Will companies that sit atop the stock market valuation table today even be around 10 years from now? As covid-19 shapes and reshapes our lives in ways we can't yet fathom, many businesses will be upended even while those not yet incubated will become the new money-spinners.
Indeed, every major crisis over the last two decades has resulted in a new set of global leaders by market capitalization (bit.ly/3bOTg1K).
Following the 2008 financial crisis, the list of top 10 firms by market cap in 2009 was dominated by five Chinese companies with Petro China leading the charge. Evidently, the devastation of US banks and financial institutions took its toll while state-backed Chinese firms rode the phenomenal growth of the nation's economy.
By 2019, the top 10 was almost completely a tech-dominated universe with the big five American firms—Microsoft, Amazon, Apple, Alphabet and Facebook—hogging the top slots while the Chinese presence came also from its tech champions, Tencent and Alibaba.
In a world battered and traumatized by the covid-19 pandemic, how will these rankings change, and 10 years from now, what will be the composition of a similar list? The pandemic is constantly throwing up new sets of needs. Companies that can anticipate and fulfil these needs will be the ones to create wealth for their shareholders.
It isn't easy to make any predictions about the ones that will make it since we are still in the midst of the catastrophic event. But here are some safe guesses in terms of the sectors that are likely to spawn the new market leaders.
Healthcare: That's the most obvious sector which should see valuations soar as the race for a cure or a vaccine for covid-19 takes centre stage. Pharmaceutical companies like Johnson & Johnson and Pfizer have always boasted huge valuations but now companies across the sector, including those into hospitals, test labs and equipment manufacturing will be in the ascendant as the world sees first-hand the crucial role they play. While the existing giants hold sway, watch out for start-ups that come up with products to mitigate the next viral attack. Telemedicine, hitherto a relatively neglected area of healthcare, may well see the next gold rush.
Education technology: All learning, education and training in the future will be a 75:25 combination of the online and offline modes. As the pandemic-driven lockdowns get extended across the world, online education is threatening the very structure of physical education. And the very real prospect of the virus resurfacing later in the year further queers the pitch for institutions as they deliberate bringing students back to the classrooms. Already though, the green shoots of an alternative system based on remote learning using digital tools are emerging. At this point, it is too localized and fragmented to add up to much. But the first company that can develop a robust global model to scale, one that can be rapidly adopted by educational institutions much like enterprises did with SAP for their resource planning, will see its valuations swell.
Telecommunications: For most part of this century, telecommunication companies have yielded ground to upstarts from other industries that have used advances in network technologies to build new multibillion-dollar businesses. Imagine Netflix or WhatsApp without high-speed internet connectivity. But the pandemic has brought to the fore the limitations of these over-the-top (OTT) platforms without the backbone provided by telecom companies. Now think of a world in which everyone and anyone is connected to the online world. That includes the 6-month-old baby whose paediatrician examines her online. In this world, everyone works, shops, socializes, finds entertainment and even dates online. And everyone does all this simultaneously. The consequent appetite for bandwidth, speed and capacity will be unprecedented. The stage is set for telecom companies that can address this opportunity of an always online world.
Information technology: Each of the last two decades has seen a newcomer entering the top 10 ranks. In 2009, there was no Amazon in the list. Today, it is firmly embedded in the top ranks. Obversely, Cisco was top dog in 1999. By 2009, it had disappeared from the top rungs. That's the kind of churn this sector is constantly subjected to. So, no prizes for predicting that an IT company, unknown today, will be among the most valuable 10 years hence. More than personal products, it is likely to be a company that can make meaningful contributions to the community. One of the lamentable features of modelling during the course of the current pandemic has been how wildly the numbers of potential infections have differed from and within institutions. Millions one day became thousands the next. Sure, this was a unique event which no one had anticipated. But now we are on our guard. By the time the next big crisis—a pandemic or a tsunami threat—comes along, people will expect accurate and real-time diagnosis. As governments and civic bodies step up monitoring of sensitive hotspots like wet markets and ocean beds, IT companies that back them with artificial-intelligence-driven services that can quickly translate the observations into actionable steps will be market winners.
The green company: Surely by 2030, among the most valuable companies in the world will be one that will be born out of our planet's desperate need to stop being destroyed. There will be a company that meets our need for energy, food, travel, entertainment and transportation with sustainable solutions. That company will be green from birth and will be more valuable than what it is worth only to its shareholders since we will all have a stake in its success.
Sundeep Khanna is former executive editor of Mint.