• State-Owned Champions investing targets former monopolies with built-in market dominance and growth potential.
• Tap into essential services like utilities and telecom with high barriers to entry and stable revenue.
• Find growth in infrastructure upgrades and technology, plus potential for consistent dividend income.
• Diversify with investment opportunities in State-Owned Champions across global markets, including Africa.

The Unlikely Charm of State-Owned Giants

I find it endlessly amusing how investors will chase the shiniest new thing, a tech startup with a baffling name and no profits, while completely ignoring the giants hiding in plain sight. We’re all looking for the next rocket ship, but sometimes the most compelling opportunities are the ones that have been around for decades, just wearing a new suit. I’m talking about former state monopolies, the lumbering behemoths that used to run our phone lines and power grids. They might sound dreadfully boring, but I think that’s precisely where their hidden value lies.

From Bureaucracy to the Boardroom

Let’s be honest, when these companies were run by the government, they were hardly paragons of efficiency. They were bureaucratic, slow, and about as profit-focused as a village bake sale. But then came privatisation. Suddenly, these sleepy giants were kicked out into the cold, hard world of the public markets with shareholders demanding results. What a fascinating experiment. You take a company with an unshakeable monopoly on an essential service, and you inject it with a dose of private sector ambition.

Think about it. These companies didn’t have to fight for market share. They already owned it. They had the infrastructure, the customer base, and the regulatory frameworks all sewn up. Companies like Telefonica Brasil didn’t have to build a network from scratch, they inherited one. The transformation from a government department to a public company forces them to trim the fat, innovate, and actually think about making money. It’s like taking a reliable old family car and fitting it with a brand new engine. The chassis is solid, but now it might actually go somewhere.

The Allure of the Unavoidable

The core of this investment idea, to me, is beautifully simple. These companies sell things people cannot do without. You can put off buying a new car, you can cancel your streaming subscription, but you are going to pay your water and electricity bills. It’s not a choice. This creates a wonderfully defensive foundation. Take Brazil’s water utility for São Paulo, Companhia de Saneamento Basico. Its customers need its services, regardless of what the economy is doing. The same goes for Korea Electric Power, which supplies electricity to one of the world’s most advanced industrial nations.

This built-in demand provides a steady stream of revenue that many high-flying growth stocks can only dream of. It’s this stability that often allows these companies to pay consistent dividends, which is a rather pleasant bonus in a volatile world. They are, in essence, the bedrock of a modern economy, and there’s a certain comfort in owning a piece of that.

Not Your Grandfather's Utility Company

Now, I know what you’re thinking. Utilities are dull. They’re for your grandparents’ portfolio. And you might have been right, ten years ago. But today, these old giants are at the centre of a massive technological shift. We’re talking about smart grids, 5G infrastructure, and digital water management. They have the scale and the capital to implement these changes in a way smaller competitors simply can’t.

This is where the story gets interesting. They aren’t just maintaining old pipes and wires anymore, they are building the infrastructure of the future. This creates a potential for growth that many people overlook. When you look at them as a collective, as in the State-Owned Champions basket, you see a pattern of modernisation and innovation. Of course, no investment is without risk. These companies are often tangled up in politics and regulation, which can change at a politician's whim. But for a pragmatic investor, the combination of defensive stability and quiet technological transformation is a compelling one. It might not be glamorous, but in investing, boring can be beautiful.

Deep Dive

Market & Opportunity

• The investment theme includes 15 former state monopolies that are now publicly traded companies.
• These companies operate in essential service sectors, providing them with established market dominance.
• The transition from government ownership to public markets is a key driver for unlocking efficiency and growth potential.
• Many of these companies are positioned to benefit from large-scale infrastructure modernization programs.

Key Companies

• Companhia de Saneamento Basico (SBS): Brazil's primary water and sanitation utility for the state of São Paulo, focused on efficiency and expansion as a publicly traded entity.
• Korea Electric Power Corp. (KEP): South Korea's main electricity provider, responsible for navigating the energy transition, modernizing its grid, and delivering shareholder returns.
• Telefonica Brasil, S.A. (VIV): A major telecommunications company in Brazil that inherited significant infrastructure and customer relationships from the state-owned Telebrás system.

Primary Risk Factors

• Regulatory Risk: Profitability can be impacted by changes in government policies, such as utility regulations, environmental standards, or pricing rules.
• Political Risk: Governments may retain significant stakes or influence, and political changes can lead to policy shifts affecting business operations.
• Currency Risk: Returns for international investors can be affected by exchange rate fluctuations, particularly for companies based in emerging markets.

Growth Catalysts

• Infrastructure Modernization: Companies are often central to government-funded programs for upgrading aging systems, transitioning to renewables, and expanding digital infrastructure.
• Technological Transformation: Adoption of new technologies like smart grids, digital water management, and 5G infrastructure creates opportunities for efficiency and new revenue streams.
• Dividend Income: Stable cash flows from essential services often support policies of paying regular and reliable dividends to shareholders.
• Natural Diversification: The theme provides exposure across different sectors like utilities and telecommunications, as well as various geographies and economic cycles.

Investment Access

• The basket of stocks is available on the Nemo platform.
• Investments can be made through fractional shares, with a starting amount of $1.
• The platform offers commission-free investing.