We believe it can be dangerous to be overly reliant on thematics when positioning portfolios. Yet as growth investors, we are always looking for companies that are tied to supportive long-term structural drivers.
Identifying these drivers is an important step toward pinpointing the undervalued companies with superior quality and growth characteristics – and we see a number of these investable themes today in emerging markets.
Theme 1: Technology
One investable theme in emerging markets is technology. E-commerce, 5G telecom, online education, distributed computing, and telemedicine have long outperformed more traditional, “old economy” industries, regardless of valuation differentials favoring the latter.
In our view, the competitive positions of companies in these sectors are strengthening amid the downturn as pandemic-related stay-at-home measures have accelerated the move to a digital society. What had been a gradual 20-year shift to online life quickly gained speed, with healthcare, shopping, education, and work going digital almost