Targeted Exposure Models From Tematica

The Tematica Select Model Suite is now available. Get access to everything from Core holdings to the favorite companies of Cash Strapped Consumers to Nuclear Energy & Uranium, not to mention a Market Hedge and even some high yielding income models.
BY TEMATICA

Distilling Everyday Noise Into Clear Investment Signals
Thematic investing, when done correctly, is exactly what it sounds like: making investment decisions based upon emerging multi-year structural changes across the shifting landscapes of economics, demographics, psychographics, technologies, regulatory mandates, and other forces. This is not fix-it-and-forget-it investing, nor is it a game of hopscotch through the latest fads or short-term trends.

At its core, thematic investing identifies secular, not cyclical trends powered by tailwinds that propel revenues, cash flow, and earnings increases at well-positioned companies. Those well-positioned, or thematically pure, companies also tend to see multiple expansion across corresponding valuation frameworks. The combination of expanding multiples and rising earnings delivers fuel for higher stock prices.

In short, when done properly and utilizing Tematica’s proprietary Thematic Scorecard, Tematica Select Models help identify and provide targeted exposure to pockets of alpha generation within broad markets and sectors. Our process produces what we like to call Targeted Exposure Models. Our model development process, at a high level, is fairly straightforward but when you get to the nitty-gritty it draws on each partner’s 30 years of research and product development experience:

  1. Identify a promising emerging segment of economic activity
  2. Evaluate the segment and project its growth/life cycle
  3. Identify companies involved in the segment
  4. Evaluate those companies’ exposure to the segment on a profit or revenue basis
  5. Create and maintain a universe of companies with a minimum 80% exposure to the segment
  6. From that universe, select the top eight names based on a mix of fundamental, consensus, and momentum factors

Limiting our models to eight names allows us to provide followers with a concentrated, targeted exposure without introducing low thematic quality names to fulfill various diversification requirements like many ETFs are forced to.

One of the helpful things when thematic investing is done right is the number of data points coming from the world around us. We capture those signals and share them in our Thematic Signals newsletter. 

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