Market-based investing that depends on sector classification has long been a favored method for diversifying an investment portfolio. However, not only has accurately defining sectors and industries been challenging but even the simple act of categorizing companies in the right sector has become complicated. This has become even more difficult with lines between sectors beginning to blur.
The lines between sectors are changing; primarily as the result of an ongoing revolution in technology that is breaking down barriers and redefining the way we do business.
Corporate diversification and acquisition of businesses across sector lines is not new. But today’s emerging corporate leaders are redefining what it means to be a company. Amazon combines its retail business with web services. Google started as a search engine, evolved into an advertising platform, and now is moving into transportation. Walmart evolved from a local retailer to incorporate pharmacy services and groceries, as well as an expanding Internet business.
What is clear is this: To succeed in the future all companies must become technology-based organizations. Advances in technology have come at an astounding rate, which is only accelerating. Technology has completely revamped the way in which businesses communicate with customers and each other, revolutionized supply chain management, fast-tracked product development, sped up financial transactions. Virtually all facets of business management have been impacted.
Which makes “sector” too rigid a definition for the newly evolved companies dominating the global market. In order to diversify, investors must now look for opportunities to match companies that are innovators with markets that are ripe for disruption.
Look at the havoc that has been wreaked on traditional industry sectors by companies like Uber, Airbnb, Apple, and technologies such as digital cameras, streaming music, and the many 3-D printing technologies now entering the market. Like these disruptive innovators, the best new investment opportunities will not be constrained by defined sectors.
Nels Wangensteen is co-founder, Managing Partner and Portfolio Manager at MayTech Global Investments (www.maytechglobal.com).
This document has been provided to you solely for information purposes. The views and opinions expressed herein are those of MayTech Global based on current market conditions as of the date hereof. As such, they are subject to change without notice. The factual information set forth herein has been obtained or derived from sources believed by MayTech Global to be reliable but it is not necessarily all-inclusive and is not guaranteed as to its accuracy and is not to be regarded as a representation or warranty, express or implied, as to the information’s accuracy or completeness, nor should the attached information serve as the basis of any investment decision.
No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission from MayTech Global.
The investment strategy and themes discussed herein entail a high degree of risk and may not be suitable for investors depending on their specific investment objectives and financial situation. References to specific investments, strategies or investment vehicles should not be relied upon as a recommendation to purchase or sell such investments or to engage in any particular strategy. The materials do not purport to contain all of the information that may be required to evaluate the investment strategy or a portfolio and investors should conduct their own independent analysis of these materials. If any offer of fund securities or interests is made, it shall be pursuant to a definitive Offering Circular or comparable disclosure document prepared by or on behalf of the fund issuer which includes risk factors, not contained herein and shall supersede this information in its entirety.