Thematic investment research

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
Durability	Is this structural (demographics, physics, regulation) or temporary?
Relevance	Does it drive revenue growth, margin expansion, or re-rating?
Investability	Are there listed equities with genuine, liquid exposure?
Verifiability	Can thesis elements be empirically tested with leading indicators?
Expansion	Is TAM growing through new use cases or geographies?
Rationality	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