Today’s low-growth macroeconomic environment makes it very hard for investors to find growth companies with a profitable outlook. Our approach consists of identifying trends disrupting traditional business models in order to find promising secular, or long-term, growers. We thus develop a multi-thematic portfolio invested across sectors and geographies.
We seek out companies with large and expanding markets for their products and services and an opportunity to penetrate those markets. We are very conscious, however, that most of the available information is already encapsulated in the stock price. We therefore try to develop a view that diverges from the consensus.
Covid-19’s boost to e-commerce
JD.com (Hong Kong: 9618) is one of the leading e-commerce players in China. E-Commerce is a typical example of the disruptive trends we focus on. With the Covid-19 virus and related lockdowns, adoption rates have strongly increased, as people have been reluctant to visit shops.
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However, overall e-commerce penetration rates are still low, especially in developing countries. We are therefore not only invested in the major US players. In China, JD.com has built a reputation around quality, authenticity and delivery.
Furthermore, the company owns all its warehouses and logistical infrastructure. This is a competitive advantage as it ensures a top-quality delivery service while enabling the company to maintain control over its own delivery chain. The upshot has been that JD.com has been able to take significant market share in China during the Covid-19 lockdown period.
Disrupting the payment industry
The Netherlands’ Adyen (Amsterdam: ADYEN) provides a single payment platform to accept payments on mobile phones and at the point of sale. Electronic payments are another example of a disruptive trend where we invest across the value chain. The segment is experiencing significant growth driven by e-commerce and new habits consumers have developed.
Growth is also being driven by measures being taken to avoid the spread of Covid-19; the need to limit physical contact when shopping is leading to greater use of electronic payments. Adyen’s business is centred on a single purpose-built global IT platform, originally only for e-commerce for large global enterprise clients. Its IT platform is now widely considered to be best-in-class in the sector. We also like the fact that the company is owned and managed by the founder himself.
Healthy returns from healthcare
Healthcare is another appealing segment of the market. The industry is ever evolving, while the ageing world population is also fuelling growth. Centene (NYSE: CNC), a managed-care company, provides health insurance in the US. It is the largest player in the market for Medicaid, the US health insurance system that provides a safety net for those on low incomes.
Centene is currently making sure that the newly unemployed still have access to healthcare. Its diversification into the faster-growing Medicare Advantage business (a part of the federal health-insurance programme) and its significant scale enable the company to remain competitive in a rapidly changing market.
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