In our view, we no longer live in an era of short-lived industrial cycles driven by the dynamics of manufacturing and the management of tangible capital. Today, we live in an era of long-term transitions in the key value chains of the modern economy, usually starting with a disruption that has an impact across several different industries.
We think that means investors need to look beyond traditional industries to identify the potential “Transition Winners” in those modern value chains. We also believe those winners are likely to be characterized by strengths built on intangible rather than tangible capital: they will be companies that have a durable competitive position in their markets, do little to no harm to society or the environment, and can adapt to change.
In this paper, we consider in detail what these three characteristics mean to us as investors, and how we believe they reinforce one another to create the economy’s sustainable, durable and adaptable Transition Winners.