Disruptions Are Opportunities
In our previous article “Disruptions on the Horizon – Canada’s Top 10 Concerns For The Near Future” we discussed in detail the top 10 disruptions that could destabilize Canadian (and Western) society, due to their high likelihood and the severity of the associated risks.
Source: Policy Horizon Canada
We then commented on some technologies most likely to help solve or at least manage these disruptions.
This also means that what is a risk for society will be a business opportunity for the right company holding the right technologies & innovations at the right time.
This is doubly important for investors, as they must thrive to protect their portfolios from disruptions and position themselves to benefit from growth and innovation.
Top 5 Stocks Thriving From Disruptions
The list is far from exhaustive and tries to represent a wide array of technologies to deal with upcoming disruptions. The selected technologies to create that list were:
- Renewables and green fuels.
- EV and utility-scale batteries.
- 4th generation nuclear power.
- Advanced biotechnology.
- AI.
1. Aker Horizons ASA (AKH.OL)
Aker Horizons is a subsidiary of the Aker group and is centered around green energy. The Aker group is an important Norwegian conglomerate focusing on renewables and marine/offshore businesses.
Aker Horizon is the holding company for several subsidiaries, including carbon capture, green hydrogen, and renewable energies.
Source: Aker
The company is notably very active in hydrogen and green ammonia generation, with a goal to decarbonize Arctic shipping, especially in Norway.
Aker Horizons can handle the entire vertical integration of green hydrogen & ammonia, from offshore windmills to hydrogen generation to green ammonia production.
It is also working on projects like waste-to-energy in France, a biomass plant in Germany, and carbon capture in the Middle East (Saudi Arabia and UAE).
This makes it a good stock for investors looking for exposure to the green energy sector at large, with a strong positioning on green ammonia & shipping, but also other diverse green energies.
Its positioning in Europe also gives it the advantage of diversifying from North America-specific disruptions.
2. Contemporary Amperex Technology Co., Limited (300750.SZ)
Chinese CATL is by far the largest battery company in the world if judged by the volume of batteries. In 2022 it produced almost half of the world”s batteries by GWh.
It also has some of the most advanced lithium iron phosphate batteries, which might be a solution for creating cheaper and “dense enough” batteries for low-cost EVs.
CATL’s expertise in battery chemistry extends to other options as well. Notably, the impressive 160 Wh/kg Sodium-ion battery was announced in 2021. Replacing lithium with abundant and cheap sodium offers an alternative to lithium, whose price has been very volatile and high in recent years. And for applications still requiring lithium, CATL is also investing $1.4B to develop lithium production in Bolivia.
But when it comes to battery performance, CATL is at the very forefront of progress. First, it announced a 330 Wh/ kg ultra-durable “million miles” battery that charges to 80% in 5 minutes and is ready for commercialization. This battery should be used by Tesla in the future and will be the new standard for high-performance EVs.
It also recently announced a record-breaking 500 Wh/kg “condensed” battery, which would be dense enough to power long-range EVs and planes. It also claims to have found a way to make batteries handle cold weather better, but this is still a weakness of the technology and a problem for EVs in cold countries.
Leaders in EVs like Tesla and BYD, or ambitious new entries like Toyota, might look to develop their own battery technology as a unique advantage. But the rest of the auto industry, including German, American, and Japanese automakers, are looking for partners to keep up in the race for advanced batteries. This notably includes Ford, Nio, BAIC, Volvo & BMW, Honda, and Mercedes Benz.
CATL has the production volume to benefit the most from economies of scale in battery manufacturing. Its large sales volume also feeds directly into scientific expertise and a large R&D budget, allowing for more breakthroughs. By not being an automaker, it is also a better partner for most of the industry than their direct competitors like BYD and Tesla.
For now, the company has been mostly focused on EVs. It might turn toward utility-scale batteries as China’s renewable energy production grows and the technology matures.
Altogether, this makes a compelling argument for CATL to remain the world’s leader in battery production. However, the rising tensions between the US and China should not be completely forgotten, and its stock might get caught in the middle of the power struggle between the 2 largest economies in the world.
3. BWX Technologies, Inc.
Before the current setups of small modular reactors, or SMR (discussed in our article “Update on SMRs (Small Modular Reactor) – Still The Future of Nuclear Power“), nuclear reactors used to be giant buildings.
Except for a small niche market that also turned out to be very profitable: nuclear power for ships like aircraft carriers, submarines, and other military systems.
This is the focus of the American company BWXT, which has delivered 400+ reactors for naval nuclear power in its entire 60+ year history. It is also active in segments of the nuclear power supply chain, having delivered 315 steam generators for nuclear power plants.
Source: BWXT
A key part of BWXT’s income comes from regular services and maintenance to existing reactors, with a schedule planned until 2053 for various operating nuclear aircraft carriers and submarines.
The company is also the only one accredited to produce high-quality uranium at 20%+. This fuel type is needed for so-called micro-reactors, even smaller than SMRs. They can power many applications, like space systems for NASA and remote military locations. BWXT is also entering the nuclear medicine field, hoping to capture some of the sector’s $500M annual revenues.
Finally, BWXT is also working on an SMR design together with GE Energy. With GE as one of the main contenders in the nascent global SMR market, including already agreed contracts with Estonia and Canada, this creates another growth venue for BWXT.
It should combine BWXT’s expertise in compact nuclear reactors with GE Energy’s reputation, commercial reach, scale, and deep supply chain.
BWXT pioneered miniaturizing nuclear reactors and should benefit greatly from the trend of SMRs picking up. It should also benefit from the military build-up of the US Navy in reaction to increasing challenges from Russia and China.
Finally, it is profitable and has predictable revenues, offering much greater safety than speculative companies with only designs to show and no running reactors.
4. Bayer Crop Science (BAYRY)
Bayer Crop Sciences, part of Bayer Global (also a pharmaceutical company), focuses on innovations around seeds and traits and crop protection.
Bayer’s innovations have helped its biotechnology scientists make targeted plant DNA improvements.
Since its merger with Monsanto, it is also a leader in GMO crops and weed management. This merger came with the problem of very expensive RoundUp lawsuits, which caused the company’s stock to tank in the years following the merger.
It controls most of the traditional GMO seed market and is also working on using CRISPR for the next generation of seeds for corn, soybean, wheat, etc.
Crop protection benefits, according to Bayer, are enormous. The crop protection mechanism safeguards around 30 percent of agricultural yields worldwide, equivalent to 550 million tons of food that could feed more than 2 billion people.
Source: Bayer
Bayer is moving from traditional GMOs through a partnership with Gingko Bioworks (DNA), one of the largest synthetic biology companies. The partnership is focused on developing biological alternatives to chemical fertilizers via gene editing of microorganisms.
It is a leader in seed variety and gene editing in plants, with 500+ new crop varieties in its pipeline (and 250 new crop registrations in 2022).
All these initiatives will be vital in keeping up food production with global population growth, as well as managing the effect of climate change, pollution, and soil erosion on farming yields.
And high farming yields will also reduce pressure on the ecosystem, by limiting the trend of deforestation and destruction of wetlands to get more fertile land cultivated.
The company is also a leader in integrating technology into farming. For example, Bayer signed a partnership with Microsoft to combine the tech giant’s data management system Azur with Bayer’s expertise in using data from satellites, field sensors, drones, field equipment, and soil sensors to create truly modern and connected farms.
Source: Bayer
Thanks to its leadership in GMOs (traditional and advanced gene editing), plant variety selection, and integration of big data into farming, Bayer can be transformative in creating sustainable high-yield agriculture.
In the process, it cleaned up its poor public image inherited from the acquisition of Monsanto.
5. Microsoft
Microsoft is the oldest of the tech giants, with a dominant position since the 1990s. To this day, it still dominates important legacy markets like PC OS (Windows) and corporate software (Office, Outlook, etc.).
It is also a company that can keep up with new tech trends, with solid activity in cloud computing.
Which company will be the leader of the AI revolution is still very much undecided. What seems certain is that Microsoft will play a role in this industry, thanks to its relationship with OpenAI, the creator of the initial LLM (Large Language Model) sensation ChatGPT.
Microsoft does not own OpenAI but is entitled to up to 49 percent of the for-profit arm of OpenAI’s profits. Microsoft added to the OpenAI collaboration a partnership with LLM Company Mistral AI (Mistral AI was founded in April 2023 and already valued at $2B 8 months later).
Microsoft also owns GitHub, with the AI coding assistance service GitHub Copilot thriving and generating revenue at an annual rate of $100 million.
Copilot is also deployed to Office 365 and Microsoft Cloud, omnipresent in many corporate IT systems, with tailored versions for individual company divisions being released, like for example a version of Copilot dedicated to finance departments or Microsoft Sales Copilot.
Microsoft is deploying AI for fundamental sciences as well, its AI4Science program. For example, its MatterGen generative AI “enables broad property-guided materials design”. It is already used to find new battery material for example.
Source: Microsoft
Microsoft is a partner of choice for other mega-corporations to leverage AI in their business. For example, pharma and agrobusiness Bayer signed a partnership with Microsoft to combine the tech giant’s data management system Azur with Bayer’s expertise in using data from satellites, field sensors, drones, field equipment, and soil sensors to create truly modern and connecting farms.
Microsoft also signed a collaboration covering AI with many other firms at the beginning of 2024, including Vodafone, Adobe, Cocal-Cola, Siemens, Rockwell Automation, Shell, and McKinsey.
Safety First?
AI was brought up regularly in the “Disruptions on the Horizon” report as both a source of risk (public trust, cybersecurity, downward social mobility), even making it in the top 10 risks by itself (“Artificial intelligence runs wild”).
It was also mentioned as a source of opportunity to avoid disruptions (biodiversity, cybersecurity, healthcare system).
With OpenAI at the forefront of AI development, it is worth noticing that Microsoft is a key influence in bringing more safety and security to the organization, looking to avoid being associated with any negative effects of AI. For example, “Microsoft-Backed OpenAI Forms New Safety Committee as It Trains Next AI Model”.
This somewhat conservative and “old school/corporate” approach might pay off with Microsoft becoming the “responsible AI actor” in the context of concerns growing over the consequences of the AI revolution.
