Two attributes to make you a better investor

Investing rewards conviction, but only when you happen to be right. As Qiao Ma, Lead Portfolio Manager at Munro Partners, points out, the overwhelming majority of companies will never become the handful of exceptional businesses that drive long-term market returns. To find those companies, investors need to search persistently, keep questioning their assumptions and accept that some ideas simply won’t work.

For Ma, two attributes are particularly important: curiosity and grit.

In this episode of The Rules of Investing, Ma explains how those qualities underpin Munro’s investment process, why studying mega-cap companies can help uncover opportunities much further down the market-cap spectrum, and how following seemingly simple questions can lead investors to businesses the broader market has overlooked.

She also takes us inside two companies that illustrate that process in action, including an aerospace supplier benefiting from three powerful structural trends, and a little-known Taiwanese company helping solve one of the semiconductor industry’s biggest bottlenecks.

Watch or listen to the full episode via the players above, or read a summary of some of the key points below.

Curiosity means turning over stones

Curiosity is embedded in the structure of the investment team at Munro. Rather than dividing its 14-person investment team between sectors or geographies, Ma says the firm’s analysts are generalists. There is no dedicated Japan analyst, semiconductor analyst or industrials analyst. The team starts with major structural growth trends, which Munro calls its ‘areas of interest’, and follows them wherever they lead.

“We start with generally one thing that really captures our attention, and we just keep digging.”

That process can involve half the investment team spending weeks examining a single theme, mapping the supply chain and asking a succession of relatively simple questions: Where is the bottleneck? Who benefits? And, ultimately, which companies can capture the most attractive economics?

One example began with the reshoring of manufacturing after COVID-19. More manufacturing meant greater electricity demand, then the data centre boom added another enormous source of demand. That led them to a simple conclusion: the world, and the US in particular, needs a lot more power.

The first question was how to generate it. That led the team to natural gas turbines, nuclear, solar and batteries. But generating electricity only gets you so far. The next question was how to transport it, which led to transmission infrastructure, switchgear and specialised contractors.

But then, how do you take electricity delivered at extremely high voltages and step it down to the roughly one volt ultimately required by a semiconductor? And because converting and consuming all that electricity produces tremendous amounts of heat, the trail eventually reached cooling. By the end of the exercise, Ma says the team had effectively followed an electron from the turbine where it was generated all the way to the GPU consuming it inside a data centre.

It also revealed an advantage to ignoring conventional sector boundaries. A Japanese turbine manufacturer, a US electrical equipment business and a European industrial company may be covered by completely different analysts in a traditional research structure, despite participating in the same structural growth trend.

Finding tomorrow’s mega-caps

That same process becomes particularly useful when investing in smaller companies. Ma runs Munro’s global small and mid-cap strategy, but continues to research large companies alongside the rest of the investment team. She believes that large-cap knowledge can provide an important guide to what is happening further down the market-cap spectrum.

Munro can take what it has learnt from companies such as NVIDIA, for example, and look for smaller semiconductor businesses sitting directly in the path of the same growth. Likewise, years spent analysing companies such as Google and Meta helped the team form a view on Reddit when it listed.

The opportunity, according to Ma, is that many smaller companies receive comparatively little analyst attention even when they are exposed to powerful structural trends. That does not mean small is inherently beautiful – quite the opposite.

“I don’t think being small is beautiful. I think being small is risky.”

The challenge is to identify the relatively small number of businesses that can overcome those disadvantages and potentially become tomorrow’s large caps. Indeed, that is how Ma measures success. The strategy began with 35 holdings, and she says nine companies have grown sufficiently over the past year to leave its small and mid-cap benchmark and enter the large-cap universe.

The objective is to find the potential future mega-cap while it is still climbing the steep part of its growth curve.

Grit does not mean stubbornness

Of course, searching for exceptional companies guarantees plenty of unsuccessful ideas along the way. That is where Ma’s second attribute comes in: grit. But her definition is importantly different from simply holding onto a stock no matter what happens.

When an investment performs poorly, she argues, investors can become consumed by the position. Loss aversion makes selling difficult, while the time and mental energy spent trying to prove the original thesis right can prevent them from looking for better opportunities elsewhere.

So she and the team combine conviction with a formal risk-management process. A 20% loss triggers a review, at which point the team can reassess the thesis and, where appropriate, step aside.

Selling does not necessarily mean permanently abandoning the company. If the timing was wrong or the thesis later improves, the team can buy again.

The advantage, Ma argues, is that a manageable setback never becomes the 50% or 90% loss that dominates a portfolio manager’s attention. An unsuccessful investment is just a setback, not the failure of an investment process.

Grit therefore means retaining the willingness to search for the next opportunity rather than allowing the last mistake to define you.

Keep digging, but know when to move on

Curiosity encourages investors to keep asking questions and developing conviction. Grit requires them to accept that, after all that work, they may still be wrong. While this might seem contradictory on the surface, she sees these two attributes as complementary.

Curiosity helps investors find the relatively small number of companies capable of becoming exceptional long-term winners. Grit allows them to survive all the ideas that do not, without becoming paralysed by their mistakes.

And in a market that can swing from euphoria to panic remarkably quickly, she believes keeping those two ideas in balance is considerably more useful than trying to interpret every move in a share price as a final verdict. As she puts it, long-term structural change is a journey. The stocks exposed to it will inevitably have plenty of ups and downs along the way.

The task for investors is to keep turning over stones, recognise when the evidence has changed, and retain enough capital and mental energy to keep looking for the next winner.

Disclaimer

Guest from Munro Partners, a corporate authorised representative (CAR 1244894) of Munro Asset Management Limited (ACN 163 522 254) an Australian Financial Service licence holder (AFSL 480509). The information discussed in this podcast is for general information purposes only and is not financial advice. You should obtain independent advice from a licensed professional adviser before making any investment decision. The views held by Munro Partners are current at the time of recording and are subject to change. Past performance information given in this recording is for illustrative purposes only and should not be relied upon as an indication of future performance. The information in this podcast has been prepared without taking account of the objectives, financial situation, or needs of individuals. None of Munro Partners, its related bodies or associates nor any other person guarantees the repayment of capital or the performance of the Funds or any particular returns from the Funds. Information about the Munro funds is available at munropartners.com. Podcast recorded 31 July 2026.