Technological disruption has been at the core of our investment strategy since our launch in 2007. Through our rigorous, fundamentally-driven research process, we pick just a handful of Small and Mid-Cap growth companies, positioned as ‘tollgates’ for sectors undergoing rapid disruption.
Our investment themes are carefully selected to reflect major structural technology shifts that should persist over many years.
Examples: the rise of e-Commerce, the modernisation of IT/Telecommunications networks and the electrification of transportation. Over the next decade (and beyond) these will reshape the world, as we know it. At the heart of each theme lies a complex eco-system of companies that evolves and matures. Our time is spent researching the key players in meticulous detail, becoming experts before these ideas hit the radar screens of mainstream investors. As each technology theme moves along its S-Curve, different investment opportunities arise within the eco-system. Our goal is to pick off the most attractive ones as they emerge, guided by our knowledge edge, experience and proprietary analysis.
Investing in ‘multi-baggers’ through active management and attention to valuation.
The rise of passive investing, and an excess of attention awarded to today’s Tech Titans, produces major valuation anomalies within our universe of smaller companies. We try to exploit these by identifying the key winners in each theme, but also by applying strict valuation disciplines to avoid ‘crowded trades’. Contrarians by nature, we are happiest when investing in unpopular or undiscovered areas. The best returns in Technology should naturally come from being early to invest in tomorrow’s Titans – smaller companies by definition. However, those with lower market caps tend to be systematically overlooked, providing a major opportunity. Our strong track record of outperformance, stretching back well over a decade, comes from running a highly concentrated and curated portfolio of disruptive growth stocks. Not all would-be disrupters are made equal; only a handful of ideas make it past our filters. But if held over the long-term, the best stocks may go on to become significant ‘multi-baggers’, with share prices potentially rising 10-20x or more.
Focus on the “pure-play tollgates” with the greatest upside.
One of our main investment considerations is whether a company can truly capture a large part of the shareholder value (i.e. share of profits) available in the identified sector. We refer to successful examples as “pure-plays”. Finding these means avoiding stocks whose earnings exposure is diluted by less lucrative business outside the main market of interest. Having high exposure to the identified theme is necessary, but not a sufficient condition to invest. The company must also be a “tollgate” operator. These have high barriers to entry, based on proprietary technology, process know-how or first-mover advantage. Such attributes can protect against future competitive threats, setting a long period of profitable growth into motion. A company doing this in a new industry, that is undergoing exponential growth, is a rare but precious find.