"With products such as the iPhone, the new 3DS games console and the Android operating system, companies such as Apple, Nintendo and Google are not only capturing the Zeitgeist, they are also capable of setting sustainable product trends", suggests Dr. Peter Fischer, board member at GAMAX Management AG, explaining a key selection criterion for a securities inclusion in the portfolio of GAMAX Funds Junior. The stock listing of the fund, managed by Moritz Rehmann and Jan Ehrhardt, DJE Kapital AG reads, at first glance, like the global "Who's Who" of brand manufacturers. Yet being a global brand name alone is not sufficient: "With Coca Cola and McDonald's, there is currently a lack of innovation and growth not already anticipated and priced in by the market. In this respect we do not currently see sufficient arguments which would justify a higher valuation for the stock." Says Fischer explaining the absence of both companies from the portfolio.
Anticipating market developments and setting trends
The largest global provider of innovative flash data devices is, in contrast, included in the portfolio: "Sandisk recognised early on that mobile appliances such as notebooks and tablet PCs required new and innovative data storage solutions. The company is now benefiting from this change in the technology standard and a rising demand for Solid State Disks (SSD)", explains Fischer. A further example of this is the fashion company Abercrombie & Fitch. David Abercrombie, founder of Abercrombie & Fitch, has, with the so-called vintage look, created a trend of wearing clothes which look worn and washed out. This kind of fashion is particularly popular amongst young people, who gladly reach deeper into their wallets for brand products. Expansion into Europe is opening up further growth potential for the American company.
Social networks: critically evaluate business models
With social networks such as LinkedIn or the Chinese equivalent to Facebook, renren.com, aspiring to a public listing, the media interest in the stock market flotation of these companies is great. For the investor, however, this also brings the risk of potentially paying too much for a business model. "Purely from a product point of view, as a social network with all its marketing opportunities, a company like Facebook would certainly be interesting", explains Fischer. Investors should however always carefully way up the opportunities and risks of investing in this segment even where there is a high degree of innovation.
Allocation is not always about the country
The fund management also has to detect current and future product trends and those manufacturers who can benefit. Here the focus is on identifying companies who are able to implement sustainable ideas and trends in the market through their innovative strength, which have growth potential and have sound corporate balance sheets. Allocation in the portfolio is therefore not so much decided on the basis of a company’s domestic market position but on the strength of the product or service itself, as product cycles and trends generally cross regional borders. In terms of sectors, the fund management sees the telecommunications and IT industries, particularly in the product areas of smart phones and 3D technology as being a top priority. "The systematic orientation of GAMAX Funds Junior towards product trends and innovations has, together with experienced funds management from DJE Kapital AG, proven to be a successful combination", Fischer is convinced of being able to offer investors a product which is suitable for the long-term accumulation of assets.
