Thematic Investment Research

---
name: thematic-investment-research
description: "Comprehensive framework for conducting institutional-quality thematic investment research. Use when the user asks to: (1) Identify and validate investment themes, (2) Analyze thematic market opportunities and value chains, (3) Build a thematic stock universe and screen candidates, (4) Conduct company deep dives with thematic focus, (5) Value companies using theme-appropriate methodologies, (6) Assess theme-level and company-level risks, (7) Write thematic research reports, (8) Design portfolio implementation and monitoring frameworks. Triggers on phrases like thematic research, investment theme, secular trend analysis, theme validation, thematic universe, value chain mapping, or requests for structured investment research methodology."
---

# Thematic Investment Research Framework

## Overview

Thematic investing identifies structural, long-duration trends reshaping economies and captures value across industries united by common secular drivers. This skill provides an eight-phase methodology from theme identification through portfolio implementation.

## Research Workflow

Execute phases sequentially, with gate reviews between major phases:

```
Phase I:   Theme Identification & Validation
Phase II:  Structural Analysis (TAM, Value Chain, Competition)
Phase III: Universe Construction & Screening
Phase IV:  Company Deep Dives
Phase V:   Valuation Architecture
Phase VI:  Risk Assessment
Phase VII: Report Construction
Phase VIII: Implementation & Monitoring
```

## Phase I: Theme Identification & Validation

### Theme Discovery Sources

Monitor systematically:
- **Primary**: Academic journals, patent databases, regulatory filings, conference proceedings, expert networks
- **Secondary**: Institutional research, consultancy reports, multilateral publications
- **Alternative**: Search trends, VC flows, job postings, satellite data

### DRIVER Validation Framework

Validate every theme against six criteria before proceeding:

| Criterion | Question |
|-----------|----------|
| **D**urability | Is this structural (demographics, physics, regulation) or temporary? |
| **R**elevance | Does it drive revenue growth, margin expansion, or re-rating? |
| **I**nvestability | Are there listed equities with genuine, liquid exposure? |
| **V**erifiability | Can thesis elements be empirically tested with leading indicators? |
| **E**xpansion | Is TAM growing through new use cases or geographies? |
| **R**ationality | Is opportunity not fully discounted in current valuations? |

### Theme Statement Construction

Structure: `[DRIVER] is causing [STRUCTURAL CHANGE], benefiting [BENEFICIARIES] over [TIME HORIZON], measured by [KEY METRICS].`

### Deliverable: Initial Scoping Document (2-3 pages)
- Theme statement and thesis points
- DRIVER validation assessment
- Hype cycle positioning
- Initial value chain sketch
- Key research questions and data sources
- Preliminary risks and thesis killers

**Gate Review**: Obtain approval before committing to full research.

→ For detailed validation frameworks: See `references/theme-validation.md`

## Phase II: Structural Analysis

### Market Sizing

Apply both approaches and triangulate:

**Top-Down**: Macro data → penetration rates → growth assumptions → industry forecasts
**Bottom-Up**: Customer segments → adoption curves → company validation → reconciliation

### Value Chain Mapping

For each layer (Upstream → Midstream → Downstream → Adjacent), analyze:
- Gross margin profile
- Competitive intensity
- Bargaining power
- Scale economics
- Capital intensity
- Technology risk

### Competitive Dynamics (Porter's Five Forces)
- Industry rivalry: concentration, differentiation, growth vs. capacity
- New entrants: capital, technology, regulatory barriers
- Supplier power: concentration, substitutes, forward integration threat
- Buyer power: concentration, price sensitivity, alternatives
- Substitutes: alternative technologies, price-performance, switching costs

### Regulatory Landscape
Document: current framework, pending legislation, subsidies/incentives, geographic variance, political durability

→ For detailed frameworks: See `references/structural-analysis.md`

## Phase III: Universe Construction

### Inclusion Criteria

| Criterion | Pure-Play | Diversified |
|-----------|-----------|-------------|
| Revenue Exposure | >75% | >10% |
| Strategic Commitment | High | Moderate |
| Growth Attribution | >50% | >30% |
| Daily Volume | >$5M | >$5M |

### Exposure Categories
- **Pure-Play** (>75%): Highest beta, often premium valuation
- **Significant** (25-75%): Meaningful leverage with diversification
- **Enabler** (10-25%): Indirect beneficiary, downside protection
- **Optionality** (<10%): Strategic upside, early-stage exposure

### Screening Factors

**Quantitative**: Market cap, ADV, revenue CAGR, margins, ROIC, leverage, valuation, momentum
**Qualitative**: Management quality, technology leadership, customer quality, IP strength, ESG, governance

### Universe Documentation Fields
Company ID | Thematic Classification | Fundamental Snapshot | Thematic Thesis | Research Status | Catalysts & Risks

→ For detailed criteria: See `references/universe-construction.md`

## Phase IV: Company Deep Dives

### Selection Criteria (10-20 companies)
- Highest thematic purity
- Attractive fundamental profile
- Strategic value chain importance
- Differentiated insight potential
- Sufficient liquidity

### Business Quality Assessment

**Competitive Moat**: Network effects, switching costs, intangibles, cost advantages, efficient scale
**Management**: Track record, incentive alignment, strategic vision, board composition

### Financial Analysis Framework

| Area | Key Metrics |
|------|-------------|
| Revenue | Segment breakdown, volume/price/mix, recurring %, customer concentration |
| Profitability | Gross margin drivers, operating leverage, R&D intensity, path to profit |
| Cash Flow | OCF conversion, working capital, capex (maintenance vs. growth), FCF margin |
| Balance Sheet | Leverage, liquidity, asset quality, return capacity |

### Thematic Leverage Assessment
- Revenue attribution (current % and projected trajectory)
- Strategic positioning and share dynamics
- Technology alignment and disruption risk
- Customer relationship quality
- Execution capability and track record

### Financial Model Requirements
- 5+ years historical, 5-10 years forecast
- Bottom-up revenue by segment with theme drivers
- Margin assumptions tied to scale/competition/mix
- Capital requirements: capex, working capital, M&A

### Scenario Framework

| Scenario | Theme Assumption | Probability |
|----------|------------------|-------------|
| Bull | Accelerates; company gains share | 20-25% |
| Base | Develops as expected; executes to plan | 50-60% |
| Bear | Disappoints/delays; loses position | 20-25% |
| Stress | Theme fails or thesis breaks | 5-10% |

→ For detailed templates: See `references/company-analysis.md`

## Phase V: Valuation Architecture

### Methodology Selection

| Method | Best For | Limitations |
|--------|----------|-------------|
| DCF/FCFF | Profitable, visible cash flows | Terminal value sensitivity |
| Reverse DCF | Expectation gap identification | Requires assumed WACC/margins |
| EV/Revenue | High-growth unprofitable | Ignores profitability |
| EV/EBITDA | Profitable comparisons | Capex/D&A differences |
| Sum-of-Parts | Diversified theme exposure | Segment data quality |
| rNPV | Pipeline/binary outcomes | Probability subjectivity |
| LTV/CAC | Subscription models | Requires cohort data |

### DCF Construction

**Revenue**: TAM trajectory → SAM → market share → pricing → cross-check
**Margins**: Material costs (learning curves) → pricing power → mix → target vs. mature peers
**WACC**: Beta (historical vs. implied), size premium, country risk, execution premium
**Terminal Value**: Extended forecast (10+ years), conservative perpetual growth, exit multiple cross-check

### Valuation Integration
1. Scenario-weighted DCF (probability × value per scenario)
2. Comparable multiples on forecast financials
3. Sum-of-parts where applicable
4. Triangulate to conviction range
5. Set target at weighted average or conservative bound

→ For detailed methodologies: See `references/valuation-methods.md`

## Phase VI: Risk Assessment

### Theme-Level Risks

| Risk | Description | Monitoring |
|------|-------------|------------|
| Timing | Longer development than anticipated | Adoption curves, milestones |
| Magnitude | TAM overestimated | Market size revisions, unit economics |
| Displacement | Alternative supersedes thesis | Patents, VC activity, breakthroughs |
| Regulatory | Policy undermines economics | Legislation, political shifts |
| Crowding | Consensus; valuations discount gains | Fund flows, ETF assets, multiples |

### Company-Level Risks
- Execution: Management track record, guidance accuracy
- Competitive: Win/loss tracking, customer surveys
- Financial: Cash runway, covenants, capital access
- Key Person: Management depth, succession
- Technology: Patent strength, R&D productivity
- ESG/Reputation: Ratings, controversy tracking

### Risk Scoring Matrix

|  | Low Impact (1) | Medium (2) | High (3) |
|--|----------------|------------|----------|
| Low Prob (1) | 1: Monitor | 2: Monitor | 3: Plan |
| Med Prob (2) | 2: Monitor | 4: Plan | 6: Mitigate |
| High Prob (3) | 3: Plan | 6: Mitigate | 9: Critical |

### Thesis Killer Definition
Must be: Specific & measurable, Observable, Pre-committed, Action-triggering

Examples:
- Theme: "EV battery costs rise for two consecutive quarters"
- Company: "Market share falls below 15% in core segment"
- Valuation: "Stock trades above 50x forward for 6+ months"

→ For detailed frameworks: See `references/risk-assessment.md`

## Phase VII: Report Construction

### Standard Structure

| Section | Length | Content |
|---------|--------|---------|
| Executive Summary | 1-2 pp | Thesis, findings, recommendations, risks, sizing |
| Theme Deep Dive | 5-10 pp | Drivers, TAM, value chain, competition, regulation |
| Company Profiles | 3-5 pp each | Overview, positioning, financials, valuation, risks |
| Risk Assessment | 2-3 pp | Theme/company risks, thesis killers, mitigants |
| Implementation | 1-2 pp | Portfolio construction, timing, monitoring, exits |
| Appendices | Variable | Models, universe, sources, glossary, disclosures |

### Quality Standards
- All claims sourced or derived from explicit assumptions
- Forecasts include sensitivity analysis
- Competing hypotheses acknowledged
- Logic chain explicit: drivers → recommendations
- Executive summary enables standalone decision-making

→ For detailed templates: See `references/report-structure.md`

## Phase VIII: Implementation & Monitoring

### Position Sizing

| Conviction | Size | Criteria | Review |
|------------|------|----------|--------|
| High | 4-6% | Deep dive complete; multiple valuation support; clear catalysts | Monthly |
| Medium | 2-4% | Fundamental work complete; timing/execution uncertainty | Bi-weekly |
| Speculative | 1-2% | High potential but significant risks; option-like payoff | Weekly |
| Watch List | 0% | Interesting but valuation/thesis not compelling | Quarterly |

Adjust for: volatility, correlation, downside scenario survival, portfolio constraints

### Entry Execution
- **Timing**: Catalyst proximity, technical context, liquidity, market regime
- **Staged Entry**: Initial (40-50%) → Confirmation (30-40%) → Catalyst (10-30%)

### Monitoring Framework

| Level | Indicators | Frequency |
|-------|------------|-----------|
| Theme | Adoption, pricing, competition, policy, sentiment | Monthly-Quarterly |
| Company | Earnings, KPIs, strategy, positioning, valuation | Post-earnings minimum |

### Exit Criteria

| Type | Trigger | Action |
|------|---------|--------|
| Target Achieved | Price at target; thesis reflected | Trim 50-100% |
| Thesis Broken | Assumption invalidated; killer triggered | Exit 100% |
| Better Opportunity | Superior risk/reward in theme | Rotate |
| Theme Maturation | Consensus; crowding elevated | Reduce systematically |
| Risk Management | Position exceeds limits | Trim to target |

### Review Cadence
- Position: After earnings; monthly minimum
- Theme: Quarterly
- Universe Refresh: Semi-annually
- Full Research Update: Annually

→ For detailed frameworks: See `references/implementation.md`

## Quick Reference: Checklists

Use checklists in `assets/` for standardized execution:
- `theme-validation-checklist.md`: DRIVER framework validation
- `company-deep-dive-checklist.md`: Fundamental analysis completion
- `risk-scoring-template.md`: Probability/impact assessment

## Research Sources Reference

**Data**: Bloomberg, FactSet, Capital IQ, Refinitiv, PitchBook
**Industry**: Gartner, IDC, IHS Markit, Wood Mackenzie, IQVIA, BloombergNEF
**Alternative**: Google Trends, SimilarWeb, Glassdoor, Orbital Insight, Thinknum