For the last couple of weeks, we’ve been exploring a new investment theme: Industry 4.0. We explored the business case for it. And then we zeroed in on an investment idea – a company that we’ve been tracking for a while. We like the company and we like the price at which it’s trading, relative to our valuation of the stock. But we didn’t pull the trigger last week because we wanted to pit it against a few other companies we’ve owned in the past – our other “known devils”. There were 5 on that list. All 5 of them were part of a larger list of Industry 4.0 investment candidates. We’ve shown an updated table in the next section.
You may be wondering why we’ve owned Industry 4.0 stocks in the past if we’ve just recently started exploring the theme. We owned those stocks because we had mapped those companies to other investment themes. In fact, here are the dominant themes mapped to our 5 known devils:
- FLIR Systems: AI & Big Data, 5G & IoT
- Lumentum: AI & Big Data, 5G & IoT
- NXP Semiconductors: Autonomous & Electro-Mobility
- Sensata: 5G & IoT, Autonomous & Electro-Mobility
- ABB: Renewable Energy
We tend to love companies that straddle multiple growth themes. As we’ve mentioned a few times before, our themes and worldviews are not so much about surfing the next wave as they are about avoiding the wrong sport. When companies straddle multiple growth themes, the probability of loss decreases, in our view.
It’s great that most Industry 4.0 companies will straddle multiple themes. That’s why it’s worth our time. As we’ve pointed out before, Industry 4.0 is a “Grand Confluence” of many of our investment themes – AI & Big Data, 5G & IoT, AV & EV etc. This is why we started with our “known devils” – we know these companies and we’ve been tracking them, which makes our job easier. Last week, one of these companies reached a price we like. Today, in this analysis, we’ll make the decision whether we should invest in that company.