NEW YORK (Reuters) - Retail, utilities, restaurants and financial services should all brace for more disruption in the year ahead, according to big-name investors who took part in the Reuters Global Investment 2018 Outlook Summit in New York this week.
Glen Kacher, whose Light Street Capital hedge fund is one of the best-performing funds for the year to date, said he was shorting most of the retail sector out of concerns that bricks and mortar stores will continue to lose market share as customers shift purchasing to Amazon.com Inc (AMZN.O), which is among his top holdings.
At the same time, large companies such as Wal-Mart Stores Inc (WMT.N) are using point of sale technology that processes debit and credit card transactions at slower speeds than coffee shops that use readers from payments company Square Inc (SQ.N), he said.
“The idea that the deli has better technology than Wal-Mart is stunning,” he said, adding that the coming year will prove to be an “apocalypse” for the sector.
Not all disruption looks to be a negative for entrenched companies, however.
Marc Lasry, the billionaire co-founder of Avenue Capital Group, said that his firm is raising $1 billion for a new hedge fund focusing on distressed debt in the utility industry, which is facing increased demand for energy just as new regulations make it increasingly difficult to build new power plants.
Avenue Capital has invested in Texas-based electric company Dynegy Inc DYN.N and bought a power plant in California, Lasry said, citing low prices.
“There are huge opportunities there,” Lasry said.
Kera Van Valen, a portfolio manager at $48.6 billion Epoch Investment Partners, said improvements in meter technology is helping utility holdings such as PPL Corp (PPL.N) cut its margins by allowing the company to be more efficient in its response to storms or outages.
“Even the utilities - which often people want to write off as boring and not exciting – can continue to grow through their use of technology,” she said.
Along the same lines, McDonald’s Corp (MCD.N) is expanding its self-ordering kiosks and digital app to all of its 14,000 U.S. locations, allowing employees to concentrate more on other areas of the restaurant, as well as partnering with UberEats, the food-delivery service run by ride-hailing firm Uber Technologies Inc.
“When you think about the Millennials and the tendencies that Millennials have, ordering from a kiosk is quite comfortable for them. It also makes McDonald’s feel a little more relevant,” Van Valen said, which should boost the company’s growth and its ability to increase its dividends.
Other disruptions may boost productivity across a sector. Joachim Fels, global economic adviser and a managing director at Pimco, which has more than $1.69 trillion in assets under management, said that blockchain - a shared ledger of transactions maintained by a network of computers on the internet that powers the cyptocurrency bitcoin - could be a disruptive factor for financial services.
JP Morgan Chase & Co (JPM.N), American Express Co, and a consortium of energy companies including BP Plc (BP.L) and Royal Dutch Shell Plc (RDSa.L) have all announced plans for blockchain-based payments systems over the last month. Fels expects that the technology will continue to disrupt financial services even if enthusiasm dies down for bitcoin, which hit a record high just short of $8,000 on Nov 8.
“I think that could lead to a spurt in productivity in financial services,” Fels said. “So that sounds to me like the next big thing.”
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Reporting by David Randall; Editing by Jennifer Ablan and Susan Thomas