Fundamental Thinking


Fundamental Thinking presents the perspectives of Harding Loevner’s analysts on a range of investment topics, highlighting our fundamental research and providing insight into how we approach quality growth investing.

Fundamental Thinking


Get some "Fundamental Thinking" in your Inbox

Climate change and other global trends could lead to more encounters with pests—and rising demand for pest control services.

Despite the ever-increasing effectiveness of modern pesticides, there is no sign extermination companies are putting themselves out of business. To the contrary, the industry has grown steadily over time in both developed and developing countries, and there are reasons to think the growth will continue for decades to come.

Fixed-base operators that run a network of locations are likely to achieve higher-than-average earnings growth in the fragmented FBO industry.

Fixed-base operators (FBOs) provide aviation services such as refueling, maintenance, and parking of aircraft to customers in the Business and General Aviation industry. Of the 3,200 FBOs that participate in the industry globally, the vast majority provide services at only one airport. Companies that operate a large network of locations have a competitive advantage over smaller rivals due to economies of scale.

Greater precision and speed, combined with lower energy requirements, give lasers a meaningful advantage over other manufacturing tools—and a long growth trajectory for laser equipment companies.

The history of lasers is punctuated by successive technical breakthroughs that have significantly broadened their capabilities and range of application. As lasers continue to advance, manufacturers have begun to replace older equipment with the latest laser tools, leading to rising sales for laser equipment companies.

Unlike Christmas, Diwali, or Chinese New Year, Ramadan shifts about 11 days earlier each year and is not confined to a single season—or financial quarter.

More than one billion Muslims abstain from food and drink from dawn to dusk during Ramadan. As the month-long holiday starts and ends about 11 days earlier each year, investment implications change over time. As Ramadan shifts from summer to spring over the next few years, some companies could experience higher growth.

Peer-to-peer lending platforms have flourished in a period of steady economic growth, but their popularity with lenders may decline during the next downturn.

Peer-to-peer (P2P) lending platforms—credit marketplaces that bypass banks by connecting individual lenders to borrowers directly—have experienced rapid growth since the global financial crisis and accounted for about US$85 billion in global loans in 2017. Some observers predict this figure to approach US$300 billion by 2022. However, a deterioration in the credit environment during the next downturn may drive P2P lenders away.

If global demand for food is rising, why did producers of a key fertilizer falter?

A growing human population requires more food—and more fertilizer. As the production of potash—one of the most heavily used fertilizers—is controlled by a limited number of companies, one might expect its major producers to be sound investments. But a historical examination of the global potash industry reveals a nuanced story, with some important lessons for investors.

By emphasizing efficiency over tradition, ABC-Mart and MonotaRO have achieved high growth despite Japan’s stagnant economy.

Japan’s GDP growth has remained low for nearly 30 years and averaged just 1.2% between 2012 and 2016. Even so, some Japanese companies have found rapid—and profitable—growth by eschewing many of Japan’s traditional business practices, upending their industries in the process.

Uber, Airbnb, and other stars of the sharing economy have high valuations that seem to belie their profitability. Is the sharing economy all hype?

In the wake of the global financial crisis, some observers expected the sharing economy would change consumption patterns. However, despite some successful outliers, many sharing platforms have failed to achieve scale and profitability. Three Harding Loevner analysts discuss why this is the case and what we might expect from the sharing economy in the future.

Cement’s “value to volume” ratio, among other factors, sets cement companies in a profitable position

Low exposure to global competition, high domestic barriers to entry, and sustainable sources of demand are structural advantages that endow cement companies with pricing power.

New tools like 3D knitting, body scanning, and augmented reality could make “custom” the new black

Though once the norm, custom clothing has been the domain of the wealthy for generations. Soon, innovations in manufacturing and design could make customized apparel widely accessible to mainstream consumers once again, unstitching the apparel, footwear, and accessories industry in the process.

As algorithms reshape the life sciences, who will make it big?

Exploitation of “Big Data” has driven the profits explosion at internet companies such as Facebook, Google, Tencent, and over the past few years. Are computational advances—such as machine learning, artificial intelligence, and cloud computing—now ready to do for life science earnings what they have done for internet earnings?

As Big Beer finally learns the mantra: "if you identify a trend, ride it, don’t fight it," the growth path for craft brewers and distillers becomes more difficult, though not impossible.

Some of the factors that allowed craft beer to flourish in the US a decade ago, such as growing consumer interest in all things artisanal and a more favorable regulatory environment, are now fueling domestic growth of craft spirits. Craft beer is also beginning to take market share in non-US markets. However, the big alcohol conglomerates are demonstrating they will not be as passive this time around.

The transition to fifth generation wireless technology will likely have deeper and broader economic implications than previous transitions.

5G will surpass three technical thresholds: 1) wireless internet speeds will be as fast as or faster than wired speeds; 2) the “internet of things” will have mass industrial applications for the first time; and 3) latency will fall to one millisecond—faster than the speed at which humans perceive touch feedback as instant—giving rise to “tactile internet” applications. These breakthroughs will transform much more than the telecommunications industry.

Though the future of cars may be automated, our investment decisions will be anything but.

While many predict the widespread adoption of fully autonomous vehicles by 2030, we see a number of risks that could stall the shift from driver assistance (Level 1) to fully automated driving (Level 5). It also remains to be seen whether software or hardware makers stand most to gain from this shift, further complicating matters for investors.

The younger, better‐educated generation of Chinese is beginning to disrupt industries around the world, presenting investors with underappreciated challenges and opportunities.

The number of Chinese students graduating from university each year has more than septupled from 1 million in 1997 to 7.4 million in 2015. This expanding talent pool, combined with the recent surge in R&D and capital expenditure in China, is quickly raising the international competitiveness of Chinese firms in high value-added industries.

Can new entrants like Dollar Shave Club break the hegemony of the branded consumer staples giants, or will it be dominance as usual?

Revenues from ubiquitous products such as coffee, detergent, and toothpaste have gone to a handful of branded consumer staples conglomerates such as Nestlé and Unilever for generations. With new trends in e-commerce, online advertising, contract manufacturing, and distribution channels changing the competitive landscape, industry fragmentation is perhaps now more likely than ever.

By sharing the thinking that underpins our investment decisions, the multimedia series will provide additional insight into how we construct and manage portfolios.

Topics covered in Fundamental Thinking will not be moored to the demands of portfolio performance reporting. Rather, the subjects explored and the debates highlighted will be more attuned to the underlying fundamentals we analyze.

You are using an old version of Internet Explorer. It may not display all features of this website. For the best experience, please update your browser.

The information on this website is issued by Trust Company (RE Services) Limited (ABN 45 003 278 831; AFSL 235150) as Responsible Entity of, and issuer of units in, the Harding Loevner Emerging Markets Equity Fund ARSN 604 215 296 (“Fund”), and approved by Harding Loevner LP (“Harding Loevner”), as the Investment Manager of the Fund. Harding Loevner is exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 (Cth) in respect of the financial services it provides to wholesale clients, and is not licensed to provide financial services to retail clients, in Australia. Harding Loevner is regulated by the Securities and Exchange Commission of the United States of America under US laws, which differ from Australian laws.

The information on this website is provided for general information purposes only, and is not investment advice or research, nor is it to be construed as solicitation of an offer to buy or sell any financial product . Accordingly, reliance should not be placed on this website as the basis for making an investment or other decision. A product disclosure statement (PDS) issued by the Responsible Entity is available for the Fund. You should obtain and consider the PDS, and related materials, and consult your professional advisers before making any investment decision.

Statements of fact on this website have been obtained from and are based upon sources that the Responsible Entity and Harding Loevner believe to be reliable. Neither the Responsible Entity nor Harding Loevner gives any representation or warranty as to the reliability or accuracy of the information contained on this website. All opinions and estimates included on this website constitute judgements of the Responsible Entity and Harding Loevner as at the date of this website and are subject to change without notice.

I am an Australian wholesale client or a New Zealand eligible investor and agree to the terms above and wish to proceed.

Click "Continue" to visit the general pages of the adviser to the Funds, Harding Loevner LP.
Click "Continue" to visit the pages for Harding Loevner Funds, Inc., a family of mutual funds for US investors.

Harding Loevner is not responsible for the content, accuracy, or timeliness and does not make any warranties, expressed or implied, with regard to the information obtained from other websites. These links are provided for your convenience and for navigational purposes only. They should not be considered a recommendation to buy or sell any securities. It should not be assumed that investment in the securities identified has been or will be profitable.

By clicking on the "I Agree" button, you acknowledge that you have read and understood this disclaimer and wish to proceed.

Terms & Conditions

Please confirm that you have read and understand the following terms of use of this website.

You are about to access the pages of Harding Loevner Funds plc, an Irish umbrella type open-ended investment company (the "Company"), which contains information about the Company and its sub-funds (each a "Fund"). These pages are for informational purposes only. It is not investment advice, nor is it intended to be relied on as a forecast or research and does not constitute an offer, recommendation or solicitation to buy or sell shares in any Fund. Access to and the information contained in these pages are restricted to persons who are residents of jurisdictions in which the distribution of the information herein is permitted. Please consult your professional advisers if you have questions about a particular investment or are unsure of the laws and regulations applicable to you.

Investment in any Fund may only be made in accordance with the terms of the relevant offering documents, and subject to the laws and regulations applicable in which the offering documents are distributed. Please further note that not all Funds are available for distribution in all or the same jurisdictions. No information regarding the offering of shares of the Funds is intended for, nor will offers or sales of such shares generally be made to, residents of the United States of America, its territories or possessions. In particular, neither the Funds nor any shares are or will be registered under the U.S. Securities Act of 1933, as amended, the U.S. Investment Company Act of 1940, as amended, or otherwise in the U.S. and may not, except in a transaction which does not violate U.S. securities laws, be directly or indirectly offered or sold in the U.S. or to any U.S. persons.

By clicking on the "I Agree" button below, you acknowledge that you have read and understood this disclaimer and wish to proceed to these pages.