Emerging Technologies (Part 1) - Generative AI and AI-driven Drug discovery
And potential stock ideas to play them
Let’s talk emerging technologies today!
I own three types of holdings in my portfolio:
The Stable compounder names
Stocks that represent an asymmetric risk/reward profile
Select ETFs
Today, let’s talk more about the second category of stocks - Stocks that represent an asymmetric risk/reward profile. These stocks usually fall in the following buckets:
Mostly, these tend to be relatively younger companies, often operating in emerging industries that could have a long runway for growth.
Sometimes, they also represent “special situations” companies e.g. companies going through restructuring or deep value names.
Alternatively, they could be large cap names where there is a material earnings driver that the market is failing to appreciate at present time, that could lead to a large delta in earnings versus expectations and/or a stock multiple re-rating.
Identifying Emerging industries that could be at the cusp of mass adoption is a great hunting ground for new ideas. Think electric vehicles ten years back or e-commerce when Amazon had just started selling books over the internet!
That said, note that by nature, “emerging” industries entail a lot of uncertainty within them by virtue of being at nascent stages of technology development. Therefore, companies here have the potential to be multi-baggers but at the same time, they can also go to zero due to a myriad of reasons. This is all to say that position sizing in these kinds of names is key - for risk management of the overall portfolio.
In this note Series, I will cover a few of the promising emerging technologies and industries and possible ways to play them through listed stocks. Let’s go!
