Digital transformation technology strategy, digitization and digitalization of business processes and data, optimize and automate operations, customer service management, internet and cloud computing

Part 2: Winning in the age of enterprise- digital transformation

– Andrew Macken, Chris Demasi and Lachlan Mackay

When it comes to the valuation of some of the world’s greatest software businesses today, it is hard to know for sure what is so.

In Part I of this two-part white paper, we identified the digital transformation of the enterprise as a prospective, structural trend that is now accelerating as a result of COVID-19. Within this trend are a number of attractive markets with high barriers to entry and limited competition. 

We believe the long-term winners of these attractive markets make for compelling investment opportunities to the extent they remain undervalued. In Part II that follows, we show the dangers of employing typical valuation heuristics in this space; and evaluate the significant opportunity costs associated with missing out on investments in the world’s greatest businesses.

It is one thing to identify the long-term winners in attractive and structurally growing markets. But it is another to find those which are undervalued. This is the simplified objective of the Montaka investment team. This is why we come to work each day.

Projecting the future value of long-term winning businesses in attractive markets is far from a trivial exercise. Indeed, one could mount a strong argument that many of the world’s very best businesses have proven to be consistently undervalued by public equity markets. We demonstrate some evidence of this dynamic here. 

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