new trends

The View from the Top
photo shows a city skyline from the perspective of a rooftop viewfinder

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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The View from the Top – 228Main.com Presents: The Best of Leibman Financial Services

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But is it Investable?

© Can Stock Photo / gina_sanders

One of our key tasks on your behalf is the search for bargains. Seeking the best bargains is one of our fundamental investment principles.

When we spot an idea, product or trend that is likely to become more prevalent or profitable in the future, we end up trying to figure out whether that knowledge can be effectively put into client portfolios. In other words, is it investable?

To invest is to put money into something in which you have a reasonable expectation of a return. This is different than speculating, which involves a high risk of large losses or large gains. Last and least, there are many ways to simply flush money down the toilet.

For example, without debating the merits, medical and other uses of marijuana seem increasingly likely to proliferate. But we believe the political risks inherent in federal government policy are so high that it is speculating at best—not investing.

When we look at specific marijuana securities, most of the buzz is about penny stocks. These, in turn, look to us to be more in the “down the toilet” category than either an investment or a speculation. So we have concluded that the proliferation of marijuana is not investable.

Another facet of investability has to do with price. A trend that everyone seems to be talking about is likely already reflected in the price of investments, leaving little room for gains. “What everyone knows usually isn’t worth knowing,” as the saying goes.

By 1999, everyone knew the internet was going to change how we live and work. The internet did indeed transform life in many ways. But related investments were trading at extremely high valuations, resulting in losses to investors in subsequent years.

We are selective—one might say picky—about the things in which we choose to invest. Our standard of investability is high. We sometimes talk to people who are enthusiastic about an idea that sounds exciting, but is not investable. No matter how good an idea is, if we cannot get it into your portfolio on an efficient basis, it is not investable.

Clients, for examples of things we believe are investable, look at your statements (or positions in LPL AccountView). If you wish to discuss this or anything else, please email us or call.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

The opinions expressed in this material do not necessarily reflect the views of LPL Financial.

All investing, including stocks involves risk including loss of principal. No strategy assures success or protects against loss.