Growth investing is about buying companies that are
under-appreciated by the market relative to their future earnings.
In our case, it’s about looking forward several years,
trying to understand how the world is changing,
and which companies might create newer,
better business models or products, and are well-placed to take advantage
of that change.
Sometimes, it’s about working with technologists,
or entrepreneurs and academics to try to figure out what’s becoming
possible that didn’t used to be, and how society is responding
to that, and what investment opportunities that may create.
It’s about understanding which companies have long-term
competitive advantages that give them sustained pricing power,
and we look carefully for those that are investing wisely today
to create the profit growth of the future rather than today.
It’s really not about fixating on short-term share prices,
we don’t spend all day looking at stock markets.
In essence, our whole approach is based on
the observable fact that most investors are
intolerant of uncertainty and have short time horizons.
It is this very uncertainty of looking five years or more ahead that puts most
investors off and creates the opportunity for us and our
clients to make large returns if we’re right
about how a company can develop in the long term.
Investing in growth can, though, require some real stoicism.
One of the characteristics of how we invest is that when uncertainty
levels in the world generally are high,
the values of growth stocks can fall quite dramatically,
as investors focus only on the here and now as if there’s
never going to be any growth again.
But, in the end, consumer behaviours and business models always change
to reflect the new things that are becoming possible,
and growth will accrue to those companies that are robust enough
to survive short-term challenges, and that are on the right side of change.
This is how progress happens, regardless of the swings that
everybody can observe in politics and economics and inflation.
So, we don’t pay much attention to those types of variables.
Some examples of where we are looking for growth in
the coming years might help to illustrate this.
We think our world is still in the foothills, for example,
of applying synthetic biology to a next generation
of manufacturing processes.
Gene sequencing and artificial intelligence can revolutionise
and personalise medicine.
The energy and ecommerce revolutions are well-known,
and our financial system is now evolving rapidly,
facilitated by improving cloud technology and security.
All of those areas we are fascinated in and we think have much further to go.
We think those who try to understand this
process of change, embrace the uncertainty
and focus on the long-term are well placed to benefit.