Articles

The Next Big Theme: October 2019

Oct 9, 2019

Cannabis

GW Pharmaceuticals gets another green light

UK-based GW Pharmaceuticals’ cannabis-derived drug, Epidyolex, received approval from the European Commission. The drug treats seizures associated with two rare forms of childhood epilepsy, Lennox‑Gastaut syndrome (LGS) and Dravet syndrome.1 Epidyolex contains a highly purified, plant-derived cannabidiol (CBD), which is a cannabinoid that lacks the “high” induced by delta-9-tetrahydrocannabinol (THC). In 2018, Epidyolex became the first cannabis-derived drug approved by the U.S. Food and Drug Administration. Another GW Pharmaceuticals drug, Sativex, treats spasticity in patients with multiple sclerosis. It contains the principal CBD and THC in a 1:1 ratio. The company began marketing the drug as a prescription-only medicine abroad in 2010.

Robotics

Industrial robots scoff at cyclical weakness

The industrial robotics market grew a healthy 6% year-over-year in 2018, according to the International Federation of Robotics’ (IFR) annual report.2 The 422,000 industrial robots sold came despite cyclical weakness in historically important end-markets for the robotics industry, including automotive and consumer electronics.3 Above-average growth from the U.S., Germany and Japan helped propel sales.4 New to the IFR’s report were data on collaborative robots, or cobots. The14,000 units sold, or 3% of total industrial installations, suggest that this nascent vertical could grow significantly faster than the overall industry.5 Cobots can now handle even fresh food items with care; their soft grippers benefit from improved dexterity and better end-of-arm-tooling. Service robots for professional use in industries ranging from logistics to medical and defense, rose by 61% to more than 271,000 units.6

Cloud Computing

Investor appetite for SaaS high

On September 19th, Datadog became the fourth Software-as-a-Service (SaaS) company to IPO this year and reach a $10 billion market cap.7 The stock of this leading cloud-scale monitoring provider closed its first trading day up 39%. Largely insulated from trade tensions thus far, SaaS companies continue to achieve high top-line revenue growth in an economic environment where growth is increasingly scarce. Many cloud companies boast high net dollar revenue retention rates, a metric that is now a key performance indicator (KPI) in the broader “as-a-service” industry as analysts place a premium on recurring cash flows. For Datadog, the rate stood at 146% for the first half of the year.8 Calculated as the beginning of period revenue of a cohort of customers + upgrades – downgrades – churn, divided by beginning of period revenue, this metric reflects how attractive and sticky business models tend to be in SaaS.

Internet of Things

When IoT Flies

Airbus became the first aircraft manufacturer to flight-test cabins enhanced by Internet of Things (IoT) innovations.9 After graduating from the concept phase earlier this year, the Airbus Connected Experience now offers airlines the ability to monitor and send large amounts of data to central analytical algorithms enabling significant value-added services for passengers, airlines and crews. For passengers, the goal is to create more personalized flight experiences, such as pre-ordering food and drink options remotely and booking private bin spaces, among other tailored options. Of course, this will also allow airlines to increase monetization opportunities.

Artificial Intelligence

Using AI to Hand Out Big Macs

McDonald’s signaled a commitment to enhance customer ordering at the drive-thru with its acquisition of Apprente. A two-year-old startup, Apprente uses machine learning to deliver human-level, conversational ordering in multiple languages and accents. Drive-thrus at fast-food restaurants like McDonald’s can be great use-case for artificial intelligence (AI) technologies, which could streamline everything from taking orders to making recommendations and processing payments. McDonald’s announced that Apprente will also be the founding member of McD Tech Labs, an integrated group within McDonald’s global technology division.10

New AI neural network detects heart failure from a single beat

Researchers from the Universities of Surrey, Warwick and Florence developed a new AI technology able to detect congestive heart failure (CHF) with 100% accuracy.11 And they did so using just one raw electrocardiogram (ECG) heartbeat.12 The researchers used Convolutional Neural Networks (CNN), a deep learning algorithm that takes in an input image and differentiates it from another. Large, publicly available ECG datasets featuring people with CHF and healthy hearts were critical to breakthrough.13 With high patient mortality rates for advanced CHF cases, early and accurate detection can be the difference between a life-threatening event and early and efficient diagnosis.

Amazon’s Alexa learns to crowdsource  

Amazon’s new Alexa Answers program will allow users to discover questions Alexa doesn’t have an answer for and submit the answers.14 Contributors will earn points every time Alexa shares the answer. Points will be tallied on a public leaderboard and contributors will be able to receive feedback from each other. Algorithms are expected to police the answers and offer editorial oversight. However, feedback from other users—especially those who receive the answers—will be key for Alexa to determine if the answer is accurate and appropriate. As AI development hinges on building up datasets, this is a new way for Amazon to capture more data and engage its customers.

THE NUMBERS

The following charts examine returns and sales growth expectations by theme, based on their corresponding ETFs.

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To learn more about the disruptive themes changing our world, read the latest research from Global X, including:

Investing involves risk, including the possible loss of principal. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Narrowly focused investments may be subject to higher volatility. There are additional risks associated with investing in lithium and the lithium mining industry.

Investments in infrastructure-related companies have greater exposure to the potential adverse economic, regulatory, political and other changes affecting such entities. Investment in infrastructure-related companies are subject to various risks including governmental regulations, high interest costs associated with capital construction programs, costs associated with compliance and changes in environmental regulation, economic slowdown and excess capacity, competition from other providers of services and other factors.

SOCL invests in securities of companies engaged in the social media industry. The risks related to investing in such companies include disruption in service caused by hardware or software failure; interruptions or delays in service by third-parties; security breaches involving certain private, sensitive, proprietary and confidential information managed and transmitted by social media companies; and privacy concerns and laws, evolving Internet regulation and other foreign or domestic regulations that may limit or otherwise affect the operations of such companies. The business models employed by the companies in the social media industry may not prove to be successful.

Cannabis companies are subject to various laws and regulations that may differ at the state/local, federal and international level. 

FINX, SNSR, BOTZ and MILN invest in securities of companies engaged in Information Technology which can be affected by rapid product obsolescence, and intense industry competition. LNGR invests in securities of companies engaged in Healthcare, Pharmaceutical, Biotechnology and Medical Device sectors. These sectors can be affected by government regulations, expiring patents, rapid product obsolescence, and intense industry competition.

The investable universe of companies in which FINX, SNSR, BOTZ, BFIT, MILN, LNGR, and POTX may invest may be limited. LIT, FINX, SNSR, BOTZ, BFIT, MILN, LNGR, PAVE, SOCL, and POTX are non-diversified.

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