Welcome to Soundbites – weekly insights on market trends, and investment strategies, brought to you by Investment Executive, and powered by Canada Life.

In today’s episode, we begin a two-part series featuring Morten Springborg, global thematic specialist at C WorldWide Asset Management in Copenhagen. He and his team have identified a number of global trends that offer a wealth of investment opportunities. In this episode, we discuss the future of the energy grid, and new developments in health care. We started by asking why capitalizing on global trends starts with finding leaders.

Morten Springborg (MS): Many, many times you can actually find some very, very attractive long-term themes but it’s very, very difficult to get the exposure via one single or group of equities. The problem for us is that many of the companies are simply too early in the growth phase. They are not profitable. We don’t know how they will get to profitability, and we don’t know who’s going to be the survivors longer term. Eventually we will start to see who the long-term winners are. They have typically a higher ability to invest in future growth and higher return on invested capital than their competitors. So, there are many reasons why would prefer to go for the market leader.

Why the coming transition to electrical power over fossil fuels has captured his attention.

MS: We talk about humongously big investments in order to realize the energy transition. But it is totally underestimated how much we need to invest into the grid in order to facilitate the integration and stability of the electrical system. We think that maybe 50% of all investments going into the energy transition will go to the electric grid. And we have a preference for what you can call the future green super-major utility companies. We think that there is going to be an opportunity for these global companies to grow 10% per annum for the next 30 years. And this particular area is going to be very, very secure, because it typically is a regulated utility model, whereby you get a regulated allowed return which is in excess of your cost of capital.

Who he likes in this sector.

MS: In the U.S. you have a company like NextEra [Energy Inc.] that has a combination of both renewable generation, but also regulated businesses in the grid. In our international strategy, we have a Spanish company. It’s called Iberdrola and that has grown over the last 20 years out of its domestic market, Spain, to become one of these global super-major grid utilities. It is a diversified geographically exposed company that has activities across on-shore and offshore wind and solar, together with a big regulated grid business both in the U.S. and in Spain. We believe that Iberdrola has the capability of growing high single-digit, low double-digit for a few decades.

Why he’s also looking at health care.

MS: Obesity is an unstoppable thematic development that is extremely problematic. And the problem is that there are so many co-morbidities associated with obesity. You have diabetes, cardiovascular diseases, hypertension, cancer, muscular problems. And there has been a tendency that we have treated the symptoms of the disease, and not the root cause — namely obesity. And actually, a Danish company, Novo Nordisk, has a leading market position in both insulin and also in more advanced and modern pharmaceutical products called GLP-1s that have been very, very effective to stabilize blood sugar in diabetics. One of these products that Novo Nordisk developed recently is a GLP-1 and the active molecule is called semaglutide. And that molecule has had some very, very interesting capabilities in that, if you give a diabetic insulin, the diabetic typically gains weight. GLP-1s actually have the opposite effect. Typically, patients lose weight. Potentially, Novo Nordisk will, within a few years, have an oral GLP-1 for the treatment of obesity that has the potential to lose patient weight by 25%. And that is a game changer.

And finally, what he’s learned from investigating trends and themes.

MS: There are so many challenges and that leads to many tremendous opportunities to address these challenges. And I think the world is doing it. It is doing it in diabetes, it is doing it in energy transition. Eventually these problems will be solved because we have the ingenuity to do it.

Well, those are today’s Soundbites, brought to you by Investment Executive, and powered by Canada Life. Our thanks again to Morten Springborg, global thematic specialist at C WorldWide Asset Management.

Join us every Wednesday at InvestmentExecutive.com, where you can sign up for our AM newsletter and never miss another Soundbite.

Thanks for listening.


Go back to the article.