Millennials have been labeled many things: lazy, entitled, narcissistic among other unflattering terms. They have also been accused of being highly risk-averse, preferring flashy investments like crypto over slow-n-steady deliverables such as stocks and bonds.
More recently, though, millennials have busted this stereotype.
Last year, they became the largest living adult generation in the U.S. after surpassing baby boomers and Generation X. But that’s only part of the shift that’s underway. Millennials not only make up the largest working cohort but are also big drivers of megatrends such as technology, social change, urbanization, climate change and emerging global wealth.
Millennials are also proving to be savvy stockpickers, frequently managing to outperform more seasoned investors. Indeed, according to data published by Apex Clearing, the Top 10 millennial stock picks representing ~50% of their portfolios have comfortably outpaced the market with a weighted mean year-to-date return of 108.5% compared to a 5.8% return by the broad market benchmark, S&P 500.
Here are the top megatrends favored by millennial investors.
#1 Clean Energy/eMobility
The EV megatrend is widely regarded as one of the biggest and most powerful trends that will dominate the world for decades. In 2019, electric mobility reached a tipping point with more than two million EVs sold around the world, good for a record 2.5 percent of the global light-vehicle market.
The Covid-19 crisis has exacted a heavy toll on most sectors of the global economy; however, clean energy sectors including EVs have proved amazingly resilient. At a time when the global oil and gas industry is going through its worst existential crisis, renewable energy sectors such as solar and wind have continued to record significant growth and playing an ever-bigger role in our electricity generation mix. The EV sector has not been left behind with 2020 EV sales expected to broadly match the 2.1 million units sold in 2019, as per the International Energy Agency (IEA).
The long-term outlook remains bright, with catalysts such as falling battery and vehicle costs, more stringent fuel economy and emissions standards, shared mobility services and the irresistible ESG megatrend expected to continue driving adoption levels. Indeed, Bloomberg New Energy Finance (BNEF) has predicted that EV sales will account for 58% of new cars sold by 2040 compared to 2.7% in 2020.
Although ESG investing is a multigenerational trend, millennials are definitely playing their part with one study finding that millennial investors are nearly twice as likely to invest in companies or funds that target specific social or environmental outcomes.
Tesla Inc. (NASDAQ:TSLA) has become the quintessential millennial stock, consistently ranking among the most popular stocks on zero-fees trading app, Robinhood. According to Apex Clearing, TSLA was the third most popular stock among millennials accounting for a 9.5% slice of the portfolios. Other popular EV stocks by this demographic are Nio (NYSE:NIO) and Nikola (NASDAQ:NKLA).
#2 Sharing Economy
The millennial generation has been driving most of the growth in the sharing economy, consisting of peer-to-peer platforms that provide access to shared goods and services. That’s according to Forrester Research, which says baby boomers are more cautious about the sharing concept.
That’s the case because millennials tend to value experiences more than material goods, characterized by their fondness for using smartphones to share their adventures on social media platforms such as Facebook and Instagram. About 47% of millennials prefer to spend money on experiences than products, compared with 29% of baby boomers.
This cultural shift has helped propel shared mobility into a multi billion-dollar industry.
Shared mobility, including services such as taxis, car sharing and ride hailing account for an estimated 5% of current passenger vehicle miles; BloombergNEF sees that rising exponentially with shared mobility services projected to account for 19% of the total annual mileage completed by passenger vehicles in 2040.
The economics of EVs are considerably more favorable in a sharing economy, thanks to lower fuel and maintenance costs. EVs currently account for 1.8% of the shared mobility fleet, but could climb to 80% by 2040 as per Bloomberg.
The leading stock here is Uber (NYSE:UBER) though millennials who went against the grain and continued piling in shortly after its IPO got badly burned. The other is Lyft (NASDAQ:LYFT) though it’s much less popular with millennials and does not rank among their top 100 stocks.
Millennials and their smartphones are inseparable, and one of the activities they love doing on their hand-held devices is online shopping. Indeed, Joan Driggs, vice president of content and thought leadership at IRI, has told eMarketer that millennials are omnichannel consumers in the truest sense of the term, equally at home shopping online as they are shopping in-store.
Millennials also constitute the most digital demographic among U.S. consumers, with nearly 86% frequently shopping online compared to 78% of Generation X and 61% of baby boomers.
There are no prizes for guessing which ecommerce site millennials frequent most: Amazon Inc. (NASDAQ:AMZN). Amazon not only serves as the starting point for many millennials when they search for products online but many tend to fully commit with 73% of millennials being Amazon Prime members.
Amazon is the second most-popular stock amongst millennials, accounting for 9.8% of their portfolio holdings.
That appears to be wise investing since digital-impacted sales have been forecast to continue growing and exceed $2.4 trillion by 2022, good for more than 58% of total retail sales.
Source: Pew Research
Millennials have frequently led older generations in their adoption and use of technology, and this certainly rings true when it comes to smartphone and mobile device use.
According to Pew Research, 93% of American millennials own a smartphone; 53% own a tablet computer and 86% use social media, essentially leading in two categories except tablet adoption where Generation X leads with a 55% ownership clip.
Although there are signs that we might have reached peak smartphone, millennials have continued to put their money where their mouths and hearts are with Apple Inc. (NASDAQ: AAPL) consistently ranking as the most beloved stock by millennials with a 10.6% share of their portfolios.
Three years ago, Facebook Inc. (NASDAQ:FB) CEO Mark Zuckerberg declared:
“I see video as a mega trend, same order as mobile.”
Turns out he was right on the money.
Consumer video has been exploding, with online video consumption skyrocketing. Netflix Inc. (NASDAQ:NFLX) continues being the big daddy of the space with 190M subscribers, making it one of the world’s largest entertainment services. Alphabet Inc.’s (NASDAQ:GOOG) YouTube is hardly a sluggard though, with revenue figures very much comparable to Netflix’s.
The global video streaming market was valued at USD 42.60 billion in 2019 and is projected to record a robust growth rate of 20.4% CAGR from 2020 to 2027 with innovations such as AI and blockchain technology expected to continue improving video quality and boosting market growth.
Not surprisingly, Netflix is the 8th most popular stock in millennial portfolios while Alphabet chips in at #14.