January 2016
Sat Jan 02 2016
Hi All,
Its been since 5 years since my last annual newsletter. After sending the last note on 2010, ICH went into a very quiet mode. We have been slowly but actively investing in technology-driven companies and funds again from 2012. The double tailwinds of abundant liquidity and the transition from old economy drivers (banks, energy, resources) to new economy drivers (technology, new energy, fintech) have driven the big growth of new economy companies. Whats our view going forward?
First, energy. The US will continue to be less energy independent, and the world’s demand for new clean energy is underestimated by many. The US economy and US companies will be the largest beneficiary of this trend due to its technological advantage and also its innovative financial model. The impact of these is under-appreciated. Solar, uranium, lithium, shale, vision recognition, self powered transportation, smart grid, battery storage will attract big funding from big institutional investors. Along with this we will see new bubbles forming amongst companies in these subsectors. Already the Shenzhen listed lithium players are already trading at bubbly territories.
Second, China consumer demand for services can only grow from here. Health (healthy food, pharma, healthcare), financial (insurance and investments), travel (customised high end, free-easy and cruises) demand has only started to take hold and has huge room to grow driven by efficiency made possible by the huge mobile base in China.
Third, bitcoin and blockchain will gain more acceptance as the year progresses, driven by both financial innovations, regulators’ acceptance and demand driven by geopolitical conflicts.
Fourth, we have reached an inflexion point in big data driven research for biotech drugs discovery. The old way of lab base research will be very much disrupted by a combination of (single) gene sequencing, cheaper computing power, big data, deeper consumer pool and AI. This will drive more drugs discovery by smaller biotech firm.
Fifth, China emergence as a major entertainment content providers. With its rich culture, geographical reach and now its financial strength, I expect China content to be a major player in global entertainment.
Sixth, more old economy leaders to be replaced by new player. Sectors in grave dangers include traditional banking, dealers that does not sell direct and need to maintain expensive physical presence.
Seventh, more automated trading in the financial markets. With cheaper computing power and AI, anyone can design a trading robot (bot) with their own algorithm.
Lastly, data security will continue to be in high growth driven by IOT, wearables and all of the above.
As a firm, we will continue to seek exposure to all the above trends while being mindful of valuations and management quality. Good investments returns are premised on getting all these right: betting on the right trend, seeking out the right companies operated by the right management. Only hard work, continuous reading and research and investing with the right partners can increase this probability.
ICH