Technology Trends to Watch in 2022 Gen-Z Disruption, Consumer Data Privacy, ESG and Renewables

tEChnology tREndS to wAtCh in 2022

gEn-Z diSRuption, ConSumER dAtA pRivACy, ESg And REnEwAblES

Despite tax loss selling, the pandemic, pending Central Bank rate hikes and the end of the world, SNN’s MCRI tech subsector’s 64% return in Q4 2021 outperformed the S&P 500’s 11% appreciation, the NASDAQ Composite’s 8%, and the Russell 2000’s 2%.

What accounts for this significant outperformance? The answer comes from how index returns are calculated. The most common indices are price-weighted, market-weighted, and equal-weighted. A price-weighted index (such as the DJIA) sums the share prices of all constituents and assigns each stock a weighting based upon its share price relative to the sum. For example, if your price-weighted index has 2 stocks (one is $1/share and the other is $2/share), the sum of stocks would be $3. The first stock would be weighted 1/3 and the second 2/3, so your index would be (1/3 × $1) + (2/3 × $2) = $1.67. You’d calculate a market-weighted index (like the S&P500, NASDAQ Composite, and Russell 2000) like a price-weighted index but use constituent market capitalizations instead of share prices. An equal-weighted index (SNN MCRI) invests an equal amount of money in each constituent. In the prior 2-stock example, each stock would have a 50% weight, so the index would be ($1 × 50%) + ($2 × 50%) = $1.50.

The day after each quarter end, the MCRI replaces underperformers across 11 sectors with the top 30 or so outperforming microcap stocks in each sector. The idea is to highlight the top performers and let them run for a quarter. So, while the MCRI’s returns are impressive, knowing how they are calculated can help provide context when comparing to your own portfolio’s returns.

The table above shows the performance of the 11 sectors tracked by the MCRI. Sophic Capital’s bread and butter is founded in developing capital markets strategies for technology issuers, so naturally we are pleased to see tech place third. We are continually asked what tech trends we are watching and which companies could benefit. For 2022, here are a few of the trends we are watching along with a couple potential beneficiaries:

Gen-Z, people born in the mid-to-late 1990s, are the world’s largest demographic, especially in Africa where the median age is 19.7 years. We like this demographic because they will be customers for decades to come. Brands think they can throw a bunch of cash at marketing and Gen-Z will pay attention. If it were only so easy.

Gen-Z tends to be very different from us old fogies. They have no brand loyalty and value community, trust, and social justice. Marketers ignoring these aspects won’t be employed for long. Fortunately, several brands understand how to resonate with Gen-Z; especially esports companies (gaming is GenZ’s favorite entertainment activity). Here are some companies worth investigating that could benefit from this trend:

• Swarmio Media (CSE:SWRM) – helps telcos attract Gen-Z subscribers via EDGE technology that reduces lag for gamers and a gaming community platform • Mijem (CSE:MJEM) – social media meets buy & sell for Gen-Z university/college students • GameSquare Esports (CSE:GSQ) – connecting brands to Gen-Z via esports and influencers • Real Luck Group (TSXV:LUCK) – esports betting • GA Pizza (TSXV:GA) – first online subscription pizza service

consUMEr DaTa privacY

We believe existing trends, such as ESG and Renewables, will only get bigger. Corporations continue to establish and update their Environment, Social, and Governance (ESG) standards. Many of the largest institutional investors screen for ESG, many governments have regulations surrounding ESG; but perhaps the most important driver is Gen-Z (remember them?). Gen-Z will not only be consumers for decades to come but are also employees and investors. They’ll shun any business that harms the environment, does not stand up for what’s socially correct, or has an inequitable workplace. The number of issuers that leverage ESG continually grows; here are some of our favorites:

• UGE International (TSXV:UGE) – develops, owns, and operates community solar project across the Northeastern U.S. and was recently added to SNN’s MCRI index (congratulations!) • Legend Power Systems (TSXV:LPS) – detects and corrects power issues from utility grid connections to commercial buildings, reducing electricity waste and greenhouse gases • Clear Blue Technologies (TSXV:CBLU) – wireless, renewable power solutions that bring telecom, internet, and IoT services to remote locations, particularly in developing nations • OneSoft Solutions (TSXV:OSS) – as the world transitions to renewable energy over the next few decades, it’s imperative to safeguard fossil fuel transportation infrastructure and OneSoft’s machine learning solution predicts when and where pipeline failures could occur.

So now you know the key tech trends we’re following. Sophic Capital is always happy to discuss these and other issuers with you, and we’d love to hear what you find interesting. Feel free to reach out any time at All@SophicCapital.com.

For decades, businesses have monetized your personal online data without your consent and without compensating you. That is slowly starting to change:

Europe has GDPR for protecting personal data. California, Virginia, and Colorado followed suit (another 30 states are going through the process). However, Big Tech could provide the impetus to safeguard our personal data. Apple allows iOS users to opt-out of ad tracking. Google is banning cookies in its Chrome browser (following actions by Firefox and Safari). Online advertising businesses are facing headwinds. Reklaim (TSXV:MYID) allows users to recapture their personal data and monetize it should they choose.

All companies named may be clients of Sophic Capital. Please review Sophic Capital’s full disclaimer on their website here: https://sophiccapital. com/disclaimers/

Sophic Capital’s President and CEO, Sean Peasgood, has enjoyed a successful career as a sell-side Analyst for over eight years. As an Analyst, he covered a diverse set of clean technology and technology stocks, including hardware and software companies that ranged from micro-cap to large-cap stocks. Sean has experience with all segments of the capital markets: Equity Research (Technology and Clean Technology), Investor Relations, Raising Capital, Corporate Presentations, Financial Modeling, Deal and Non-Deal Roadshows,Valuation, Initial Public Offerings, Strategic Communications, Equity Sales, Mergers and Acquisitions and Investment Banking.

For more information about Sophic Capital, please visit: www.sophiccapital.com