Thematic Report

Theorality 2016 – From theory to business reality

by Shaun Cochran / Sep 29, 2016

An investor’s guide to disruption-proofing your portfolio

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Theoralitly 2016 provides an intellectual framework with which the investor can try to better understand a rapidly changing world – an “investor’s guide to disruption-proofing your portfolio”.

In the report, CLSA identifies three key global cross-industry investment trends and five industry-specific trends that investors must not ignore:

  • Artificial Intelligence is arguably the most transformational technology of our time. AI advances and data availability will massively scale the productivity of humans, machines and institutions. At first glance, Alphabet looks to have in the initial lead in this space.
  • Connected Everything is our preferred descriptor versus the esoteric Internet of Things. It enables new business models, but requires a substantial privacy tradeoff most consumers do not understand.Splunk, PTC, & Softbank offer exposure here.
  • Rendered Realities entered the public consciousness in 2016 with leaders looking to make its use as ubiquitous as smartphones. Companies are already building an ecosystem with improved training a focus. HTC offers good exposure within Asia.
  • Internet X.0 is dominated by a few major platforms and is seeing a convergence of focus around a contextual, conversational, video-centric internet. Facebook and Line are well-positioned for this change (and so indirectly Naver).
  • Advanced Services are neither on or offline, but use the best of both industries to compete on unrivalled customer experience. Tomorrow’s winners understand this. China leads the way via Baidu,Tencent and Alibaba. Walmart is the dark horse.
  • Fintech ideas typically advance existing models. It is most transformational where countries leapfrog dated technologies. Fintech has some truly transformational components such as blockchain. Rakuten generates ~50% profit from fintech.
  • Advanced Manufacturing is evolving to reduce the tradeoffs between complexity, scale, speed and cost. Automation is key, but requires more data and better AI. Fanuc and Keyence are beneficiaries or more accurately, drivers of this process.
  • Advanced Transportation aka autonomous driving will fundamentally reshape auto business models and the global economy; 2016 marks the point of acceleration. Mobileye is a clear winner of ADAS and movement toward autonomous driving.