China’s disruptive internet companies

17/04/2019

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Richard Clode, Portfolio Manager on the Janus Henderson Global Technology Team, discusses his recent trip to Hong Kong, where he met with a number of Chinese internet companies.
 
While there are many exciting investment opportunities created by disruption and powerful internet-related trends in China, there are also many companies that are having to raise capital regularly and are, therefore, failing to develop sustainable business models. Richard highlights the importance of seeing through the ‘hype’ to uncover sustainable businesses that can benefit from long-term technology trends.
 
Key takeaways: 
  • China offers disruptive and powerful internet-related trends
  • Valuations and business models of some Chinese internet companies appear challenged, however
  • There is a huge amount of capital chasing small pockets of growth and this is supporting unsustainable business models 
  • The team seeks to identify key technology trends and long-term ‘winners’

 

Glossary
 
Negative gross (profit) margin: a negative gross profit margin indicates that the cost incurred to produce a company’s goods or services exceeds the revenue generated.
 
Fintech: a portmanteau of ‘financial’ and ‘technology’, fintech describes technology that supports or enables the delivery and use of financial services.
 
VC funds: Venture capital (VC) funds are investment funds that manage the money of investors who seek private equity stakes in startup and small- to medium-sized enterprises with high growth potential. These investments are typically high-risk/high-return opportunities.
 
Convertible bond: a type of bond that the holder can convert into a specified number of equity shares in the issuing company, or cash of equal value. The conversion from bond to stock can be made at specified times during the bond's life and is usually at the discretion of the bondholder.

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Janus Henderson Horizon Global Technology Fund

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