For financial professionals in the UK

How can investors find tomorrow’s tech titans?

James Henderson

James Henderson

Portfolio Manager

7 Jan 2022
3 minute read

The history of hi-fi and video technology flops is long and sometimes amusing, as long as you are not a victim.

Imagine the disappointment of the family who splashed out excitedly on a 3DTV, paying £50 a head for goggles, only to find the picture just left them dizzy. Or the film buff who in the late 1990s invested in “the future of home entertainment” – a costly LaserDisc player – just as Hollywood abandoned the format.

Years ago my father proudly showed me his Betamax video recorder. Soon afterwards it was superseded by VHS and became little more than an ornament on the sideboard. It did serve one useful purpose, though. It taught me about investing in technology.

Working with my co-manager, Laura Foll, I spend the bulk of my time looking for the leading British companies of tomorrow. Sometimes that means identifying yesterday’s leaders that have the potential to reinvent themselves (think Rolls-Royce with nuclear power and aero engines that work with sustainable aviation fuel).

More often it is about unearthing promising, upcoming tech companies. One area that holds particular fascination at the moment is clean energy, in view of the need to rebuild our energy infrastructure in this country and globally. We have four holdings of listed companies in this arena that each offer different methods for storing energy.

AFC Energy in Surrey is one of the leading providers of alkaline fuel cell systems. These combine hydrogen and oxygen to produce electricity, heat and water. First developed for space missions, the technology could be used to power High-Speed Two trains and shipping. It could also provide an off-grid back-up energy source for power-hungry data centres and construction sites. The construction industry currently accounts for nearly 40 per cent of global energy-related emissions, mainly produced by diesel-driven equipment.

Ceres, a spin-out from Imperial College London, has a different approach. Its SteelCell technology generates power efficiently from conventional fuels like natural gas and from sustainable fuels like biogas, ethanol or hydrogen. It can be used to provide combined heat and power for commercial and residential buildings. It may also be used in data centres and for extending the range of electric vehicles.

ITM Power owns one of the world’s largest electrolyser plants. Based in Sheffield, it can take excess renewable electricity and use it to generate hydrogen gas. Hydrogen is seen as central to the new energy mix. As new wind farms come on stream, we will have points in the day when we are generating more electricity than we need. The ability to convert that into a clean-energy store, like hydrogen, may prove to be invaluable. It can then be used in cars (such as the Toyota Mirai), trains or lorries and myriad other applications.

Ilika produces solid-state batteries – a less flammable alternative to conventional liquid-based lithium-ion batteries. These can be miniaturised to just millimetres in scale for use in next-generation active implanted medical devices.

These are all exciting companies, but then it is easy to be excited when you meet enthusiastic experts developing cutting-edge technology. How do you pick the winners? Sadly, there can be no guarantees of success – but there are considerations that can help you mitigate or reduce the risks as a private investor.

Market opportunity: Good tech companies are almost always loss-making in the early stages because they require so much investment. They are hard to value. Sales figures offer little guidance as a metric, because there often aren’t any. So look at the addressable market. What excites us about these companies is the scale of the opportunity if they succeed. The risk is asymmetric.

Diversification: This is a mantra for any smart investor. Because of the market opportunity, we can afford to back several players. Some will not make it, but if we identify a winner the gains can be more than tenfold – much more. That can easily offset any losses.

Patience: We buy only listed companies and even then we have learnt not to jump too soon. After its IPO in November 2004, Ceres’s share price jumped to £26, but it eventually fell and flatlined between 50p and £2 for eight years. We first bought the shares in August 2018 at £1.60. They began to take off in 2020 and are now at £9.40 [5 Jan 2022]. It often takes time for technology to reach commercial viability – a lot longer than you anticipate. Yes, you may miss the early gains by holding out, but it is safer overall. Be prepared to hold a winner. Investors often bank their gains too soon.

Test the waters: Sometimes we will buy a small stake and take time to get to know the company better, following its progress more closely. It means we are better placed to recognise when to build a position.

Partnerships: We are particularly keen on commercial partnerships. ITM has a joint venture with global chemical firm Linde. Ceres has partnerships with Bosch and China’s Weichai corporation. It was the Bosch partnership that gave us the confidence to make our investment. These multinational partners can bring resources, distribution and wider expertise to a growing tech firm.

Management: Another obvious green light for us is when there is proven management in place. Ilika’s team has been around a long time. The firm’s chief scientific officer, Brian Hayden, was a founder of the business and is professor of physical chemistry at the University of Southampton. He is a pioneer of surface science and has been researching solid-state materials for over 20 years. He has around him experienced managers who have the necessary mix of scientific expertise and entrepreneurial talent.

It is impossible to say which of the four clean-energy technologies we have backed will do best. They may all have a role to play – action on green energy is unlikely to be satisfied by a single solution. And it may not be the best technology that wins through.

Many defunct technologies – LaserDisk, Betamax, DAT audio tapes – were considered superior technology, but each had a drawback or found itself superseded before it could take hold. You cannot predict accurately the determinants of success, but I hope the tips outlined here – some learnt the hard way – will help.

These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.


Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.


The information in this article does not qualify as an investment recommendation.


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