Strategies of Enhanced Investments

Introduction to the Trending Ideas strategy

Launched: 07/13/2020
Actualized: 07/15/2021
The strategy invests in highly promising markets that we select manually. Our analytical team prioritized first sectors: US medical marijuana, digital players in China.
The strategy invests in highly promising markets that we select manually. Our analytical team prioritized first sectors: US medical marijuana, digital players in China.
Enhanced Investments platform searches for stocks with low entry prices, exponential growth rates, and the potential to disrupt their industries in the future. The selection of companies is carried out according to criteria: rapid growth trajectories of financial indicators, not too high scores on multiples, positive or improving profitability.

Trending Ideas was launched on December 22, 2020 and performed +90.5% since inception versus S&P500 returns as +18.7 for the same period. 1 of 9 our portfolio’s picks even increased by 208% in that time and still looks great to grow.

Prerequisites: Extreme Growth in US Cannabis and Digital China Sectors Combined with Low Multiples

Our initial analysis showed that steady revenue growth did have a significant influence on share price performance.

Our baseline assumption (confirmed by the analysis) was that growth companies are autocorrelated: fast-growing companies, on average, continue to grow rapidly, and slow-growing companies continue to grow slowly. We also assumed (and confirmed) that the growth rates shown in the last period are especially important (since often growth companies "cease to be growth companies").
Growth is almost the only metric that tech companies need to focus on
Another assumption (which also found confirmation) was that the companies with the fastest historical growth trajectories in financial performance, on average, show capitalization growth much higher than the rest of the companies.
Finally, we assumed (which also found confirmation) that if we add a limitation on the maximum EV/Sales multiplier (to control risks and avoid the situation of entering "overheated companies"), this will not worsen, but, on the contrary, will slightly improve the performance of the strategy.

Growth is the most important metric that venture capital funds look at; for example, some partners at Y Combinator (the world's most successful venture capital accelerator) say growth is almost the only metric that tech companies need to focus on.
We mention venture capitalism specifically for one reason — in recent 10 years performance of VC funds are 3x-3.5x versus the best fund managers. This why, we do believe that we should import some ideas of VC's approaches in our strategy.

Moreover, companies with ultra-fast growth rates of financial indicators does not focus on profit (or EBITDA) when measuring the success: they are measured by revenue. Such companies may be unprofitable at the moment (due to financing of growth) — the market expects that they will start earning profits sometime in the future.

Summarizing our ideas, we based our methodology on four assumptions:
Growth companies follow trends: the companies growing fast tend to grow fast; companies growing slowly tend to grow slowly.
Recent revenue growth is one of the most important factors when predicting future growth.
Companies with the most rapid historical revenue growth generally have much better share price performance compared to others in their industries.
High-growth companies may not always report profits in their early stages making strict revenue measuring inaccurate.
Trending Ideas Main Focus: We manually select interesting and growing sectors using the screening capabilities of our platform.

Strategy invests in high potential sectors, first picks: medical cannabis in US, digital players in China.
Medical cannabis
  • The companies in the portfolio on average show a historical growth rate of 153% YoY;
  • Growing players are only valued twice as expensive as non-growing FMCG players;
  • The cannabis sector is forecast to grow 25-30% CAGR on the horizon 2020-2028.
Chinese digital companies
  • In general, Chinese companies are growing more than twice as fast, and are valued at only 30% more;
  • Companies in our sample are growing 5 times faster than American companies;
  • IMF predicts China's GDP growth of 8.1% in 2021 and 5.6% in 2022.
In the future, the portfolio will be replenished with new areas, such as SaaS, alternative energy.

Approach: selecting booming but bargain companies

How do we analyze booming companies?
Are revenue, web traffic, and operational indicators growing rapidly? What is the growth rate?
What are the global macro trends and industrial conjuncture for the companies' markets? What positive factors exist at the level of the company itself?
What is the gross / operating margin and EBITDA margin? Are these indicators improving?
How is the company assessed in terms of value-multiples relative to historical levels and peers?
How far is the share price from local highs?
Are there additional factors of underestimation that need to be considered?
Using the screening capabilities of our platform, our analytical team finds interesting companies in digital China and "green" Americas markets. After finding an interesting company, our analytical team performs thorough analysis, brain storming every idea with team, filtering one-off and side effects for company’s economics and publish an analytical note.

Thereby, Trending Ideas portfolio companies are selected according to criteria: rapid growth trajectories of financial indicators, not too high scores on multiples, positive profitability.

Actual performance: 4.84x times S&P500 overperformance

We launched the strategy on December 22, 2020, and it showed excellent results: the overall result is +90.5% since launch versus S&P500 +18.7% returns for the same period. Our top pick company in the portfolio grew by shocking 208%.

Not a single unprofitable idea in 6 months from the launch of the strategy
As for 06/22/2021
At the moment Trending ideas showed +84.4% this year 2021 versus S&P500 return as +16.5%, slightly slowing down amid the rhetoric of the official China. Even so, the TI strategy performs just great as shown below.
Trending Ideas vs the S&P 500

Maximum drawdown was occurred on 05/13/2021 as -29.1%.

Now the strategy has killing Sharpe ratio as 2.42. It is used to help investors understand the return of an investment compared to its risk. Sharpe Ratios above 1.00 are generally considered "good", as this would suggest that the portfolio is offering excess returns relative to its volatility.

Example deals

  • Chinese online broker with 143% revenue growth and undervaluation relative to competitors (P/S ann 6.2x)
  • Has Interactive Brokers among its shareholders, which serves as some additional guarantee of integrity

  • Chinese lending platform with a good revenue growth trajectory of +49% and low valuations (P/S 3.5x)
  • The company is entering a new market

  • One of the fastest growing cannabinoid producers: +131.8%
  • The company managed to break even. EV/S 11.5x; P/S 11.8x

  • Designs and manufactures smart watches, fitness bracelets and some other gadgets for Xiaomi and its own brands
  • Demonstrates good historical growth rate of +51.2% and it is undervalued by multiples relative to direct competitors (EV/S ann 0.5x vs 3.1x)
As of 06/22/2021


Trending Ideas incepted on 2020−12−22;
Outperforming S&P500 — actual performance of Trending Ideas strategy is +90.5% (more than +200% annualized);
Sharpe ratio is incredible 2.42;
Great growth opportunities in selected sectors;
With the growth of inflation and rates, influence of regulators, the strategy showed a drawdown from the highs like all fast-growing companies' strategies, but still in great profit from the launch and from the beginning of the year (unlike funds investing in fast-growing companies).