Trends Watch: Smart Stock Picking: Balancing Innovation & Risk Control

EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.  

This week, Elana talks with Rishi Sadarangani, Founder & Chief Investment Officer, R/Evolution Gate.

What is your outlook for innovation-based stock picking?

Disruption and market volatility create alpha.  The world is changing faster than ever. Disruptive innovation and geopolitical shifts are creating entirely new markets and leaving traditional incumbents in the dust.  At the macro level, an increase in interest rate volatility based on uncertainty in the inflation and interest rate outlook has led to higher factor volatility, influencing equity prices with greater frequency and intensity.  This presents a unique opportunity for investors with the right approach to capture innovation’s outsized returns.

Where do you see the greatest opportunities and why?

We see the greatest opportunities in what we describe as the “THC” (technology, healthcare, consumer) industries.  These sectors are breeding grounds for innovation, poised to disrupt traditional markets and deliver supercharged returns.

Here's a glimpse into the most promising areas:

• Technology’s Transformative Power:
  • AI Goes Mainstream: Generative AI will revolutionize how entire industries operate.
  • Immersive Computing: Get ready for groundbreaking interfaces that blend physical and digital realities (think metaverse, VR, AR).
  • Web 3.0 Revolution: Decentralized and secure Web 3.0, powered by blockchain, will unlock new possibilities.
• Healthcare's Cutting Edge:
  • Personalized Medicine: Cell, gene and novel therapies hold immense potential, particularly for oncology and rare diseases.
  • GLP-1's Promise: Research into GLP-1 drugs offers hope for treating addiction, Alzheimer's, and Parkinson's.
  • AI Revolutionizes Biotech: AI-first companies and AI-driven drug discovery are transforming the industry.
• Consumers’ Reimagined Experiences:
  • Rise of Non-Alcoholic Beverages: Booming category caters to changing consumer preferences.
  • Robots in the Home: Expect to see robots seamlessly integrated into everyday life.
  • Retail Redefined: The digital and physical shopping experience will continue to merge, with a focus on innovative in-store experiences and personalization.
  • Future of Work and Travel: Remote work, hybrid models, and resurgent travel will fuel demand for collaboration, creativity, and virtualization tools. This trend, coupled with the metaverse's growing potential, creates massive long-term monetization opportunities.

What are the greatest challenges you face and why?

Traditional market signals are getting noisier. The rise of passive investing, ETFs, and automated trading strategies means more and more market participants are following the herd, not underlying company, industry, or security fundamentals. This can lead to markets becoming overheated or undervalued and staying that way for longer stretches.

What keeps you up at night?

The biggest challenges I see are human-centric. Issues surrounding social cohesion, political polarization, and societal resilience keep me up at night.  Domestically, the potential for certain forms of extremism to further erode our social fabric, institutions, and rule of law deeply concerns me.  Globally, geopolitical risk is escalating as is the risk of weapons of mass destruction being used.  This is a chilling prospect with potentially devastating consequences. 

As a student of history, I know that humanity has overcome immense challenges before.  The human spirit has the capacity to find creative and lasting solutions.  However, getting there may be uncomfortable. 

The views and opinions expressed above are of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper.