Next decade to be an era of digital disruptors

Speaking exclusively to InvestorDaily at a media briefing in Sydney, Capital Group investment director David Polak said that the long-term trend that is beginning to emerge out of the companies it has invested in remains the internet as a global distribution platform.

“Technology providing the components that enable this digital transformation and consolidation across many industries — leading to better pricing, smoother cycles — should lead to higher valuations in due course,” Mr Polak said.

Mr Polak cited that internet platforms like Amazon and Netflix not only have significant total addressable markets but also have considerable consolidation.

Another example is Taiwan Semiconductor, a company that makes the logic chips that go into the services that enable Amazon Web Services and Microsoft Azure to dominate the cloud computing market.

“Taiwan’s Semi is now one of two companies, along with Intel, that makes cutting-edge logic chips. In 2003, there were 25 companies who made cutting-edge logic chips,” the investment director said.

Speaking on Capital Group’s New Perspective Fund (NPF), Mr Polak said that there’s been a real wave and a theme of consolidation.

“You will find both of the world’s manufacturers of aeroplanes. You’ll find two of the world’s manufacturers of aero-engines. You’ll find one of the two companies that makes spirits around the world. You’ll find a number of the chemical companies that have recently consolidated. And so on and so forth,” Mr Polak said.

“In particular, companies adopting a ‘multilocal’ approach — by establishing successful operations in their local markets, rather than retreating in the face of global trade barriers — are gaining traction.

“This is one of the key reasons why we believe the multinational companies that NPF invests in are better positioned for success in the long run.”

[Related: Fintech revenues up by 125%]