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. 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.
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. 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. 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.
 Thomson Reuters, August 2017: https://www.reuters.com/article/us-worldpay-m-a-vantiv-idUSKBN1AP0KJ
 Thomson Reuters, August 2017: https://www.reuters.com/article/us-kite-pharma-m-a-gilead-sciences-idUSKCN1B810Y
 Thomson Reuters, March 2017: https://www.reuters.com/article/us-intel-mobileye-idUSKBN16K0ZP
 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
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