For students everywhere, it was back-to-school time earlier this month.

Well, for many of our investors, it’s now back-to-portfolio time. Inevitably, we are asked whether it is time to take profits, hold cash, and wait for markets to correct before making further investments, or whether stocks still have further to run. Our view on how to answer this question never changes. Do not trade equity markets. Invest in companies. In our case, we invest in companies that we believe are benefitting from growth trends in the world economy.

By growth trends, we mean deep, long-term currents that we believe will last for years, as opposed to cyclical recoveries. We seek companies whose revenues and profits are rising as these trends increase demand for the goods they produce or the services they provide, enabling them to gain new customers, sell more to existing customers, raise prices  ̶  or perhaps even a combination of all three.

 

This philosophy – which we have ALWAYS followed – is evident in the growth themes that are present in our portfolio.

The Data Deluge

The largest theme in our portfolio is one we call “The Data Deluge”. As our use of the internet has widened, the amount of data flying over the world’s telecommunications networks is growing at a blistering pace. Each new device that we attach to the internet increases that amount of data, keeping the rate of growth high. Right now, this growth is expected to continue at an annual rate of more than 20% for at least the next five years.1

 

This deluge of data has to be sent, sorted and stored, and there are companies along this value chain meeting those growing needs and profiting in the process.  We own a variety of companies that we believe will benefit from the Data Deluge, including telecommunications service providers, equipment makers, satellite companies, broadcasters, and Internet service providers. 

 

We are invested in enterprise software and service firms.

 

We own companies that hold virtual reality imaging patents. Semiconductor chip manufacturers, and the developers of the equipment used to manufacture semiconductor chips, are in our portfolio as well. We own digital security companies and CAD-CAM software suppliers. We have invested in companies that help create and maintain the equipment and systems that are necessary for data servers and warehouses of “the cloud.” Altogether, we have roughly 20% of our portfolio invested in the value stream created by The Data Deluge.

Other Growth Trends

Another growth theme in our portfolio is the Evolution of the Car, which we addressed in our most recent blog.

 

We have invested for decades in the rising affluence of the world’s consumers. We own branded consumer goods companies, brewers, distillers, a chocolatier, and luxury houses  ̶  our “Bread, Booze and Bling” theme. This rising affluence supports companies in our Leisure theme, including an aircraft maker and a cruise company. It is why we own a drug company that fights diabetes, a disease that is rising right along with the level of sugar in the world’s diet.

 

Additional themes in our portfolio include the Justifiable Middleman and Successful Analogs, which we’ll discuss in future blog posts.

The point is that these themes don’t change with the seasons. The companies that are monetizing these growth trends can do so for quite a long time, in our opinion. That is why our themes have such long duration. For instance, the most recent theme was added over three years ago, and we have held many companies in our portfolio for five years, 10 years – and even longer in some cases.  

For additional insights on potentially profitable long-term trends, view the full archive of the GrowthSpotting series.

Follow @OppFunds for more news and commentary.