Technological advances throughout history have fundamentally changed our work and lifestyles. In recent history, we can identify periods in time when advances were large and profound enough that we think of them as industrial revolutions.
First, we had the introduction of steam power in the 18th century, followed by the adoption of electricity in the 19th century. More recently, the third revolution is commonly associated with the adoption of computers and computer programs.
That brings us to industry 4.0, as it’s known. Building on the third revolution, it involves the expansion of our automation and digitisation. With new technologies available to businesses, many are either at the forefront of innovation or are introducing new technologies to improve their processes or offer new services.
As an investor, change and innovation offer exciting opportunities. We think there’re two key areas set to thrive from new technologies and changing digital demand.
This article is not personal advice, if you’re unsure whether an investment is right for you, seek advice. All investments and any income they produce can fall as well as rise in value so you could make a loss.
Investing in individual companies isn’t right for everyone – it’s higher risk as your investment is dependent on the fate of that company. If a company fails, you risk losing your whole investment. You should make sure you understand the companies you’re investing in, their specific risks, and make sure any shares you own are held as part of a diversified portfolio . A new world for healthcare
Rising expectations around the globe for effective, cheap and easy to use healthcare systems mean the industry is constantly under pressure to adapt and improve. Technology and innovation are changing the way we engage with our health and expanding the range of treatments on offer.
Smith & Nephew is a medical device maker operating across Orthopaedics, Sports Medicine and Wound Management. Innovation is at the heart of the business’ strategy. It’s spent $171m in the first half of 2021 to deliver new technologies and products to healthcare professionals.
The group already offers a range of robotic assisted surgery tools for knee and hip replacements. And it recently announced the purchase of US-based Engage Surgical, whose treatments are expected to benefit from robotic integration, provides a perfect example of merging new technology into existing processes.
For Smith & Nephew, that helps expand their operation in an area where sales lagged over the pandemic, when elective surgeries were put on hold. With treatments back on the table, there’s opportunity to not just recover but grab market share in the process – especially if the group can offer better technology than its peers.
There’s no doubt the pandemic accelerated a range of technological advancements in the healthcare industry. Gone are the days where the only way to contact your GP meant waiting on the phone from 8am and heading off to the traditional four walls of the doctor’s surgery.
Telehealth services provide virtual healthcare services to patients, from ongoing support to on-demand urgent care. The market’s been growing rapidly, expected to increase from $70.5bn in 2020 to $598.2bn in 2028.
Teladoc Health is a leading business in the arena whose total members grew off the back of the pandemic. Estimated to come in around 76.5m for 2021, an increase of 37% in the past two years. That’s provided a welcome boost to underlying cash profits, estimated to be up over eight times pre-pandemic levels for the 2021 financial year. Teleadoc total US members
Total US members, m
Source: Teladoc investor presentation – January 2022.
Now we’ve normalised, user growth will likely slow as customers regain access to in-person GPs. That’s to be expected, and it’s an area where we still expect demand to continue growing in the long term. Of course, exact demand patterns are very tough to predict as the world gets back to normal.
That makes it especially important to point out that the group’s yet to turn a bottom-line profit. This adds a layer of risk. While we understand the long-term investment case, investors would need to be prepared for the ups and downs that come with investing in a pre-profit company. That also makes the group harder to value, but looking on a price/sales basis, it’s some way below its longer-term average.
Ultimately, investors should be paying attention to healthcare as a technology option. We expect the healthcare sector at large to be a benefactor of industry 4.0, as new technologies pave the way for novel treatments and new ways of accessing healthcare. Into the clouds
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