consumer and healthcare sectors, he co-founded Kallpod in 2014, a tech solutions provider for the hospitality & healthcare industries.
No Investment Advice
The content in this article is for informational purposes only and should not be construed as financial advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or offer by Steven Barrow Barlow, BINJ, Finance Monthly or any third-party service provider to buy or sell any securities or other financial instruments.