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Disruptive Innovation 

14.05.2013

Guardian Wealth Management has carved out a reputation as one of the leading professional financial planning companies for UK and expatriate clients.

As a company, Guardian Wealth Management is committed to helping its clients create and preserve their wealth, whether they are interested in UK investments, European investments or want to focus further afield in Asian investment opportunities.

We pride ourselves on our ability to remain at the cutting edge of the latest investment trends and movements.

It is therefore with interest that we note the recent research undertaken by Bank of America Merrill Lynch, which has shown that since 2007 there has been an $800 billion flow into bonds and an outflow of nearly $600 billion from equities.

With S&P 500 gaining 13.4% in 2012 and the start of 2013 showing an equity-bound increase brought on by President Obama’s pledge to restart the US economy, is now the time to reassess our investments in the US stocks?

Disruptive InnovationSmaller companies are usually successful at capitalising on our enthusiasm for technological advancements or for pushing the boundaries of medical science.

We are all aware of the investment market leaders, Google, Apple, Proctor & Gamble, companies that are constantly plastered all over the investment trade press and cited as “must-haves” for your pension pots.

But who are the upcoming companies we should be aware of?

These companies thrive on “disruptive innovation” a term, which describes a product or service, which grows to such an extent that it eventually displaces established competitors.

Driehaus Capital Management are experts in the small cap sector and has identified a number of investments themes it believes supports some good bottom-up US stock-picking opportunities from small companies driven by disruptive innovation, including companies displaying sustainable and bullish end-market dynamics.

For example, as the internet grows it provides a richer stream of companies which lean themselves to disruptive innovation. Driehaus has identified some exciting opportunities for many fast moving Software-as-a-Service (SaaS) companies as well as other internet infrastructure companies and web analytic providers.

In the Biotech sector there are numerous opportunities for Biotech and Pharma companies, especially those working towards unmet needs in Oncology and Rare Diseases.

In the ‘’shale gas revolution’’, developments are now benefiting manufacturing, transportation and chemical companies that supply the industry, whilst also providing a cheap energy source needed in order to re-accelerate US manufacturing.

Although investing into small cap companies can provide greater returns, the potential for risk also increases.

This is a consequence, which needs to be considered by all investors. small cap stocks are less followed by analyst and therefore prices are not always an accurate reflection of the company’s fundamentals.

Also, smaller stocks are less liquid and access to capital for smaller companies is harder to come by. However, on the upside small cap stocks offer the potential for higher growth as investors are starting on a smaller earning base and the size of the pool stocks is greater than in the large cap sector.

So is now the right time to invest in the small cap sector? Attempting to time an investment into any market can be a risky business.

Any exposure to the US small cap sector or any other sector should only form a sensible part of your assets.

For further information on your investments including the small cap sector please contact one of our professional financial planners or visit the website for more beneficial information.


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