Who will win from these 3 powerful themes?

Nick Griffin

Corporates are now spending heavily on digital transformation, not just for growth, but for their very survival. This creates a tailwind for providers of cloud computing, data analytics, and AI. Here we look at the winners from this theme, as well as the winners from two other powerful themes for 2018.

Digital Transformation

What we see when we talk to many corporates around the world is that they are faced with a growing threat from digital disrupters. I think this is fairly obvious whether it's Amazon, Google, or Facebook.

Cloud spending is something that's quite important, and has grown considerably in recent years, but we think it accelerates aggressively in 2018, mainly because from the cost side, it's very beneficial to corporates. It also allows companies to position themselves to capitalise on artificial intelligence applications going forward.

We see companies like Accenture and Microsoft benefitting from this conversation, as well as some of the smaller IT firms like Blue Prism, which was very successful for us last year.

Automation

More and more corporates are starting to engage in a fulfilment arms race, with a primary focus on the shift to ecommerce. People want convenience, and they want their items delivered to their home within 24 hours. Amazon can obviously do this, and we think every other retailer around the world will get there.

We expect heavy investment into automation in 2018 and beyond. We like companies such as ABB in terms of robotics, as well as machine learning corporates like Cognex. Machine vision is the key code that most of these guys want to crack to realise this fulfilment, and its where we think a lot of this extra money is going to be invested.

Transformative M&A

Everyone will be aware that the US tax changes were voted into law at the end of last year, and this allows large US corporates to repatriate huge amounts of offshore foreign earnings (we think nearly $1.4 trillion can be repatriated).

Where could this money go? M&A firms will be significant beneficiaries. We've got a good insight into this at the end of last year when Disney purchased Fox, and I think the reason why corporates will look at this is because ultimately with disruption accelerating and companies getting very little benefit for buybacks, if they are in the wrong position, you will often see corporates trying to change the narrative, something Disney did quite successfully with Fox.

We also looked at these other targets that potentially could be acquired, and we wouldn't discount seeing a large banner deal like in Netflix or PayPal at some point in time.

Goldman Sachs, Evercore, and Moelis look to be well positioned to benefit from this M&A theme.

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About this contributor

Nick Griffin

Nick Griffin

Head of Investments, Munro Partners

Nick is a founding Partner and the Chief Investment Officer of Munro Partners. He is responsible for the investment management of Munro’s key investment funds and the formulation and implementation of the proprietary investment process.

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