“Getting in on the ground floor” may sound enticing. We humans like to be first, best, and on top of things. But just remember that the view is usually better from higher up.
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Never the Same Normal Twice
At the start of 2020, few people could have guessed the whiplash and lasting impact the novel coronavirus has caused. The pandemic has affected each of us in different ways, some minor and some profound.
“The return to normalcy” has been a stated goal for many individuals, leaders, and communities. And different people have different perspectives on the types of costs they are willing to pay in the interest of the return to normalcy.
But what is normal?
Some of you are reading these words on the screen of a cell phone. A few decades ago, this moment would’ve sounded absurd. Our website is available online: 50 years ago, the internet was still firmly in the realm of science fiction. Heck, a century ago, the notion of an electronic programmable computer itself was beyond imagination.
Many things that we take for granted in our lives, it turns out, are hardly “normal” at all: in the big scheme, our everyday circumstances would be new and alien to those who came before us. The routines of our daily lives, the things that feel so comfortable and natural to us, are often a product of a specific time and place in human history.
The oldest among us—just at the edge of living memory—were born in a world that would have found many of our habits and rituals unrecognizable.
Other things, however, they would recognize in an instant. Survivors of the 1918 influenza epidemic would have been keenly familiar with wearing face masks in public and witnessing the ongoing debate about their usefulness and appropriateness. Stories about overcrowded hospitals and overworked doctors and discussions about “flattening the curve” would not have been new (or surprising) to them.
It turns out that not only is our “normal” actually abnormal, but our “abnormal” is more normal than we might think.
Someday, hopefully in the not-too-distant future, we will be able to close the chapter on this pandemic and our lives will return to normal.
… Which is to say, they will be different, new, and unprecedented. Just like always.
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Never the Same Normal Twice – 228Main.com Presents: The Best of Leibman Financial Services
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The View from the Top
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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Portfolio Themes: Spring 2022 Updates
In our portfolio management, we try to pick and choose our spots. We’re investing for the long term, after all. We are not indexers; we invest in individual companies for their unique characteristics and the potential behind their story. We avoid knee-jerk reactions to any day-to-day news.
Sometimes, though, the daily news covers an issue that’s big enough to linger. Much of the news cycle lately has been dedicated to the war in Ukraine. The implications for the global economy are profound and have a direct impact on our work.
The war may be accelerating trends that were already there, but now they are more pressing.
OIL, ENERGY, FOOD, & BEYOND
Maybe you’ve noticed at the gas station, but one of the big impacts is the price of oil. In the short term, we foresee great profits for oil companies, but skyrocketing oil prices and energy uncertainty have also renewed interest in the next energy revolution. Solar power and electric vehicles have been on their way for a long time, but the world needs them more urgently than ever before.
These issues are interconnected with trends in agriculture. Ukraine and Russia are not only both food producers: they’re even bigger producers of fertilizers, supplies, and equipment. Agricultural commodities were already on the rise before war broke out, so food producers around the world were already investing heavily in new planting. The journey ahead will be interesting for even “boring” food production and distribution companies, but greater profits may be rapidly approaching.
THE IMPACT OF INTEREST RATES
Those rising prices have energized more interest in durable commodities such as copper and gold, which we’ve been following in our shop for a long time.
But the double whammy of rising interest rates and rising materials costs has a cooling effect on the housing industry, which we have been easing out of by steps. The shortage in the nation’s housing supply persists—and probably will for a spell. For now, homebuilders are a longer-term, lower-priority investment for us.
WHAT THE PANDEMIC MEANS FOR TECH
In times of strife, investors tend to seek comfort and safety, so more volatile sectors such as technology are starting to come back down to earth. We believe this may create buying opportunities in software and internet companies, which are less vulnerable to high interest rates and commodity prices. (They are often light on debt and low on material costs.)
Even as COVID-19 continues across the globe, some areas of life have become more manageable. The air is clearing a little for airlines and travel stocks, although we are more interested in another area of potential: biotech and pharmaceutical companies. While pharmacy stocks may be easing as the pandemic rally subsides, we are looking forward to new breakthroughs in the years ahead. The advances made in the pandemic, we believe, will prove to offer even more applications elsewhere in the future.
TAKING STOCK
The world is a complex place. As always, our thinking evolves on a weekly basis through our research process. Our vision, however, stays trained on these longer-term trends—and what they mean for our longer-term plans and planning.
Clients, want to know what this means for your portfolio? 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.
Stock investing includes risks, including fluctuating prices and loss of principal.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
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Portfolio Themes: Spring 2022 Updates – 228Main.com Presents: The Best of Leibman Financial Services
This text is available at https://www.228Main.com/.
That Unimaginable Future
As humans, we sometimes have trouble visualizing that which is not yet in existence. Back at the dawn of personal computing, when some were predicting that most homes would eventually have a computer in them, a common question was, “Why would they?”
People just struggled to imagine all the uses that would emerge.
Later, after the wonders of cable television spread across the land, talk of a new kind of communication technology arose—sort of a two-way or interactive television. These earliest visions of the internet were also met with dismissal, as people wondered what good that would be.
The lesson in this history? It may be that we are only ever scratching the surface of the potential capabilities of emerging technologies. There are many things on the horizon: ubiquitous internet access across the globe from low Earth orbit satellites, 5G and 6G and ever-faster connectivity, cloud storage of software and data at ever-decreasing prices, the “internet of things,” virtual reality and augmented reality, electronics in more and more devices… and much more.
The possibilities thrill us.
In our research, we assume that it’s beyond our capacity to foresee all the applications on the way, but we also believe that perhaps their ramifications can be guessed at. For instance…
- More semiconductors will be needed for more devices.
- Screens will show up in many new places on many new things, we can reasonably suppose.
- We can readily imagine that mobile devices will handle increasing amounts of data and apps.
- Information storage and traffic on mobile could expand exponentially.
So instead of pretending we can predict that unimaginable future, we strive to understand the structure of related industries and how these relationships might develop. Then we determine which established companies may benefit, and we’ll try to identify emerging companies with key technologies.
Then, we sort this out into what is investable, and we manage portfolios in keeping with this background. We don’t predict the future; we imagine some probable possibilities.
Clients, if you have some insight that might help us, or want to talk about this, please email us or call.
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Play the audio version of this post below:
That Unimaginable Future – 228Main.com Presents: The Best of Leibman Financial Services
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