In movies and popular media, there are certain images associated with investors. One of the character tropes is the well-to-do friend racing around in their fancy sports car.
Picture it with us. The car, bright and shiny, has a vanity license plate: it notes the ticker symbol for the holding that made them rich. If the story gives away any more information, it’s that the friend benefitted from a hot tip about a tiny tech company on the brink of striking it big.
Outside of Hollywood, it’s true that some of the most successful investors have done something like this. They happened upon that one hot investment that more than made up for all the mediocre ones. (The bad ones, too, for that matter.) They happened to get in, early.
Clients, we’re seeing newer industries with many possible pathways to growth over the next 7, 14, and 21 years. It’s exciting, but within each of these sectors, there might be dozens of public companies vying to become the next big thing. They all want their ticker on the license plate. The problem is, there is no way to tell—in the moment—which single company it will be.
If a growing industry is going to prove to be important, there’s no harm in waiting for the field to narrow. Time will tell, and so will experience, performance, management, debt, and competition. The companies that aren’t built to last? They’ll be winnowed out soon enough.
The car, the license plate, those aren’t the goal: we believe in investing because it’s getting a piece of the action. It’s providing capital to endeavors we can get behind.
So while getting in on the ground floor sounds enticing, there’s no promise that the building will ever be built—and it’s hard to beat the view from the top.
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