How Third Bridge supported idea generation at a global hedge fund: From inflation to French retail

  • Public Equity
  • Consumer
  • Europe

A USD 50bn+ global hedge fund was using Third Bridge’s integrated solutions for idea generation on large cap European stocks. The client was examining the impact of inflation, starting with the food retail market.

Using Third Bridge

The research process began with Maps to understand the value chain of different product families and identify producers across global supply chains. Over 50 different Maps and Forum transcripts were analysed to understand in detail the relationships between suppliers and retailers, sales trends and pricing dynamics.

With the support of Connections, Third Bridge’s expert network service, the client was also able to interview relevant industry executives with intricate knowledge of the key players, and the challenges and opportunities they were facing.

Uncovering differentiated insights

At the time, it was widely reported that food retailers across Europe were not passing on their increased costs to consumers, but a number of industry specialists interviewed by Forum sector analysts suggested that single digit inflation-driven price increases were imminent.

Based on the differentiated insights that were emerging across Forum Interviews, the client decided to explore which food categories were most affected. They discovered a plethora of transcripts that investigated whether some, such as proteins, were able to pass on inflationary pressures, and how they were positioned in the increasingly uncertain environment. The client learned that inflation in the proteins sector was indeed much higher than most other categories, with specialists commenting that costs would ultimately have to be pushed through.

Rounding out the investment thesis

Using Maps to analyse the full manufacturing chain, the client then navigated through more than 10 Forum Interviews on the French retail market to uncover further narratives to round out their investment thesis. In particular, they gained information and qualitative insight on the competitive dynamics and macro forces impacting the hypermarkets.

Key outcome for the client

The output of the work culminated in a successful long Carrefour/short Casino position for many months.

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