2 macro investment themes and associated stocks to consider for a 2025/26 ISA portfolio
When I started investing five years ago, I would literally pick either household names or recovery plays. The results in my Stocks and Shares ISA portfolio ended up being somewhat hit or miss. For example, I made money on International Consolidated Airlines but lost a bucket on boohoo.
Today, I very much apply a thematic approach to investing. Firstly, I’ll research across a broad number of mega themes. Secondly, I will then break down each theme into a number of distinct sub-themes. Finally, I will look for individual stocks to invest in.
Copper, the electrification metal
Climate change and the push for net zero is one of the biggest macro themes in investing today. However, investors are only starting to wake up to the many challenges of how to make it a reality.
In our push to move toward cleaner sources of energy to power our homes, transport, and the like, we have forgotten one very important thing – the need for vast quantities of copper.
On average, an EV requires over twice as much copper as one powered by the internal combustion engine. But that’s just the tip of the iceberg.
As we electrify our world, ageing electricity grid infrastructure will need upgrading too. In the UK, our grid was build back in the 1960s. Across the globe, the International Energy Agency predicts some $11trn will be needed to invest in the grid to make net zero a reality.
Copper is a metal with growing demand. My favoured pick is Glencore. It currently mines nearly 1m tonnes a year. But it has capacity to double that in the years ahead.
Copper is a key part of the company’s future portfolio, but today the vast majority of its revenues still come from coal. Depressed prices lately have resulted in lower profits, hitting its share price.
Ageing demographics
One of the biggest challenges facing Western society’s today is a growing ageing population. In the UK alone, the number of people over 65 is expected to grow 35%, to over 15m, by 2040. The challenges are enormous. From healthcare provision to retirement savings, the insurance sector is set to grow.
But the real growth opportunity in this arena, I believe, lies in emerging markets. A growing, aspirational middle class across both India and China dwarfs the mature markets of the UK or US.
My standout pick is Prudential (LSE:PRU). It holds top three positions in 10 Asian life markets today. Asia alone accounts for approximately 30% of global wealth.
Demand for life, insurance, and savings-related products is expected to boom in the coming decades. Single-digit life insurance penetration rates together with limited pension and social security provision have created huge health, protection, and mortality gaps in Asia.
What individuals take for granted in the West, including health protection, needs to be accounted for out of a huge chunk of Asian people’s own pockets.
Prudential’s share price has taken a beating lately as a result of a sluggish Chinese economy, post-Covid. But when I look beyond the short-term noise, I believe that Prudential makes for one of the most compelling growth stories in the FTSE 100.
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Andrew Mackie has positions in Glencore and Prudential. The Motley Fool UK has recommended Prudential Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
