BofA Securities recently published a series of reports on the economic and market effects of Generation Z, the cohort born between 1996 and 2016, providing a number of promising investment themes and some truly surprising data points.
Working life is set to begin for those born in the early years of Gen Z, so BofA’s survey of 15,000 people sought to gain insight into changing consumption habits. Gen Z will account for an estimated 27 per cent of global income, or US$33-trillion, by 2030, out-earning Millennials the following year.
The survey results highlighted a demographic group almost constantly online, spending more than 10 hours per day on their phones. Arguably, the best investment opportunity that arises from this are stocks with exposure to online payments – Gen Z prefers to pay by phone over every other method, with credit cards a distant third place.
Only half of U.S. teens have a driver’s license – a definite cause for concern for automakers – and less than 50 per cent consume alcohol and more than half restrict meat intake in some way.
Media consumption appears to be the sector where the most change is set to occur. Only 25 per cent of Gen Z watch broadcast television ever, compared with 45 per cent for Millennials. Only a quarter of Gen Z watch traditional sports, and that makes the future of broadcast TV even more dire.
More than half of Gen Z reported playing three hours or more of video games per week, and followed eSports. They prefer user generated video content services like TikTok over professional productions available on Netflix and Amazon Prime.
The research report listed a number of stocks set to benefit from all of these trends. Ubisoft Entertainment SA for video gaming and eSports, Ascential PLC for online payments, are two examples.
I used to roll my eyes at these generational change research reports, but I don’t anymore. Yes, the changes take place over long time periods and often the investment ideas aren’t immediately actionable. The analysts can get it wrong, choosing to emphasize the wrong trends. In hindsight, however, the major economic trends predicted as Millennials entered the work force were the rise of social media and streaming content, and as investments, those trends worked out extremely well.
— Scott Barlow, Globe and Mail market strategist
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Stocks to ponder
BRP Inc. (DOO-T) Just last month, the stock was trading at a record higher. However, since Pfizer Inc. released positive clinical trial data for its coronavirus vaccine on Nov. 9, BRP’s share price has tumbled 16 per cent. The recent pullback reflects concerns by investors that once there is a coronavirus vaccine, the heightened demand for BRP’s products will drop off as demand was pulled forward. But the stock is now oversold and pullbacks in the share price may represent buying opportunities, according to our equities analyst Jennifer Dowty, who provides this profile of the company. (for subscribers)
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What’s up in the days ahead
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