automobile revolution

Portfolio Themes: Fall 2022 Edition
graphic shows a photo of a basket of apples and the words "Fall Themes"

Investment research is an ongoing process here at 228 Main. Real-world developments are always intersecting with the changing prices of shares; the mosaic looks a little different each day. In our weekly meetings, we review news about companies we own, trade our insights, and talk about emerging bargains or trends. 

We think about what we own—and why. 

We sometimes find bargains in a particular industry or sector. Other times we study trends and try to sort out who will benefit in the years and decades ahead. Looking over the whole Buy List, patterns emerge. 

The single biggest theme often surfaces as a result of our search for quality companies at fair prices. Dominant, sector-leading firms—the blue chips—run the gamut from big green farm machines and home improvement chains to the largest retail health company and the biggest player in a highly fragmented industry (a consolidation play). This is where you’ll find Warren Buffett’s company, too. 

Emerging growth companies may benefit from increasing connectivity, innovation, and automation. Paired with the large technology companies who make the devices, systems, software, and chips we depend on every day, we have solid exposure to what seem to be likely growth areas in our economy. 

Natural resources have been a focus for years, and we continue to refine our thinking as the energy revolution unfolds. Copper and other industrial metals may have favorable supply-and-demand outlooks for years and decades to come. The fossil fuel industry persists, even as alternative energy becomes an increasing fraction of our total energy needs. 

The evolution of the automobile continues to intrigue us. We have exposure to this theme via big tech companies and copper producers, but also via ownership of automakers old and new, plus a supplier of sophisticated components that support the evolution of mobility. 

International diversification in Europe and India makes sense to us, and a few plain old bargains (in our opinion) round out our list. Among the shifting landscape in Europe and one of the world’s largest populations in India, we recognize some opportunities for exposure. 

Clients, we share a long time horizon; we stay focused on major trends. This approach provides some continuity in our thinking across the years, even while we work hard to understand the day-to-day factors affecting our holdings. It’s a thrilling challenge, and we’re always happy to share our thinking with you! 

Please call or email us when you want to discuss how this relates to your plans and planning. 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. 

Investing includes risks, including fluctuating prices and loss of principal. 

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Portfolio Themes: Fall 2022 Edition – 228Main.com Presents: The Best of Leibman Financial Services

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Autonomy: Freedom, Independence…

© Can Stock Photo / RioPatuca

Dictionary definitions of autonomy talk about freedom and independence. This is fitting, when you think about what autonomous or self-driving vehicles (AV) are going to do for those who are unable to drive. And that is just part of the story.

In our society, a drivers license has long represented freedom and independence – autonomy, in other words. One of the toughest issues in dealing with friends or elders with diminishing abilities has been that moment when driving a car becomes a threat to one’s self and others. And some among us have never been able to drive, due to injury, sickness, or congenital conditions.

Progress has been made in the development of autonomous cars. Within the next few years, we are likely to see the first widely available autonomous vehicles. This will make it possible for those who cannot drive to live autonomously, independently, on their own. Delivery of goods and services may be more widely available than ever before. Getting to a medical appointment or store will be routine for nearly anyone, in any condition.

An even larger benefit might come from a reduction in motor vehicle injuries and fatalities. When a self-driving car is implicated in an accident, everybody hears about it – the news covers it extensively. Yet these incidents rarely happen. And each month, more people die in US traffic accidents in conventional vehicles than were killed on 9/11.

From an investment standpoint, it is possible to own stock in several of the leading approaches to autonomous vehicles. A significant fraction of the value of one of the traditional auto companies is in its autonomous vehicle division. With another company, you gain ownership in an aggressive AV development program along with the leading internet search business, among other things. These are established, profitable companies. The third is a somewhat controversial, newer company that has yet to book a full-year profit, as it works on building an electric vehicle business.

In the investment advisory accounts we manage through LPL Financial, we have chosen a number of paths to gain exposure to the evolution of the automobile. This diversified approach will hopefully bear fruit in the years to come. No guarantees, of course.

Just as in the 1990’s, it was difficult to understand the pervasive changes the internet would bring to everyday life, autonomous vehicles may present a transformation as sweeping. We humans tend to believe things will be as they are now – it is hard to visualize change. But we believe change is coming.

We will continue to study and watch. Clients, if you would like to talk about this or anything else, please email us or call.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.