Ideas for up-and-coming industries to focus on for an investment thesis

July 03, 2022

by a searcher from University of Pennsylvania - The Wharton School in Philadelphia, PA, USA

Hi All - I’m hoping to soon begin the process of formulating an investment thesis around 2-3 target industries. Curious if anyone has ideas on specific niche / relatively un-trafficked industries to dive into or even best practices on “ideation” for those early in the process and looking for themes.
thanks!

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Reply by a searcher
from The University of Michigan in New York, NY, USA

It's difficult to identify "relatively un-trafficked" industries in a broad sense to identify attractive industries. Either they're under the radar because they're structurally difficult industries (for example, home health service, known for being attractive in theory, but operations are very difficult as you need a personal home health aide paired with each customer and it's not an option not to deliver on a given day), or they're under the radar because they haven't been discovered yet as being attractive. From what I've come across, success in search hinges upon 1) acquiring in an end market that's growing and 2) executing well once you own the business. Most successful searchers (though there are exceptions) will tell you that having the perfect investment thesis about where the future is going was far less important than knowing how to operate well once you're inside the business. I add the comment about buying in a growing industry to simply add the point that many who've been in the search community for a while say that acquiring into a dying industry and hoping to take the last couple puffs off a cigar that's about to go out (to borrow a term from Buffett) rarely leads to success in search. Doesn't exactly answer your question, just my 2 cents. Good luck!

Reply by a searcher
from Auckland University of Technology in Auckland, New Zealand

My advice would be to look for trends going on in industries in your country that may benefit you. I tend to do this by looking through government reports on trends within different industries to see if there's one that appears ripe for disruption or new entrants. Once I find something interesting I usually reach out to people within the industry to get "industry insider" knowledge that gives a higher level view of the industry.

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