Lessons learned from investment mistakes

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Hong Kong-based Yan Taw Boon, director of Asia research and co-manager of the Next Generation Mobility Fund at Neuberger Berman

The firm’s mobility-themed fund seeks investments in companies involved in next generation transport.

The fund holds positions relatively long, typically for two-three years. Sell signals are when a stock overheats and exceeds the target price. Then, the positon would be trimmed or exited.

Additionally, “if we made a mistake and the original thesis doesn’t hold, we would exit”, Boon said.

A key point is that the managers aim to avoid hyped technology by looking for companies that are already generating revenues from the theme. But even then, situations can change quickly.

Recalling one investment that underscores that idea, Boon mentions XPO Logistics, a leading-edge logistics and transport company that works with machine learning and predictive analysis. It derives about one-third of revenues from its customer Amazon.

“Recently one issue we never thought would happen, did. Amazon, XPO’s biggest customer accounting for 35% of revenue, said ‘We’ll do our own logistics and slowly exit’.

“When one-third of revenue goes away it’s a big red flag. There’s a chance they can turn around, but losing Amazon – which in the long run can be a competitor — is not going to be easy.

“We made a tough decision that the thesis has changed,” and sold out of the position, he said.

When investing in disruptors, one lesson is that they can themselves be suddenly disrupted.

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