ResearchFor Qualified Investors only
Introduction
The Next-Gen Leaders are a selection of the most promising
high-growth companies in the US and Europe that will benefit from
major technological innovations and structural changes in corporate
and consumer behaviour.
Thousands of companies are now developing new technologies and
unique business models which promise to reshape the future of
businesses and consumers. There are many listed and tradable
companies with cutting-edge products and exciting growth profiles
that investors need to be invested in.
We have identified many areas of innovations in the Technology,
Media, Consumer, Healthcare, Industrial and Financial sectors. We
invest in innovation themes primarily and then find the companies
with the strongest fundamentals.
We focus on the long term perspectives for each industry and stocks
and tend to ignore short term volatility. We also tend to ignore
short term fads and “hype” stocks that fail to make our quality
criteria.
Of the S&P’s five hundred constituent companies, only half
would have been included in the index 20 years ago. In two short
decades, innovation and entrepreneurship have led to massive
industry shifts and vindicated, time and again, Schumpeter’s
principle of creative destruction.
For Qualified Investors only
The Next-Gen leader portfolio is built as a basket of investment
themes identified by our research team with carefully selected
stocks within each theme.
Traditional financial concepts still apply!
Next-Gen Leaders must operate in an industry benefiting from strong
secular growth drivers;
They must have structural advantages and a defendable position
through product differentiation, technological advantage or high
barrier to entry;
They must have a scalable business and a large addressable market
to allow for sales and earnings growth;
Companies must have a strong top-line growth or generate some Free
Cash Flow as well as having a comfortable EBIT Margin;
Stocks should exhibit price momentum and ideally a decreasing
valuation.
Introduction
Our Universe
There are three main areas where we find most opportunities for
innovation and growth:
B2B Technology
Digitalisation of the corporate world is driving a boom of spending
for modern software (for specialized or general functions), for IT
management and for Cybersecurity solutions. Companies are also
increasingly outsourcing their investment in their IT or back
office workload to companies offering PaaS (Platform as a Service)
solutions.
B2C Media, Tech & Commerce
Fast changing consumer habits are driving investment opportunities
in the media, retail and even banking/payment space with the
emergence of new champions and the transformation of traditional
companies embracing digital solutions.
Healthcare Innovation
The recent successes of some ground-breaking therapies, innovation
in diagnostics, big data analysis and the growing capital flooding
the biotech industry are driving a new super cycle for medical
innovation. There are a wide range of companies that will benefit
from this growing trend. Of course this includes Pharmaceuticals
and Biotechs which produce and develop the drugs, but also all the
services, outsourcing and tools & equipment companies that
support the industry.
For Qualified Investors only
B2B Technology Media Entertainment
Application Software e-commerce and e-services
Analytics & Visualization E-Commerce
Dassault Systemes TV
Adobe Electronic Arts
Trimble
IHS Markit Stryker
Investment Themes
Our research team regularly publishes investment reports on the
most innovative and fast growing industry. All this material is
available on our website and two main structural trends that we
constantly and relentlessly explore (Digital Transformation and
Healthcare Innovation) serve as the base for the construction of
our Next-Gen Leaders portfolio.
#Digital Transformation #Healthcare Innovation
For Qualified Investors only
Application and Infrastructure Software
Digitalisation of the corporate world is driving a boom of spending
for modern software (for specialized or general functions), for IT
management and for Cybersecurity solutions. Companies are also
increasingly outsourcing their investments in their IT or back
office workload to companies offering PaaS (Platform as a Service)
solutions.
Salesforce.com is the leader of CRM (Customer Relation Management)
applications.
Workday is the leader of HCM (Human Capital Management)
applications.
Coupa is the emerging leader of BSM (Business Spend Management)
applications.
Service Now is the leader in ITSM (IT System Management)
applications.
Adobe is the leader of Creative Design applications and is also a
leader in digital marketing solutions and has a fast growing
digital signatures offering.
Trimble offers positioning and modelling solutions for a number of
industries such as Agriculture, transportation and
construction.
Salesforce - Lightning
Adobe - Photoshop
Engineering Software
Engineering Software is a niche industry in the global software
market with a number of highly specialised players who offer design
(CAD) and product management (PLM) solutions for a number of
industries.
Market leaders are Dassault Systemes, Ansys and Autodesk
Synopsys and Cadence Design offer solutions for the semiconductor
industry
PTC, offers innovative IoT and AR solutions
and Nemetschek is construction and real estate specialist
Ansys – Turbulence Modeling
PTC – Augmented Reality
Cadence - Chip Design
The rise of cloud computing, digital payments, internet-of-things,
self-driving cars, and digitalization in general leads to
increasing security risks and provide opportunities for the
Cybersecurity industry.
Cybersecurity should remain one functional area in Technology that
is unlikely to see a cyclical slowdown, as companies beef up
defences against new malware and ransomware attacks. Cyberattacks
across the globe are on the rise and the ratio of breaches to
incidents remains high, pointing to some growing sophistication in
attacks.
Palo Alto Networks and Fortinet develop Next Generation Firewalls
that offer enterprise-wide Internet security to protect companies
from breaches in their corporate networks.
CyberArk is the leading vendor in the security market of Privileged
Access Management (PAM) which helps enterprises secure their assets
in a hybrid environment.
Splunk provides software that collects and analyzes machine data
generated by websites, applications, servers, networks, and mobile
devices.
Cybersecurity
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Payment Technologies
The banking and payment space is poised for years of disruption
amid evolving consumer expectations, policy changes (such as PSD2
in Europe), cost savings from traditional banks, and increased
competition from tech savvy newcomers. This offers huge
opportunities for new-comers but also for existing players that are
able to consolidate their industry and to upgrade their offerings
to modern standards.
Digital Multi-Solutions Leaders Square and Paypal are two strong
beneficiaries from the shift towards digital payments for small
merchants, from the boom of e- commerce and from the shift of
consumers to “Neo-Services” .
Integrated Payment Technology Platforms in the US and Europe are
well positioned to continue consolidating the industry and benefit
from the long term secular shift towards electronic payments and
the digitalisation of the banking industry.
This category includes a number of legacy companies that are
consolidating the industry such as Global Payments, Fiserv and
Fidelity National in the US and Nexi and Worldine in Europe. But
also Adyen, a fast growing Dutch online disruptor.
Paypal – User Platform
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Media Music and TV
The Covid period has been marked by an acceleration of media
streaming services amid the launch of new services (Disney+, Apple
TV+, HBO Max, etc..) and of course a surge in time spent on
subscription streaming services during the lockdowns.
This trend is benefiting owners of media content and content
platforms. The media subscription trend will continue to grow and
hugely benefit owners of attractive media contents as well as a
number of streaming platforms and content aggregators.
Warner Music Group is the only pure play music content company. It
owns a number of prominent labels including Atlantic Records,
Parlophone Records, Elektra Records and Warner Records with artists
such as Ed Sheeran, Coldplay, Madonna, Pink Floyd, Led Zeppelin,
Ray Charles or John Coltrane…
Vivendi is a French media conglomerate headquartered in Paris whose
most prized asset is Universal Music Group, Gameloft. The company
also has activities in music, television, film, video game, book
publishing, communication, tickets and video hosting services
through companies such as Canal + or Gameloft.
Discovery operates a group of factual and lifestyle television
brands, and is in the process of merging with ATT’s Warner Group to
create a global media champion.
Warner Music Group Labels
Discovery + Warner Media brands
For Qualified Investors only
Media Video Games
Though they are faced with a number of short terms challenges Video
Game Publishers continue to benefit from heightened engagement and
spending as well as a growing user base.
We have reduced our exposure to the sector but we expect fresh
catalysts an a rerating of the industry at some point in the coming
months.
Activision Blizzard is a video game company that owns a number of
core franchises such as Call of Duty, World of Warcraft, Overwatch,
and Candy Crush.
Electronic Arts has several exclusive sports licenses (FIFA, Madden
NFL, NHL, etc...) and an exclusive Star Wars license from Disney,
as well as others games including Battlefield, Apex Legend and The
Sims.
Take Two is the fourth leading developer with franchises such as
Grand Theft Auto, NBA 2K or Red Dead. It has an under-monetized
player base with some room for a catchup with larger rivals.
Electronic Arts – Fifa 21
For Qualified Investors only
Life Sciences
The recent successes of some ground-breaking therapies, innovation
in diagnostics, big data analysis and the growing capital flooding
the biotech industry are driving a new super cycle for medical
innovation. There is a wide range of companies that will benefit
from this growing trend. Of course this includes Pharmaceuticals
and Biotechs which produce and develop the drugs, but also all the
services, outsourcing and tools & equipment companies that
support the industry.
IQVIA offers a broad range of biopharmaceutical developments and
contract research services (CRO) to pharmaceutical companies. The
company, the largest of its kind, assists clients by outsourcing
clinical trials, laboratory analytical services, and market
research.
Charles River Laboratories is a full-service contract research
organization (CRO). It is also well-known as the industry’s largest
and most sophisticated supplier of genetically-modified,
purpose-bred “research models” (lab rats, mice, guinea pigs,
gerbils, etc.
Catalent is a global provider of delivery technologies,
development, drug manufacturing (for Covid MRNA vaccines in
particular) , biologics, gene therapies and consumer health
products. Lonza provides products and services to the
pharmaceutical and biologic industries, including performance
chemicals and custom manufacturing of biopharmaceuticals.
Illumina is the leading developer of life science tools and
integrated systems for large- scale analysis of genetic variation
and function. Illumina is well placed to benefit from the upcoming
boom of diagnostics.
Vericel manufactures advanced cell therapies for sports medicine
and severe burn care markets.
Charles River Laboratories - Genetically modified mice
Illumina – Method of DNA sequencing
For Qualified Investors only
MedTech
The MedTech industry is benefiting over the short term from the
post-Covid rebound of procedures. Over the long term, the industry
is supported by technological innovations with an acceleration of
technological breakthroughs more particularly in imagery,
diagnostics and surgical technology.
Intuitive Surgical manufactures and markets of robotic surgical
equipment. The company’s flagship product is the da Vinci Surgical
System, a suite of devices and software that amount to a
remotely-controlled surgical platform, which allows doctors to
perform minimally-invasive laparoscopic (camera-assisted)
procedures at a minute scale.
Stryker is a medical technology company that designs, manufactures,
and sells products including surgical equipment and navigation
systems, endoscopic and communication devices, used in joint
replacements, trauma surgeries, and other emergency medical
equipment.
Siemens Healthineers provides medical imaging, laboratory
diagnostics, point-of-care testing, digital ecosystem and reading
solutions for healthcare applications.
Intuitive Surgical – The Da Vinci surgical system
Siemens Healthineers – Magnetic Resonance Imaging (MRI)
Our Approach
Fundamental criteria based mostly on top line growth;
Identification of stocks already engaged in a phase of
outperformance.
Investments are selected using a fundamental approach:
Stocks may be initially identified by a screening approach but are
mostly identified by our constant observation of financial
markets;
A thorough fundamental analysis is always performed before any
inclusion in the portfolio.
Stocks are classified as:
Core Investments for the more established and financially stable
companies;
Speculative Investments for the riskier, less mature, high growth,
high valuation companies;
Under Watch for the list of stocks we consider for a potential
inclusion in the portfolio (our “Bench”)
For Qualified Investors only
Financial Ratios & Performance Metrics
Estimated EV/Sales
Estimated Price/Sales
Estimated EV/EBITDA
SaaS Specific Metrics
ARR: (Annual Recurring Revenue): value of the contracted recurring
revenues (for subscriptions), normalized to a one-year
period.
DBNNR (Dollar-Based Net Retention Rate): Current period ARR divided
by the ARR of the previous period (typically 12 months)
…
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New subscribers
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We look at traditional financial metrics but with a special focus
on • Longer term expectations (2Y Forward) and GAAP earnings • Top
line growth, TAM and EV/Sales for Hyper-Growth stocks • P/E, Return
on Capital, sustainability of margins and Free Cash Flow
Generation for more mature companies
When needed, we look at performance metrics that are specific to an
industry.
For Qualified Investors only
Salesforce.com : Exponential Growth
Salesforce.com historical performance shows exactly what type of
story we are looking for in a Next-Gen Leader candidate: • An
exponential growth of the top-line; • A transformation of growth
into profits after a few years;
For Qualified Investors only
Salesforce.com : Exponential Growth
And, if possible, a decreasing valuation that shows that the market
is reasonably pricing in the future normalization of growth.
For Qualified Investors only
Union Securities Research Services
Descriptive Research explaining industries, indices, and structural
themes.
Core Equity Strategy - Quality stocks that we believe are a fit for
a long- term investment, selected based on a mix of long-term
investment themes and operational criteria.
Market Analytics and Exploration
Morning and intraday reports and Weekly Reviews of Equity
Markets.
Flash Alerts and Weekly Analysis of Global Markets.
Satellite Equity Strategy - Promising high-growth companies in the
US and Europe that will benefit from major technological innovation
and structural changes in corporate and consumer behavior.
Long Term Investment Themes based on disruptive trends changing the
landscape of entire industries.
Structural Trends #Digital Transformation #Green Transition
#Healthcare Innovation
+ on demand analysis and screeners, tactical investment themes,
macro comments, … www.unionsecurities.ch/research/
Global Leaders
Next-Gen Leaders
Technical Analysis
Equity News
1204 Geneva, Switzerland
www.unionsecurities.ch
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