Growth From Consolidation
Not all of the action is rooted in tech and innovation, however. In fact, some of the best investment opportunities are outside the tech sector.
As in any emerging market, a key is to look for consolidation trends. Importantly, it has nothing to do with how the macroenvironment is behaving, and it also doesn’t even matter if the underlying industry is growing or not. If the consolidation tailwinds are strong enough, they can prove beneficial for investors. Currently, this is happening across multiple industries—in hotels, restaurants, offline pharmacy chains, and industrial technology.
“I love investing behind consolidation trends because if you can invest in one of the ultimate winners, the growth is phenomenal,” Moffett says. “It doesn’t even matter if the underlying industry is growing.”
One low-tech example of those is Yum China, Moffett says.
“Yum is largely KFC in China. You can’t get much more low-tech than selling fried chicken. But it’s become very valuable because of the consolidation around it.”
Moffett looks for innovation and consolidation, but also for companies that are well managed.
“Yum and other companies understand exceptional corporate governance, the importance of shareholders—and of a net cash balance sheet,” he says.