the next-gen leaders an introduction
TRANSCRIPT
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
For Qualified Investors only
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
For Qualified Investors only
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)
…
…
New subscribers
…
…
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
Investment research – Risk information: USS researches are prepared and published by Union Securities Switzerland SA (regulated by FINMA in Switzerland) “USS”.
The investment views have been prepared in accordance with legal requirements designed to promote the independence of investment research.
This material is for your information only and is not intended as an offer, or a solicitation of an offer, to buy or sell any investment or other specific product. Certain services and products are subject to legal restrictions and cannot be offered worldwide on an unrestricted basis and/or may not be eligible for sale to all investors. All information and opinions expressed in this material were obtained from sources believed to be reliable and in good faith, but no representation or warranty, express or implied, is made as to its accuracy or completeness (other than disclosures relating to USS). All information and opinions as well as any forecasts, estimates and prices indicated are current as of the date of this report, and are subject to change without notice. The market prices provided in performance charts and tables are closing prices on the respective principal stock exchange. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. Opinions expressed herein may differ or be contrary to those expressed by other business areas or divisions of USS as a result of using different assumptions and/or criteria.
In no circumstances may this document or any of the information (including any forecast, value, index or other calculated amount ("Values")) be used for any of the following purposes (i) valuation or accounting purposes; (ii) to determine the amounts due or payable, the price or the value of any financial instrument or financial contract; or (iii) to measure the performance of any financial instrument including, without limitation, for the purpose of tracking the return or performance of any Value or of defining the asset allocation of portfolio or of computing performance fees. By receiving this document and the information you will be deemed to represent and warrant to USS that you will not use this document or otherwise rely on any of the Information for any of the above purposes or otherwise rely upon this document or any of the information.
Opinions expressed herein may differ or be contrary to those expressed by other business areas or divisions of USS, as a result of using different assumptions and/or criteria. USS and any of its directors or employees may be entitled at any time to hold long or short positions in investment instruments referred to herein, carry out transactions involving relevant investment instruments in the capacity of principal or agent, or provide any other services or have officers, who serve as directors, either to/for the issuer, the investment instrument itself or to/for any company commercially or financially affiliated to such issuers. At any time, investment decisions (including whether to buy, sell or hold securities) made by USS and its employees may differ from or be contrary to the opinions expressed in USS research publications. Some investments may not be readily realizable since the market in the securities is illiquid and therefore valuing the investment and identifying the risk to which you are exposed may be difficult to quantify. USS relies on information barriers to control the flow of information contained in one or more areas within USS, into other areas, units, divisions or affiliates of USS. Futures and Options trading is not suitable for every investor as there is a substantial risk of loss, and losses in excess of an initial investment may occur. Past performance of an investment is no guarantee for its future performance. Additional information will be made available upon request. Some investments may be subject to sudden and large falls in value and on realization you may receive back less than you invested or may be required to pay more. Changes in foreign exchange rates may have an adverse effect on the price, value or income of an investment. The analyst(s) responsible for the preparation of this report may interact with trading desk personnel, sales personnel and other constituencies for the purpose of gathering, synthesizing and interpreting market information. Tax treatment depends on the individual circumstances and may be subject to change in the future. USS does not provide legal or tax advice and makes no representations as to the tax treatment of assets or the investment returns thereon both in general or with reference to specific client's circumstances and needs. We are of necessity unable to take into account the particular investment objectives, financial situation and needs of our individual clients and we would recommend that you take financial and/or tax advice as to the implications (including tax) of investing in any of the products mentioned herein. This material may not be reproduced or copies circulated without prior authority of USS. Unless otherwise agreed in writing USS expressly prohibits the distribution and transfer of this material to third parties for any reason. USS accepts no liability whatsoever for any claims or lawsuits from any third parties arising from the use or distribution of this material. This report is for distribution only under such circumstances as may be permitted by applicable law. Forecasts and estimates are current only as of the date of this publication and may change without notice. USS manages conflicts and maintains independence of its investment views and publication offering, and research and rating methodologies. Additional information on the relevant authors of this publication and other USS publication(s) referenced in this report; and copies of any past reports on this topic; are available upon request from your sales representative.
External Asset Managers / External Financial Consultants: In case this research or publication is provided to an External Asset Manager or an External Financial Consultant, USS expressly prohibits that it is redistributed by the External Asset Manager or the External Financial Consultant and is made available to their clients and/or third parties.
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
For Qualified Investors only
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
For Qualified Investors only
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)
…
…
New subscribers
…
…
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
Investment research – Risk information: USS researches are prepared and published by Union Securities Switzerland SA (regulated by FINMA in Switzerland) “USS”.
The investment views have been prepared in accordance with legal requirements designed to promote the independence of investment research.
This material is for your information only and is not intended as an offer, or a solicitation of an offer, to buy or sell any investment or other specific product. Certain services and products are subject to legal restrictions and cannot be offered worldwide on an unrestricted basis and/or may not be eligible for sale to all investors. All information and opinions expressed in this material were obtained from sources believed to be reliable and in good faith, but no representation or warranty, express or implied, is made as to its accuracy or completeness (other than disclosures relating to USS). All information and opinions as well as any forecasts, estimates and prices indicated are current as of the date of this report, and are subject to change without notice. The market prices provided in performance charts and tables are closing prices on the respective principal stock exchange. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. Opinions expressed herein may differ or be contrary to those expressed by other business areas or divisions of USS as a result of using different assumptions and/or criteria.
In no circumstances may this document or any of the information (including any forecast, value, index or other calculated amount ("Values")) be used for any of the following purposes (i) valuation or accounting purposes; (ii) to determine the amounts due or payable, the price or the value of any financial instrument or financial contract; or (iii) to measure the performance of any financial instrument including, without limitation, for the purpose of tracking the return or performance of any Value or of defining the asset allocation of portfolio or of computing performance fees. By receiving this document and the information you will be deemed to represent and warrant to USS that you will not use this document or otherwise rely on any of the Information for any of the above purposes or otherwise rely upon this document or any of the information.
Opinions expressed herein may differ or be contrary to those expressed by other business areas or divisions of USS, as a result of using different assumptions and/or criteria. USS and any of its directors or employees may be entitled at any time to hold long or short positions in investment instruments referred to herein, carry out transactions involving relevant investment instruments in the capacity of principal or agent, or provide any other services or have officers, who serve as directors, either to/for the issuer, the investment instrument itself or to/for any company commercially or financially affiliated to such issuers. At any time, investment decisions (including whether to buy, sell or hold securities) made by USS and its employees may differ from or be contrary to the opinions expressed in USS research publications. Some investments may not be readily realizable since the market in the securities is illiquid and therefore valuing the investment and identifying the risk to which you are exposed may be difficult to quantify. USS relies on information barriers to control the flow of information contained in one or more areas within USS, into other areas, units, divisions or affiliates of USS. Futures and Options trading is not suitable for every investor as there is a substantial risk of loss, and losses in excess of an initial investment may occur. Past performance of an investment is no guarantee for its future performance. Additional information will be made available upon request. Some investments may be subject to sudden and large falls in value and on realization you may receive back less than you invested or may be required to pay more. Changes in foreign exchange rates may have an adverse effect on the price, value or income of an investment. The analyst(s) responsible for the preparation of this report may interact with trading desk personnel, sales personnel and other constituencies for the purpose of gathering, synthesizing and interpreting market information. Tax treatment depends on the individual circumstances and may be subject to change in the future. USS does not provide legal or tax advice and makes no representations as to the tax treatment of assets or the investment returns thereon both in general or with reference to specific client's circumstances and needs. We are of necessity unable to take into account the particular investment objectives, financial situation and needs of our individual clients and we would recommend that you take financial and/or tax advice as to the implications (including tax) of investing in any of the products mentioned herein. This material may not be reproduced or copies circulated without prior authority of USS. Unless otherwise agreed in writing USS expressly prohibits the distribution and transfer of this material to third parties for any reason. USS accepts no liability whatsoever for any claims or lawsuits from any third parties arising from the use or distribution of this material. This report is for distribution only under such circumstances as may be permitted by applicable law. Forecasts and estimates are current only as of the date of this publication and may change without notice. USS manages conflicts and maintains independence of its investment views and publication offering, and research and rating methodologies. Additional information on the relevant authors of this publication and other USS publication(s) referenced in this report; and copies of any past reports on this topic; are available upon request from your sales representative.
External Asset Managers / External Financial Consultants: In case this research or publication is provided to an External Asset Manager or an External Financial Consultant, USS expressly prohibits that it is redistributed by the External Asset Manager or the External Financial Consultant and is made available to their clients and/or third parties.