Investing in Innovation

Sparkline Capital

Kai Wu

Research

17 Pages

Sparkline Capital builds a long history of innovation investing using patent data and natural language processing to track emerging technologies. They argue that innovation as a theme has delivered distinct long term returns but is prone to speculative cycles that need to be tempered with valuation and quality discipline.

Date Published: April 2022

Key Takeaways

Defining innovation: The strategy targets companies linked to fast growing technology clusters identified through patent text and topic modeling.
Economic role: Innovation waves tend to cluster around general purpose technologies that reshape industries and productivity over decades.
Investment design: Sparkline stresses combining innovation exposure with valuation, profitability and other intangible factors to avoid pure hype.
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