Specialist companies usually make for effective innovators and, therefore, attractive investments. That’s why they feature prominently in our thematic equity portfolios.
Not all ugly ducklings turn into swans. In the investment world, it takes a lot of skill and specialist industry knowledge to identify growing, innovative companies that will ultimately thrive. It is worth the effort, however, as investors who take an active stock-picking approach and succeed can be richly rewarded.
In some cases, a takeover can serve as the ultimate signal of a company’s success – its transformation into a powerful swan, if you like. It crystallises profits for investors and creates a bigger, more powerful business which is often better placed to deliver on the technologies and projects being developed. Indeed, a number of companies in Pictet Asset Management’s thematic portfolios have become acquisition targets in recent years. We believe this is testament to the skill and expertise of our fund managers in recognising and choosing to invest in the most attractive opportunities in their respective fields.
Our security strategy, for example, was invested in British payment provider Worldpay when it was bought for GBP8 billion by bigger US rival Vantiv, representing a 22.7 per cent to the pre-offer share price[1]. Vantiv was keen to establish a global footprint in the fast-growing e-payment processing space at a time when consumers are increasingly switching from cash to cards. The combined business (Vantiv remains in our portfolio) processes USD1.5 trillion of payments a year across 146 countries.
This trend of using acquisitions to get access to new markets, products or technologies can be seen across industries. In the health and biotech sectors, for example, Gilead Sciences Inc agreed to buy another of our holdings, Kite Pharma Inc, which develops cancer immunotherapy products, in a nearly US$12 billion deal, representing a 29.4% price premium[2].
Even the globe’s biggest companies, such as Intel and Microsoft, get involved. The world’s largest computer chipmaker acquired Israel-based autonomous driving technology firm Mobileye – part of our robotics portfolio – for $15.3bn, snapping up one of the few pure AV companies in the word at a 33% premium[3]. Mobileye’s technology includes machine vision systems which are trained to identify pedestrians, monitor blind spots and decode traffic signs.
Meanwhile, in the digital space, Microsoft paid a near 50 per cent premium for LinkedIn back in 2016 – a total of $26.2bn[4]. The deal extended the software giant’s footprint in the business world, giving it the opportunity to secure new customers from LinkedIn’s network for 433 million professionals.
Clearly, cutting edge innovation is something that big companies can also do well and the investment managers of our thematic equity portfolios continue to invest in a number of large, well-known firms. But, equally, active investors have the opportunity to identify future successes early on by investing in smaller, specialist firms and to use these investments to improve returns. That is what sets our thematic equity portfolios apart.
More information on Pictet AM’s actively managed thematic equities here.
[1] Thomson Reuters, August 2017: https://www.reuters.com/article/us-worldpay-m-a-vantiv-idUSKBN1AP0KJ
[2] Thomson Reuters, August 2017: https://www.reuters.com/article/us-kite-pharma-m-a-gilead-sciences-idUSKCN1B810Y
[3] Thomson Reuters, March 2017: https://www.reuters.com/article/us-intel-mobileye-idUSKBN16K0ZP
[4] Thomson Reuters, June 2016: https://www.reuters.com/article/us-linkedin-m-a-microsoft/microsoft-to-buy-linkedin-for-26-2-billion-in-its-largest-deal-idUSKCN0YZ1FP
Disclosures
This marketing material is issued by Pictet Asset Management (Europe) S.A.. It is neither directed to, nor intended for distribution or use by, any person or entity who is a citizen or resident of, or domiciled or located in, any locality, state, country or jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Only the latest version of the fund’s prospectus, KIID (Key Investor Information Document), regulations, annual and semi-annual reports may be relied upon as the basis for investment decisions. These documents are available on assetmanagement.pictet or at Pictet Asset Management (Europe) S.A., 15, avenue J. F. Kennedy, L-1855 Luxembourg.
The information and data presented in this document are not to be considered as an offer or solicitation to buy, sell or subscribe to any securities or financial instruments.
Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to change without notice. Pictet Asset Management (Europe) S.A. has not taken any steps to ensure that the securities referred to in this document are suitable for any particular investor and this document is not to be relied upon in substitution for the exercise of independent judgment. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Before making any investment decision, investors are recommended to ascertain if this investment is suitable for them in light of their financial knowledge and experience, investment goals and financial situation, or to obtain specific advice from an industry professional.
The value and income of any of the securities or financial instruments mentioned in this document may fall as well as rise and, as a consequence, investors may receive back less than originally invested. Risk factors are listed in the fund’s prospectus and are not intended to be reproduced in full in this document.
Past performance is not a guarantee or a reliable indicator of future performance. Performance data does not include the commissions and fees charged at the time of subscribing for or redeeming shares. This marketing material is not intended to be a substitute for the fund’s full documentation or any information which investors should obtain from their financial intermediaries acting in relation to their investment in the fund or funds mentioned in this document.
This document is a marketing communication issued by Pictet Asset Management and is not in scope for any MiFID II/MiFIR requirements specifically related to investment research. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any products or services offered or distributed by Pictet Asset Management.
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