Quick Thoughts: Space and the Fourth Industrial Revolution

Stephen Dover, Head of Equities, thinks innovation transcends both space and time and headlines investing within five platforms of growth.

Stephen H. Dover, CFA

Stephen H. Dover, CFA Head of Equities

When the Apollo 13 crew helplessly floated in space 50 years ago after an oxygen tank failed, its flight plan changed from a moonwalk to an emergency Earth landing. For the crew to survive, they engineered “the mail box”1 in 35 hours from available materials: spacesuit hoses, tube socks, and duct tape.2 Need, creativity, and timing coalesced for the Apollo 13 crew to launch and later return safely to Earth. The Third Industrial Revolution lit the Space Age with innovation that emboldened space dream makers and allowed consumers to participate with the sale of space technology, such as wireless headsets, LEDs, and more.3

Innovation is meaningless if it isn’t practically replicable, available, utilizable, or comprehendible. The Space Race fostered today’s Fourth Industrial Revolution, and during COVID-19, innovation is accelerating in meaningful ways. These are five major evolving platforms of growth that we expect to generate considerable economic value over the next five to 10 years:

  • Global E-commerce is an area of tremendous opportunity. We see significant opportunity in payment companies, business-to-business (B2B) procurement, drone manufacturers, and other new ways to deliver packages and products.

  • Genetic Breakthroughs within diagnostics and therapeutics, including gene editing, gene silencing, and expansion to agricultural and artificial intelligence (AI) applications.

  • Intelligent Machines: AI is speeding time to market and enabling customization by permeating data and product development, production, and design.

  • New Finance: Three vectors driving access to capital—the concept of money, efficient pricing, and methods of exchange—are evolving, relying on data to appropriately price risk, be more efficient, and innovate during COVID-19.

  • Exponential Data: Most future growth will rely on data that is not always virtual nor clean. And data delivery, physical components, access, and storage are often ignored.

In his paper “Investing In Innovation,” Franklin Equity Group Portfolio Manager Matt Moberg details how the Fourth Industrial Revolution will affect all parts of the economy. Innovation can drive long-term wealth creation, yet it is one of the most misunderstood and mispriced areas of equity markets. This disconnect between perception and reality creates opportunities for active management.

What Are the Risks?

All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. The technology industry can be significantly affected by obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants as well as general economic conditions. Investments in fast-growing industries, including the technology and health care sectors (which have historically been volatile) could result in increased price fluctuation, especially over the short term, due to the rapid pace of product change and development and changes in government regulation of companies emphasizing scientific or technological advancement or regulatory approval for new drugs and medical instruments. Actively managed strategies could experience losses if the investment manager’s judgment about markets, interest rates or the attractiveness, relative values, liquidity or potential appreciation of particular investments made for a portfolio, proves to be incorrect. There can be no guarantee that an investment manager’s investment techniques or decisions will produce the desired results. Past performance is not an indicator or a guarantee of future results.

CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

  1. Source: NASA.gov, “Apollo 13 Lunar Module ‘Mail Box’,” March, 23, 2008.

  2. Source: Popular Science, “The Greatest Space Hack Ever,” October 8, 2014.

  3. Source: NASA Jet Propulsion Laboratory, “20 Things We Wouldn’t Have Without Space Travel.”

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