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As growth investors, our nirvana is identifying the next disruptive winner which will dominate the future in the way that the likes of Amazon and Facebook dominate the present.

By Craig Bonthron, Investment Manager, International Equities

Our three key sources of alpha when searching for the next big winners are:

  • Unappreciated sustainability of returns
  • Unappreciated addressable market
  • Unappreciated rate of adoption (i.e. ‘hockey stick’ growth)

We have been passionate sustainable investors for many years but admit that we have historically struggled to find disruptive companies that can capture real value from our global sustainability challenges. Nascent technologies, poor business models or management, regulatory complexity or cyclical headwinds often got in the way.

Craig Bonthron, Investment Manager, International Equities at Kames Capital

Interestingly however, we have noticed more and more sustainable companies emerging as viable disruptive winners. Another way of putting it is that when we search for disruptive companies, more and more of them are offering solutions to some of our biggest sustainability challenges. Innovative companies that have identified a problem and are working to solve it.

We would always rather invest in a ‘sustainable’ disruptor than one that offers no clear benefit to the planet or society. We would even say that sustainability deserves a valuation premium, but we never invest solely on the sustainable impact of a product or service. The investment needs to stack up on all of our other fundamental, valuation and technical considerations too.

As sustainable investors and bottom-up stock pickers, the key thing in our mind is not to chase a growth trend that does good or sounds good, but to invest in businesses that can capture value from it (i.e. increase market share and returns on capital as they grow). Trends or ‘investment themes’ exist within the market, but these are always evolving so we need to be open minded about where we look and very selective about which stocks we pick.

In summary, we are very positive about the future and believe focusing on the growth disruptors (i.e. improvers) of the future is the best way to capture value from sustainability trends. We are sustainable growth investors who seek disruptive businesses in an era where an increasing number of disruptive businesses are sustainable. This is good for us, for our investors, and for the planet.

Below we highlight some of the ‘sustainable disruptors’ which we invest in. These examples provide a good insight into the types of companies we look for:

Everbridge (USA)

Real-time emergency communications built on a cloud-based software platform. Growing quickly due to a disruptive low price combined with a step change in functionality versus old one-way communication infrastructure. Tangible life-saving and economic benefits during natural disasters and terrorist events.

Insulet (USA)

Manufacturer of the Omnipod, an innovative tubeless pump patch that delivers insulin for Type-1 diabetics. Improves patient quality of life and long-term health whilst reducing overall healthcare costs. A unique technology that replaces 14 needles over 3 days of use or an alternative larger pump and tube which has high upfront costs.

Chroma Ate (Taiwan)

Customisable, precision testing and measurement equipment which is a crucial part of the solar, electric battery and semiconductor development and manufacturing process. Deep relationships with customers and high quality innovative products enable the company to capture profits from strong growth trends in areas that are helping to reduce meaningfully our reliance on fossil fuels.




Pictures © Kames Capital © Fotolia

Important information

Opinions expressed represent our understanding of the current and historical positions of the market and are not an investment recommendation or advice.  Any securities and related trading strategies referenced may or may not be held/used in any strategy/portfolio. Any Opinions and/or example trades/securities are only present for the purposes of promoting Kames Capital’s investment management capabilities. Sources, both internal and external, used are deemed reliable by Kames Capital at the time of writing.

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