Global smaller companies: performing without the hype
Between the hype and genuine innovations a lot of mega-cap artificial intelligence dust was kicke...
A recent survey conducted by Vantiv and Socratic Technologies found that 92%* of millennials have active subscription services. This is perhaps not surprising given we are the generation labeled ‘impatient’, ‘demanding’, and as having a ‘penchant for convenience’.
I am one such millennial. Although I’d argue about the demanding bit, I certainly like convenience. For years (before I had to pay London rent), I had a monthly shoe delivery curated just for me. My weekly food shop is delivered fresh to my door every 5 days – with a recipe and the exact amount of ingredients needed to cut down on food waste. I’ve gifted many annual flower subscriptions to family over the years and, of course, I have Netflix and Amazon Prime. Like most millennials, these are all products and services that I use every day. So I decided to find out how I could invest in these companies and more…
‘Netflix shook it up, brought this whole new generation of people who said, ‘I watch things when I want to watch, how I want to watch, where I want to watch, and that’s something that no one’s going to ever forget.’ This has changed the game completely, and I think it’s the tip of the iceberg.’ – Mike Colter, actor
Let’s start with the biggest category. 64%* of millennials have an online streaming account. Netflix, a holding** in Scottish Mortgage Investment Trust, is obviously the dominant power in this space. A survey back in 2017 found that 19% of all respondents said Netflix was their default source of programs. I imagine this figure is even higher today. I know in our household Netflix is our ‘go to’, but close runner up is Amazon Prime videos.
Amazon, top ten holding** in Threadneedle Global Select and T. Rowe Price Global Focused Growth Equity, is a funny one, because it includes so many services: from next-day delivery, to video streaming with original content, and even music streaming. It’s no wonder 55%* of millennials have a Prime subscription. I personally don’t know what I would do without it.
Amazon music isn’t the only subscription out there for music lovers. Apple Music and Spotify (a holding** in the aforementioned Scottish Mortgage Investment Trust) are top of their fields when it comes to subscription based audio. Apple Music was launched back in 2015 as a strictly music platform, but they quickly started to expand into video and, taking a page out of Amazon’s playbook, on 1 November the company is launching Apple TV+, the first all-original video subscription service. A holding** in BMO Responsible Global Equity, only time will tell if Apple’s branch into original content will be successful. Jeremy Gleeson, manager of AXA Framlington Global Technology talked to us about this recently. He’s of the opinion that Apple understands the importance of uniqueness in this space. And I for one can’t wait for ‘The Morning Show’ with Reese Witherspoon and Jennifer Aniston.
I will admit I was skeptical about this one, but my husband convinced me to try it out and annoyingly he was right. It’s nice to not having to think about an entire week of dinners to inevitably have leftovers or food I didn’t cook at the end of the week. Subscriptions like HelloFresh, help to cut down on the stress of the weekly food planning.
The third largest holding** in RWC Continental European Equity, HelloFresh has also been the strongest performer in the fund during the first nine months of 2019. Commenting in a recent update, the managers said: “Since its IPO in 2017, the company has continued to deliver revenue growth ahead of consensus expectations.”
The company has also given me a little bit of time back on Saturday mornings, when I would normally be planning the meals for the coming week…
**Source: fund fact sheets, 30 September 2019