Market strategist Kiril Sokoloff’s thematic investment radar

Tricks clean energy electric vehicles Opto Sessions In this week’s episode of Opto Sessions, Kiril Sokoloff, chairman and founder of market research firm 13D Research & Strategy, discusses the thematic investment strategy that has helped him to anticipate some of the market’s major trends of the past 40 years. LISTEN TO THE FULL INTERVIEW: Apple Podcasts Spotify As one of the first to start investing thematically, Kiril Sokoloff has made a name for himself as a thematic investing expert. The global investment strategist began investing in themes when he founded 13D Research & Strategy in 1983, a market research firm that has consistently identified the most significant trends in global economies. “Over the last 40 years, I don’t think we’ve missed a single major technological transformation,” The accuracy of his calls has helped the firm to achieve phenomenal success by often going against the consensus. Sokoloff’s contrarian outlook has played a key role in allowing him to correctly anticipate some of the market’s biggest events and trends over the past four decades, from the commodities’ supercycle peak in 1978 to the internet and ecommerce boom in the mid-1990s. Some of his most notable investment calls were made during the early days of his career, including when he correctly anticipated an inflationary blow off due to tax cuts and deregulation in the US in the early 1980s. Sokoloff had foreseen a period of disinflation and an ensuing takeover boom that nobody was prepared for. A proven thematic investing track record Following the success of his early forecasting, Sokoloff founded 13D Research & Strategy to be a firm that specialised in finding investment opportunities within Schedule 13D filings, which is a form filed with the SEC to disclose a person or group that has acquired more than 5% of a company. By 1986, over the span of three years, the firm made more than 178 recommendations that were taken over while using this strategy. In 1995, his focus turned to Asia, where he identified the emerging Asian Financial Crisis. At the time, Malaysia had finished building the world’s tallest building and was constructing the world’s longest building, which to Sokoloff was a traditional sign of a major secular top. He then understood the great opportunity China represented and co-founded the first pure Asian hedge fund, during a period where the Hang Seng rose from HK$3,000 in 1990 to close to HK$12,000 in 1993. This was followed by, among other achievements, investing in internet and ecommerce companies in the 1990s before the dot-com crash, and oil in 2002, when it was only $20 a barrel, riding the trend to over $140 at its peak in June 2008. “Many times, a theme is investing in the solution to an economic problem. The economic problem isn’t going to go away, so it’s driven by the need to fix it,” 13D’s thematic investment strategy Sokoloff has often found that the secret to uncovering emerging investment themes is in the smallest of details. While these developments may seem trivial and insignificant to some, he has a honed talent in seeing the impact of these miniscule factors to the bigger picture. “One of my strengths is to understand what the key driver of things is,” he explained. He believes that the trick to identifying the next big investment trend is to pick out the single factor that will be the chief driver of a whole cycle. “There’s so many different factors, variables, countries and geopolitics that you have to be very humble,” Sokoloff said. However, Sokoloff admits that he believes the firm’s execution on investment themes is not as good as its ability to spot the next big thing. “It’s very hard to do both well. I’m focusing the big things and that’s what I find interesting. My own view is I try to be simplistic.” Investing in disruptive innovation By far the biggest theme today is disruption, and Sokoloff had been at the forefront of it. In 1988, he spotted the very early signs of a digital revolution. “We understood the digital age was coming,” he recalled. “[At the time] I tasked one of my colleagues, who’s been with me almost from the beginning, to focus on what [Joseph] Schumpeter’s called ‘creative destruction’ and what we now call disruption.” As the digital world began to take shape, it was obvious to Sokoloff that there was going to be huge disruption. “It started with the recording industry,” he explained, adding that from there it spread from industry […]

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