Is Investing through Themes a sensible approach?
Most of my portfolio holdings are tied to a theme, with a few exceptions. The idea is to give me some tailwinds in my investments over the long-term. A risk is that you overpay for the tailwind, due to Mr market already pricing in a rosy future. When I evaluated other portfolio managers, we would say it’s extremely hard to call Macro events, a pure bottom-up stock picker has a better odds to create alpha. The problem for me is that this is a hobby, so I do not have the time, to sift through that many companies, to find the undervalued few gems. I need to think in bigger strokes and trying to exploit that I can see where the world is moving before the crowd does. I also see some edge in how long term I can hold the strategy and that I can express my views globally through big and especially small companies, that a fund manager can’t trade in. So let’s go through the Themes, I list the weight to the theme and the companies I invested in to ride the theme.
Virtual Reality (5%) – Sony
First up is a brand new theme in the Portfolio and therefore as of yesterday close, the portfolio has a new holding – Sony Corp bought at 5% weight. (Sorry I am a bit late to announce it). My bet is that VR products will be the Christmas gift of the year 2016. It’s not a hype, it’s real, and it will become mainstream very quick. Sony is well positioned to ride this trend.
Electric Vehicles (17%) – BYD, Coslight Technology, Highpower Int
I have talked a lot about Electric Vechicles, when I started my research about a year ago, it was not such a hype yet. Now a lot of junior Lithium miners with a potential mine up and running in 6 years have gone up 300% the last 6 months. Well the hype is here, I have struggled a bit how to express my view and belief that we will all be buying electric cars in 5 years (Getting it right). Currently I’m riding a shorter trend more geared towards China and how Chinese subsidies are helping my current holdings, which all are battery makers and BYD who also successfully sell electric buses around the world.
Modern Web-based Banks (11.7%) – Skandiabanken, Avanza Bank
I work in banking, I know what is happening, most us do and we are scared. Because we know a lot of the things we have been making money on for ages is going away – and it is going fast. It’s niche players as the companies I own that will be able to navigate this and come out as winners as Titans as Deutsche Bank and others fall helplessly. Or better yet, are bought by a Titan.
Growing Chinese Middle-class (29%) – NetEase, Ping An Insurance, Ctrip, Yuexiu Transport
So almost everyone that invest in China/Asia is bullish on the whole Chinese middle-class consumer play. It’s easy, 300-400 million new people enter the middle-class and they want all the products and services we westerners consume, so buy companies that produce what they consume? Yes and no. Yes because the underlying story still holds, No because the obvious ways to play it through regular consumer staples companies etc is too expensive, the multiples are really high. I found my ways to play it, which I think brings a nice risk-reward.
Strong Growth/Consumption in Nordics (12.4%) – Ramirent, MQ
The Nordic consumer is today rich, richer than ever before, for a few reasons. Unemployment is low, interest rates are negative, house prices are at top or close to top levels, equity market is OKish. All in all, there is spending power. So we will build and we will consume, I found two companies were one is a bit of turnaround and the other has found a strong CEO/leader.
Stock Specific (16.8%) – Criteo, Zhengtong Auto, Microsoft
This is a mix of Criteo being a high growth company, Zhengtong Auto being a deep value play and Microsoft being somewhere in between.