Speaking to InvestorDaily, Seres Asset Management chief investment officer Evan Erlanson said approaching investment from a thematic angle opposed to an economics or industry standpoint enables investors to find interesting stocks and ensure they understand them better than anyone else.
Mr Erlanson said thematic investing has allowed Seres Asset Management to focus on smaller and mid-sized companies that are more rapidly growing.
According to Mr Erlanson, most of the initial public offers within the Asian market come from these small and medium-sized companies.
“These kinds of stocks tend to have higher growth and tend to be a lot better managed than a lot of the large caps in the market because they are privately owned,” said Mr Erlanson.
“They are less well understood, so that’s a source of information advantage for people who actually want to do their homework and dig into what the industry dynamics are.”
Mr Erlanson said while large banks like Morgan Stanley, Macquarie and UBS within the Asian market have large teams of analysts, “what you find is there’s a lot more experts on cement than there are experts on industries that are actually pretty interesting and smaller”.
He also said that it is not until stocks reach the US$1 billion mark that they “become interesting to larger monopoly investors”.
It is also at this one or two-billion dollar point that stocks are added to the index so the index funds or passive investment start to get involved, said Mr Erlanson.
“This is where you see a spike in the evaluations that are recorded to these companies – you get the earnings growth but you also get some re-rating as they pass through investability levels or market cap.”
Consequently, Mr Erlanson said investors can benefit greatly from an earlier exposure to the upside growth of a company.
One of the themes Seres Asset Management has been following since last year is the ‘south east Asian automotive supply chain theme’.
Seres Asset Management chief executive Ken Lu said this theme includes a variety of companies, including auto-part names, industrial estate companies that supply land to automotive manufacturing centres and automotive export ports.
“These are all benefiting from the same theme but industry wise there is no correlation between these three separate segments,” said Mr Lu.
Mr Lu said e-commerce is another theme Seres Asset Management has been working on.
“E-commerce is obviously a big theme spanning through all equity and capital markets; its sustainability is beyond debate, with a large part of offline life moving online,” said Mr Lu.
“Sometimes an old or offline company will move part or all of its business online and as that process evolves the market may slowly recognise that, creating an opportunity to get in before evaluations shoot though the roof.”
Mr Lu said online advertising is another theme they are exploring that has spun off the larger e-commerce theme.
