We conduct primary research, tap into our comprehensive network in the countries we invest in, and travel frequently to identify these Next Gen themes and the most promising stock opportunities within each theme. There are currently six themes in the portfolio: “the smartphone is the new bazaar”, “the rise of the emerging markets creatives”, “the world has a new favorite pastime”, “old problems new infrastructure”, “the Next Gen franchises”, and “sustainable development”.

We do a deep dive of the most promising stock ideas within those themes: we approach company analysis like business owners trying to understand what defines success in the industry, the market opportunity, the unlevered returns of the business, unit economics, capital needs, risk, the sustainability of returns (i.e. there is a competitive advantage), strategy, and the value of the business. We look for companies that face a multi-year opportunity to create value for investors. We use a checklist to make sure we covered all the important topics supporting the investment decision.  We debate the investment thesis for owning the stock, contrasting it with our opportunity cost, market expectations, and our experience.

We manage a concentrated portfolio of 20 to 40 names. Some of the companies we own have multi-year opportunities ahead of them, so we expect to remain shareholders for many years until the opportunities fully materialize in the stock valuation. We minimize risk by holding a concentrated portfolio of companies with secular growth stories that we seek to understand very well. Position sizing is a function of conviction, liquidity, volatility, and return expectations. Opportunity cost of capital is an important consideration—the team consistently monitors position sizes and will adjust sizing as conviction, price levels and opportunity costs between investments are re-evaluated.