Our core investment thesis is that companies need new capabilities to contend with today - and tomorrow’s - increasingly complex, dynamic, high-velocity environment of global hyper-competition, not to mention the emerging megatrends. New analytical and investment models are required to uncover those capabilities systematically, and we have spent over 10 years developing and refining them.
We call our approach Strategically Aware Investing (SAI). It supports stock picking at all levels by combining:
- Financial analysis criteria
- Company, sector and thematic research in order to find the best-managed, forward-looking and most “future-proof” companies. Companies that are adaptable, responsive and have innovation capacity are those that are more likely to succeed.
- An analysis of the company’s megatrends exposure
Investment success involves finding better-managed, more agile and forward-looking companies, with more sustainable competitive advantages, at attractive valuations.
A series of powerful secular global megatrends, combined with the accelerating velocity of change in global markets, is creating an entirely new set of alternative risk/return drivers and competitive imperatives for companies.
In this emerging competitive environment, there will be an unprecedented value premium for the most innovative, adaptable, responsive, and forward-looking companies.
Traditional financial analysis is of only limited use in helping investors identify them. New analytical models and research are required.
Arguably the single greatest determinant of companies’ competitive and financial performance is its management quality. Despite this, Wall Street and City analysts only rarely analyze it systematically.
Companies’ ability to manage these megatrends-driven risks and opportunities better than their competitors is an increasingly robust proxy and leading indicator for their strategic management and execution capabilities.
The variations among company-specific exposures to these emerging megatrends — and their capacity to respond to them — are considerable, even within the same industry sectors. Deltas can be 30 times or more.
Few investors have done the in-depth research necessary to discover which companies are which. Consequently, the substantial differences among companies’ risk and opportunity profiles driven by the emerging megatrends remain largely hidden from investors. This creates significant information inefficiencies and asymmetries which astute investors can exploit.
Those information inefficiencies are particularly pronounced in emerging markets, where the power of IPCM’s information advantage, and the positive sustainability impacts of our portfolios are arguably even greater.
This ‘megatrends alpha premium’ will become even greater going forward, as the secular global megatrends continue to bite deeper.
Successful, forward-looking investment strategies require integrating insights about megatrends exposures and other forward-looking factors with more conventional fundamental and quantitative financial analysis — from the very outset.