Quality Innovation | Method

Unique analysis and investment process

Quality Innovation is Serafin Innovation Hub's special investment approach to stock selection. This approach combines classic quality analysis, which focuses on the current state of the company, with modern innovation analysis, which forecasts the future qualitative strength of the company. Our unique company selection is based on scientific knowledge in innovation management - for objectively measurable success through the positive correlation between innovation efficiency and stock performance.

For an innovation to qualify as a Quality Innovation, the focus must be on the long-term profitability of the innovation. Quality innovations have characteristics that lead to higher customer satisfaction and loyalty, greater market share, and long-term profitability compared to the competition. Companies that focus on a qualitative innovation strategy try to keep profitability high through innovation and to cover research and development expenses from existing cash flow.

Richard Schaefer: Client Relationship Manager; richard.schaefer[at]serafin-am.com; +41 (21) 323 71 71

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How innovation and stock performance are related

The Serafin Innovation Hub identifies innovators and emerging technologies that offer high growth potential for investors at an early stage. This enables it to invest in companies that are developing or using these technologies before they are widely accepted. Companies that regularly innovate successfully benefit from revenue growth, higher profits, and faster market penetration. It seems obvious that the share prices of companies with such innovation successes and technological advantages tend to rise.

Selection

With our "Quality Innovation" investment style, we look for companies that are leaders in their industry and stand out for their track records of continuous innovation and introduction of new products or services into the market. The Serafin Innovation Hub, therefore, looks for companies that have a strong competitive advantage, a proven ability to innovate, and a focus on developing high-quality products or services. Companies should have a long-term vision and a commitment to invest in research and development to stay ahead of the competition.

The innovation analyses of the Serafin Innovation Hub include two core phases:

Quantitative innovation efficiency measurement
Qualitative innovation detail measurement

Serafin Innovation Funds each include the most innovation-efficient companies in the universe. Based on the exclusively built databases, Serafin combines selected innovation analytics methods to analyze the innovation efficiency of companies. The evaluation and analysis results produce a ranking of companies according to their innovation efficiency within the peer group relevant to a fund.

Get to know our methods in detail:

Quantitative innovation efficiency measurement

The innovation capability of companies is measured by comparing the input and output indicators of the innovation process using an innovation efficiency measurement. The graphic on the right shows this measurement procedure and the comparison of innovation inputs (e.g. R&D investments) to innovation outputs (e.g. sales of new products), which subsequently have a financial impact on the company. A significant advantage is that in this way small and large companies can be considered and compared simultaneously with each other in one measurement at the same time.

Qualitative innovation detail analysis

The innovation efficiency measurement results in a ranking list of the most innovation-efficient companies. The top 60 companies in this ranking are then subjected to a detailed qualitative review by the Serafin Innovation Hub team. The purpose here is to develop an understanding of the company's current innovation activities that are not already accounted for by the input/output measurement.

The Serafin Innovation Hub additionally reviews the extent to which potential portfolio candidates cover current megatrends and innovation trends and focus on general-purpose technologies and enabling technologies.

Which domains are analyzed by Serafin?

In summary, the following domains are of particular interest in the innovation analyses. These are quantified where possible and otherwise examined qualitatively.

Research and development
Knowledge creation
Innovation culture
Cooperations
Commercialization
Patent success
Process improvement

The Serafin Innovation Hub introduces itself

The Innovation Hub is responsible for the development of innovation-focused models and the execution of innovation analyses within the Serafin Asset Management Group.

In this context, the innovation efficiency and innovative strength of companies are measured quantitatively using advanced models. In addition, a detailed qualitative analysis of innovators is also carried out about their future viability and coverage of relevant market and technology trends.

The resulting innovation assessment of listed companies serves as a basis for Serafin's innovation investment products. Furthermore, the results are also made available internally for the other products and a close cooperation with the investment team of Serafin Asset Management Group is ensured. The Innovation Hub enables the inclusion of factor innovation in all investment strategies of Serafin. Depending on the focus of the respective investment strategy, innovation can be weighted more or less strongly.