We define Millennials as individuals born between 1980 and 2000. Their preceding generations, Generation X and Baby Boomers, are born between 1965–1979 and 1946–1964 respectively. There are a number of factors which characterise Millennials and their changing consumption behaviour.
We believe Millennials are reshaping markets and have the potential to impact businesses across sectors and geographies. The GS Global Millennials Equity Portfolio seeks to connect clients to this evolving consumer story.
Millennials are quickly becoming the most influential global consumer. Here’s why we think now is the time for you to take notice.
There are approximately 2.3 billion Millennials around the globe, making this the largest generational cohort by population size. By contrast, Generation X and Baby Boomers are made up of 1.4 billion and 1.2 billion individuals respectively.
As Millennials enter the workforce, they are now entering their prime earning years and we expect their global income to have surpassed that of Baby Boomers in 2017.
As Millennials earn more, they are going to spend more. Millennial spending is expected to increase by 17% over the next 5 years compared to a 3% increase for Generation X and a 10% decline for Baby Boomers.
Our research has shown that Millennials are driving a series of trends that will shape tomorrow’s investment opportunities. The following case studies highlight a number of businesses that we believe are benefitting from this secular growth theme.
This business connects Millennials online through wireless and broadband infrastructure. As Millennials consume more data, share more information and shift to mobile devices, this business will benefit from higher data usage. Served by a strong management team, this is a high quality business with dominant market share, that is committed to global expansion and continued innovation.
This business is the market leader in online food ordering in 12 countries and has been a key beneficiary of Millennials’ preference for ordering food online. This business has dominant market share in all of its core regions and has a consistently increasing number of active users. High margins and solid cash generation ability should position this business to outperform over the long term.
This company is the world's largest ingredients & flavours producer, leading the industry in salt & sugar reduction, allergy management and healthy ingredients. As Millennials shift to healthy eating, the company will be well-positioned to take advantage of demand trends. We also like the company because of its competitive strength, solid management team, and focus on innovation to address consumer preferences. Further consolidation in its industry could additionally strengthen the business’ leading position.
We anticipate that Millennials will drive a wave of change and opportunities in the coming years. The GS Global Millennials Equity Portfolio is designed to connect clients to these opportunities in a thoughtful way, with a focus on quality businesses at supportive valuations.
We have built an extensive universe of stocks which are all exposed to Millennial consumption behaviour. Each stock is assigned a ‘Millennials sub-sector’ and level of exposure to the theme (ranging from low to high).
Consistent with GSAM Fundamental Equity’s active, bottom-up approach, this strategy is focused on identifying companies with sustainable competitive advantages and strong management teams with a history of high returns on invested capital.
Focusing on cash flow metrics, we seek to ensure we are not overpaying for these businesses in order to maximise returns over the long term. We seek to identify companies that we can invest in at a discount to their intrinsic value.
Inspired by the Next Generation