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Q&A with Sam Kim: Secular Growth in the AI and Technology Sector
TrueShares Technology, AI & Deep Learning ETF (LRNZ) seeks to provide thematic exposure to a concentrated portfolio of secular growth technology companies that are significantly involved in advanced levels of artificial intelligence. We spoke with Portfolio Manager Sam Kim to understand how the fund responds to broader market conditions.
What is the investment philosophy behind LRNZ?
Our investment objective is to achieve long-term capital appreciation through investing in secular growth companies broadly in technology and life sciences sectors, and more specifically in companies with heavy AI exposure. LRNZ employs a high-conviction, concentrated portfolio, typically holding about 20 to 25 names. The focus on secular growth companies helps lower the correlation to broad market indices. Our mission is to identify and invest in the secular growth technology companies that can become dominant winners in their sectors like Microsoft, Cisco, or Nvidia.
Are the secular growth companies in LRNZ relatively immune from inflation or high interest rates?
Good question. Most of the time, except in extreme cases like a recession, high-quality secular growth companies tend to consistently show improving fundamentals year over year and quarter over quarter. This underpins our preference for high-quality, secular growth companies with strong fundamentals stemming from their unique product positions.
We tend to focus and gravitate toward secular growth names because these companies tend to grow their revenues based on their own product cycle, somewhat independent of macro conditions or geopolitical situations. The stock price movement of our portfolio companies tend to correlate more directly with their own growth cycles and fundamentals, rather than what the market is doing.
How are the companies in the fund impacted by broad headwinds and tailwinds like Ukraine, geopolitical risk, or the upcoming election?
These macro headwinds affect everyone, including our portfolio companies. But their own product cycles have more influence on the fundamentals and corresponding price appreciation. Ultimately, companies have to show the clear benefits of using all these AI-related technologies in the form of improved margins and enhanced revenues.
What are some secular growth companies in the AI and technology space we should watch?
There are impressive companies providing the key enabling semiconductor technologies like Nvidia, which I already mentioned, and AMD. There are also the companies in the data management layer, like MongoDB and Snowflake. Then there are some AI application companies like Samsara and Elastic. Elastic is an interesting, under-the-radar name that provides vector search capability.
Why else is secular growth an important characteristic of LRNZ?
Because we focus on secular growth companies, LRNZ is a low-correlation fund that behaves somewhat differently and is uncorrelated to the broader tech market. As the saying goes, it’s much harder to beat the market when you own the market. LRNZ aims to provide long-term capital appreciation and meaningful alpha over time.
For all LRNZ holdings, please visit: true-shares.com/lrnz/
Sam Kim is a Portfolio Manager for Black Hill Capital Partners, LLC. Mr. Kim has been in the investment management industry for over 25 years, specializing in investment, research and analysis of secular growth companies, largely in technology related sectors. Prior to founding BH Capital Partners, Mr. Kim was a Senior Analyst at Amerindo Investment Advisors, a top-tier Wall Street investment management company that focused on investing in long-term secular growth companies in the science and technology sectors. During his tenure at Amerindo, in addition to covering newly public companies, Mr. Kim was also active in analyzing and investing in late-stage private companies. Prior to his financial career, Mr. Kim acquired first-hand knowledge in designing large-scale, real-time software and communication systems as a Systems Analyst/Consultant at Teledyne Browne Engineering and a Software Systems Engineer at Raytheon Corporation. Mr. Kim received a B.S. in Bio-Medical Engineering; an M.S. in Computer Engineering from Boston University; and an M.S. in Management from the Sloan School of Management at MIT.
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