Author Archives: Chris Versace, Chief Investment Officer

About Chris Versace, Chief Investment Officer

I'm the Chief Investment Officer of Tematica Research and editor of Tematica Investing newsletter. All of that capitalizes on my near 20 years in the investment industry, nearly all of it breaking down industries and recommending stocks. In that time, I've been ranked an All Star Analyst by Zacks Investment Research and my efforts in analyzing industries, companies and equities have been recognized by both Institutional Investor and Thomson Reuters’ StarMine Monitor. In my travels, I've covered cyclicals, tech and more, which gives me a different vantage point, one that uses not only an ecosystem or food chain perspective, but one that also examines demographics, economics, psychographics and more when formulating my investment views. The question I most often get is "Are you related to…."
World Reimagined: A Reckoning for Companies

World Reimagined: A Reckoning for Companies

In 2010, corporate citizenship took a major step forward when the International Organization for Standardization (ISO), an international nongovernmental organization made up of national standards bodies, released ISO 26000, a set of voluntary standards meant to help companies implement corporate social responsibility.

While the notion of corporate citizenship dates back to the 1950s, the challenges presented by both the COVID-19 pandemic and Black Lives Matter movement ushered in a new era of corporate citizenship in 2020 that went far beyond the realm of philanthropy. Companies rallied to do good in the face of the coronavirus and stepped up efforts for diversity, inclusion, and belonging. In many respects, 2020 will be a year worth forgetting, but for corporate citizenship, it will be a year to remember.

In early March, the World Health Organization’s (WHO) estimated 89 million medical masks would be required for the Covid-19 response each month, along with 76 million examination gloves and 1.6 million goggles. To help fend off the coronavirus and protect medical workers treating those infected as well as address potential shortages of key products, companies altered their production lines to help how they could. Here are just a few examples:

Read more here…

How the Pandemic Irreversibly Forced Digital Acceleration

How the Pandemic Irreversibly Forced Digital Acceleration

When we look back on 2020, there will be several notable items that jump out from the record books. The COVID-19 pandemic and its impact on the global economy will likely be at the top of the list, as will the pull-forward in digital transformation that ensued as people adjusted how they worked, lived, and played.

Pain points tend to give way to solutions, and given the number of pain points that emerged as a result of the pandemic, we have seen digital solutions come about in part to solve consumers’ needs.

With the deployment of new connective technologies such as 5G and gigabit fiber bringing greater data speeds and network capacity as well as lower latency compared to existing networks, there will be no putting the digital genie back in the bottle.

Read more here…

Hackers use web-based project management BaseCamp to attack networks

Hackers use web-based project management BaseCamp to attack networks

It’s never a dull moment when it comes to our Cybersecurity and Digital Privacy investing theme and the corresponding index given that hackers are constantly looking for vulnerabilities and other gaps to exploit. According to a new report, phishing campaigns that distribute malware or steal your login credentials have started to use Basecamp, a web-based project management solution that allows people to collaborate, chat with each other, create documents, and share files. It appears once again the ongoing game of one upmanship between cyber attackers and cyber defenders is poised to continue as the way we live, work and play become increasingly digital.

Security researchers MalwareHunterTeam and James have found that threat actors are distributing BazarLoader executables using public Basecamp download links.

BazarLoader is a stealthy backdoor Trojan from the TrickBot gang used against high-value targets to compromise their networks. Once installed, BazarLoader will deploy Cobalt Strike beacons that allow threat actors to access the network and ultimately deploy the Ryuk ransomware.

By abusing safe services such as Basecamp to host malicious files and phishing pages, users can be lulled into a false sense of trust and open files that they normally would not.

Furthermore, by using Basecamp URLs, threat actors can create carefully constructed and targeted campaigns to infiltrate a network as users may feel that the file is from their Basecamp project.

Source: Hackers now abuse BaseCamp for free malware hosting

GAO report warns of aviation cybersecurity risks

GAO report warns of aviation cybersecurity risks

We at Tematica are unfortunately firm believers that the new connective technologies and applications associated with our Digital Lifestyle and Digital Infrastructure investing themes will create new attack vectors for cyberattackers and other bad actors. A new report  describes the connected entrainment we enjoy while traveling on aircraft as an example of just that. Another market that will help drive cybersecurity and data privacy spending that is captured by the Foxberry Tematica Research Cybersecurity & Data Privacy USD PR Index and the Rize Cybersecurity and Data Privacy UCITS EFT (CYBR).

The Government Accountability Office (GAO) noted in a report Friday (Oct. 9) that the Federal Aviation Administration (FAA) has not held testing of possibly susceptible technology, prioritized digital risks or created a digital security instruction program.

Entertainment systems, wireless networks, technologies that send information back to earth without intervention and position broadcasts are some of the complex digital infrastructure on commercial airliners.

According to the report, as noted by Bloomberg, “Until FAA strengthens its oversight program, based on assessed risks, it may not be able to ensure it is providing sufficient oversight to guard against evolving cybersecurity risks facing avionics systems in commercial airplane.”

Source: GAO Warns Of Aviation Cybersecurity Risks | PYMNTS.com

What Is Precision Farming, And Who Are The Players To Watch?

What Is Precision Farming, And Who Are The Players To Watch?

Food is perhaps the best known consumable product, and the economic laws of supply and demand are pointing to an emerging pain point unlike any we have seen in recent history. To combat this looming problem, the agriculture industry is embracing technology, much of which is similar to that housed inside the smartphones we use today, giving rise to the precision agriculture market.

Read more here

Disclosures

Thematics trump the S&P 500 in 3Q 2020

Thematics trump the S&P 500 in 3Q 2020

Last week we closed the books on the third quarter of 2020, which ended with a whimper as September saw all the major US stock market indices give back a portion of their August gains. That lackluster finish was fueled by renewed concerns surrounding the pandemic and its impact on the global economy, the lack of a fiscal stimulus deal in the U.S., and risks of a contested presidential election. Despite September’s retreat, the major US equity indices closed the quarter up between 5.3%-9.4% % with the Russell 2000 bookending on the low end while the Nasdaq Composite Index led the pack leaving the S&P 500 and the Dow Jones Industrial Average in the middle. By comparison, the Tematica Research Cleaner Living Index finished the September 2020 quarter up 27.1% even though the index moved lower during the final month of the quarter. That climb during the quarter capped off a 45.0% move higher in the Cleaner Living Index for the first nine months of 2020 vs. just a 4.1% gain for the S&P 500. 

The outperformance of the Tematica Research Cleaner Living Index reflects one of the many structural changes that are unfolding on a global basis, triggered by shifting consumer preferences and behaviors that are leading companies to pivot their business models in response. In the case of Cleaner Living, the index captures the shift toward products and services that are cleaner and better for you, your body, your home, your workplace, and the environment. 

Structural changes, such as those, are identified by Tematica’s investment themes and captured in its indices and model portfolios, all of which have outperformed the broader market thus far in 2020. For the September quarter, the Foxberry Tematica Research Cybersecurity & Data Privacy Index returned 7.1%, which elevated its return for the first nine months of 2020 to 22.7% vs. 4.1% for the S&P 500 and 9.4% for the Nasdaq Composite Index. Similarly, the Foxberry Tematica Research Sustainable Future of Food Indexachieved a gain of 11.4% for the September quarter and outperformed the major US equity market indices with its 10.1% gain for the first nine months of 2020.

In our view the only thing better than the influence of one thematic tailwind is a confluence of multiples themes be it for the Thematic Leader model portfolio or Tematica’s Thematic King that is Amazon (AMZN). The Thematic Leaders model portfolio, which returned 20.2% in the September quarter, is an equal-weighted portfolio showcasing the companies that exemplify each of Tematica’s 14 investment themes. Amazon possesses the highest Thematic Scorecard ranking given its exposure across all of our investment themes.

For the first nine months of 2020, the Thematic Leaders model portfolio was up 61.1% and since its inception in December 2018, the portfolio is up 118.9% compared to 34.2% for the S&P 500. Amazon shares were no slouch either, rising 70.4% during the first nine months of 2020, as consumers embraced digital shopping and companies embraced the cloud amid the pandemic. As impressive as that performance was, however, Amazon shares lagged behind Beyond Meat (BYND) and Farfetch Ltd (FTCH) shares, the respective leaders for Tematica’s Sustainable Future of Food and Living the Life investment themes. 

The outperformance of the Thematic Leaders as well as the Tematica Research Cleaner Living Index, the Foxberry Tematica Research Cybersecurity  Data Privacy Index, and the Foxberry Tematica Research Sustainable Future of Food reaffirm Tematica’s view that sector investing is dead, and to outperform the investment herd one needs to think differently. 

Here comes China’s aging population 

Here comes China’s aging population 

Credit Suisse issued a report that speaks to the heart of our Aging of the Population investing theme – the changing demands and needs of the aging population as well as their economic footing will lead to a sea change in spending as Boomers no matter what country they live in become conservers of wealth. The spending shift will translate into tailwinds for certain areas of the economy and pronounced headwinds for others.

 

China’s baby boomers are set to retire in the coming years, and they’re spending in different ways compared to the current retirees, according to a Credit Suisse report.

These baby boomers — defined in the report as those born in the 1960s — are more aware of having their health-care needs covered, and that’s set to lead to a “very sharp shift” in trends in the country, said Will Stephens, Asia Pacific head of quantitative and systematic strategy at the bank.

Effects from the aging population will be felt across a wide range of industries, from health care to insurance, and travel and e-commerce, according to the report, which surveyed 1,500 middle-aged and elderly consumers in China.

Stephens said the group was “the largest cohort in history” — or about 245 million Chinese, and highlighted the differences compared to the current generation of retirees.

“I think the key difference here is the sheer scale and size of the current generation of Chinese baby boomers that are going to be retiring over the next 10 years,” he said. “This boomer generation came of age right at the cusp of China’s inflection point into what’s essentially the greatest growth trend in history. So they have very different consumption patterns, different interests than what we see amongst the current retirees,” he told CNBC on Tuesday.

Citing the survey, Stephens pointed out that 39% of baby boomers expect that existing health-care social security plans will not likely meet their needs.

Source: Credit Suisse: China’s aging population will benefit healthcare, insurance

Consumers turn to chocolate and candy during the pandemic #Shocker

Consumers turn to chocolate and candy during the pandemic #Shocker

New data from the National Confectioners Association (NCA) has revealed sales of chocolate and candy in United States have increased during the coronavirus pandemic no doubt as folks looks to have at least a brief respite from things. This speaks to the heart of Tematica’s Guilty Pleasures investing theme while the NCA’s findings solidify the Thematic Leader Status for The Hershey Company (HSY) for that theme.

 

Overall sales of chocolate and candy have increased 3.8% with chocolate (+5.5%) and premium chocolate (+12.5%) outpacing the rest of the category, NCA data reveals, based on its analysis of sales performance from March 15, 2020 to August 9, 2020.

The grocery channel has become a key driver for chocolate and candy sales growth as consumer behaviors continue to evolve during the pandemic and more people shop at grocery stores. In the grocery channel alone, chocolate and candy sales are up 16.6% with chocolate (+17.9%), premium chocolate (+21.4%) and non-chocolate (+13.5%) all performing very well.

Source: Chocolate and candy soothe COVID-19 trauma, NCA reveals

Data breach exposes data of more than 100K patients at Utah Pathology Services

Data breach exposes data of more than 100K patients at Utah Pathology Services

A number of reports have named healthcare facilities and services as a prime target for cyber attacks, no surprise given the amount of personal data contained in their patient records. What the below report shows, however, is it took the identification of a different problem to reveal the the scope of data that was being made available, including in some cases social security numbers.

As one might expect, Utah Pathology has updated its security measures but it has also offered one year of free identity monitoring services to individuals affected by the incident.

 

The company wrote it discovered on June 30 that an unknown third party hacked into one of its email accounts in an attempt to redirect funds from the business. After discovering the attempted fraud, Utah Pathology secured the email account and launched an investigation.

Approximately 112,000 patients had their personal information exposed by a data breach at Utah Pathology Services.

The breach was discovered when the organization discovered “an unknown party attempted to redirect funds from within Utah Pathology,” according to a press release from the company. The attempted fraud led to the discovered of that patient information was accessible and included one or more of the following:

    • Date of birth
    • Gender
    • Phone number
    • Mailing address
    • Email address
    • Insurance information including ID and group numbers and clinical and diagnostic information related to pathology services
    • And, for a smaller percentage of patients, Social Security number

 

Source: Breach exposes data of more than 100K patients at Utah Pathology Services | KUTV