
Two Sectors That Could Define the Next Decade
What are the top secular trends in the world today? Michael Hughes, Client Portfolio Manager for the BMO Concentrated Global Equity Fund (CGE) and BMO Concentrated Global Balanced Fund, explores the value of data-rich companies amid the artificial intelligence boom, the innovations revolutionizing the Health Care sector, and their vast potential.
April 2024

Michael Hughes
Senior Vice President & Client Portfolio Manager - GuardCap Asset Management Limited
Read bioLooking Through the Quality Lens
There is no one definition of Quality; however, there are a few traditional parameters that most can agree on, like low leverage and high returns on invested capital. We also look for additional criteria, like diversification, strong cash generation, and secular growth in the industry. It’s about ensuring a company isn’t too reliant on one product, customer, or geographical market and can perform well through a difficult period.
Rather than identifying characteristics that will propel a company upwards when all is well, we look for the things that can protect against the downside. For instance, a company in an industry that keeps growing will likely hold up despite economic uncertainty. These are the Quality traits behind the potential for long-term sustainable growth and downside protection.
Some of the top secular trends to watch in 2024 lie within artificial intelligence (AI) and Health Care. These themes are set to drive growth opportunities and define industries over the next decade.
Beyond the Boom: AI and Digitization
Digitization, or converting information and content into a digital format, has been the mega-trend of the last few years—and we expect it to continue, as it affects our everyday lives. Think about the digitization of payments or advertising, for example. People are using less cash, and ads cover more real estate online than ever before. Of course, digitization is, to some extent, being superseded by the advent of the AI era. Markets have responded strongly to particular companies’ stock prices based on the idea that AI will be a much more important part of how we live. The problem, however, is that AI as a whole is a more immature trend—one that is still quite unpredictable over the long term—and it’s not yet clear who will emerge as the winners and losers from the transition to AI in business.
For the time being, the market suggests that the producers of AI infrastructure (e.g., processors, data infrastructure and storage, and leading Open Source AI providers) will come out on top. It’s a “picks and shovels” argument—at the beginning of the Gold Rush, it was uncertain you would find gold, but you would be sure to make money if you opened a hardware store near where the gold was to be found. Hence the strong outperformance among the “Magnificent Seven,” a group of high-profile technology companies—although there are already doubts around one or two of those.
“It’s not yet clear who will emerge as the winners and losers from the transition to AI.”
However, two crucial elements are required for AI to work. The first is processing power, underscoring the significance of companies like Nvidia. The second, and equally vital, is data. Suppose a company has a data advantage over others in its sector. In that case, its ability to invest in AI capabilities will likely enable it to achieve efficiencies and cost savings and to provide more value-added services than its competitors. It is our expectation that this lens will be the key to long-term stock selection and success in the future. We’re not necessarily looking for capital-rich or asset-rich companies but for data-rich ones.
Alphabet, Google’s parent company and one of the top holdings in the BMO Concentrated Global Equity Fund (as of March 30, 2024), is a technology conglomerate that produces software for data collection and spans more than the search industry with ventures in robotics and even life sciences.
A Changing World
In Health Care, on the other hand, there are a couple of fascinating secular trends to watch, including demographics. In China, the second-largest population in the world is beginning to age. Many countries are facing similar challenges, albeit on a smaller scale. To put it into perspective: one-in-six people in the world will be aged 60 years or over by the year 2030, according to the World Health Organization (WHO).1 For the Health Care sector, this means expanded levels of demand as people get older and, as unfortunately tends to happen, get sicker.
Another trend that has been hitting the news in a big way is the creation of a new class of drugs (glucagon-like-peptide-1, or GLP-1), some applications of which are designed to help people lose weight. This could potentially impact a large segment of the population, as a WHO study found that over one billion people worldwide are obese.2 Managing excess weight could potentially help head off many illnesses affecting longevity, including heart disease, for example. Pharmaceutical companies have come up with compounds that essentially make you feel full, making it easier to lose weight. Some believe that this trend could even be of such great importance that it could impact the prices of some foodstuffs. While we wouldn’t expect it to cause a sudden drop in demand for food, it could cause food companies to slightly adjust what they produce in the future.
Novo Nordisk, another fixture in the portfolio, has a 100-year-plus history of innovation in medicine. It first commercialized the production of insulin in 1923, forever transforming the treatment of diabetes.3 Today, the company continues to pioneer solutions, like Ozempic (a GLP-1 medicine), to improve the quality of life for those managing chronic diseases all over the world.
How the AI Era is Reshaping Health Care
The above themes are far from mutually exclusive. In recent years, there have been increasing discussions about and use of AI in Health Care, with a need for productivity fuelling its case. On the one hand, an increasing number of people are getting older and need health care. On the other hand, there is a diminishing number of younger people or those with qualifications to care for them. This is proving to be a particularly challenging issue in so-called “emerging market” countries where experienced health care practitioners tend to get recruited into higher paying jobs in more developed economies. Part of this shortfall, however, could be rectified with the use of AI, which holds a lot of promise for the overall future of health care.
The possibilities are abundant in areas such as diagnostics and imaging, where AI-supported screening is already improving detection rates for the presence of cancer in mammography4 and other medical tests read with the naked eye. There is also the potential for robotic surgery done locally or remotely, enabling a surgeon to operate on a patient even if they are not in the same operating room. Imagine the efficiencies of monitoring patients with less intensive human inputs—potentially improving preventative care or even responses to epidemics. AI has the power to reshape the future of the Health Care sector to support better outcomes—and in some ways, it already is.
One company we hold is Accenture, a multinational professional services company, which is, among other things, finding ways to improve the quality of health care using technology. From increasing patient engagement to stabilizing the workforce, it’s using data-driven insights to optimize operations and build resilience.
1(2022, October 12). Ageing and health. World Health Organization.
2(2024, March 1). Obesity and overweight. World Health Organization.
3(2024). About Us - The shoulders we stand on. Novo Nordisk.
4(2023, August 2). AI-Supported Mammogram Reading Detects 20% More Cancers. BreastCancer.Org.
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This article was published on Friday, April 26, 2024.