Two: The Internet provides an asymmetric distribution of information.
Three: There’s an incredible opportunity to participate in the upside of disrupted verticals.
In October 2016, the WSJ penned an article lamenting the demise of stock picking. Titled “The Dying Business of Picking Stocks,” it opened with the line: “Investors are giving up on stock picking,” and continued on with a series of doom-and-gloom sound bites that we’ve all heard before.
Respectfully, I have to disagree.
In my view, there is no better time to be investing in the market than today. Of course, you need to arm yourself with the right strategy – and rethink everything that you thought you knew about investing. But once you do that, you’ll see that it’s actually a stock picker’s paradise.
So let me walk you through this.
•••••
One: Everything is up for grabs
First of all, you have to approach the market right now with a particular mantra in mind: Everything is up for grabs. Repeat that to yourself if you must. Everything is up for grabs.
Why is everything up for grabs?
Because about twenty years ago, the internet came along and triggered a massive
“Cambrian explosion” in our economy.
For the uninitiated, the Cambrian explosion was an event that happened 500 million years ago, back when the earth was just a rock floating around the universe with a relatively few number of unsophisticated organisms. But then, something amazing happened: New life forms started springing up rapidly, and the rate of diversification among animals in the wild grew by an order of magnitude. The key part was this: It all happened really, really quickly That’s what’s happening today in pretty much every industrial vertical.
Disruption, innovation – the Internet – this has led to a Cambrian-style event that is going to dramatically change how companies and entire industries operate. Consider, for a moment, that $1 trillion of IT spending is in the process of being upended by the shift to cloud computing, according to research firm Gartner.
For a stock picker, this presents a massive investment opportunity, but you have to know where to look. That’s because the internet also created a paradigm shift in how industries are distributed, and increasingly, markets are becoming “winner take all.”
Technology and disruption fuels this paradigm.
Think about it in terms of network effects: Once Facebook became the de facto platform for social networking, why would anyone use MySpace or any other less popular network? Same goes for media and entertainment: Why sign up for some random website that has 10 videos when you can log on to Netflix (NASDAQ:NFLX) and watch thousands of your favorite titles?
The answer is that the Internet created a dynamic where entire categories are being whittled down to one company. If you’re picking stocks, why pick the #2 or #3 company in a given vertical, when the #1 company might own more than 90% of the industry market share within the next few years?
Of course, all of this begs the question: How do you know which company is slated to become the industry leader?
Two: The Internet provides an asymmetric distribution of information
If you believe that markets operate purely efficiently, and it’s impossible to beat the market, I hate to break it to you: You’re wrong. There is an asymmetric distribution of information, and you can use that asymmetric information flow to your advantage.
When I approach stock picking, I’m not just reading over the latest analyst report or perusing the CEO’s latest letter to shareholders. That’s just a tiny piece of the research process.
Before the Internet, one might educate himself or herself about a company by reading analyst reports, checking the news, and going through financial statements. But today, there’s about a million more ways to learn about a company. I vacuum up every possible bit of information about the company – from their Glassdoor reviews to publicly-available documents to watching live streams of conferences on YouTube.
All of this is made possible by the Internet.
Again, this is an asymmetric distribution of information: If you’re willing to put in the work, it’s never been a better time to be able to understand and research businesses in a totally new way.
At Nightview Capital, we also use our own unique methods and strategies to identify innovative, future-focused business models. We’ve re-modeled old Wall Street valuation theories for today’s disrupted environment, and crafted our own investment strategies built for the modern day, technology-driven economy.
Think of it this way: The paradigm of the global economy has completely changed, so our approach to investment has changed along with it. Specifically, we’re less inclined to rely on traditional shortcuts to value like earnings per share. EPS is a valuable metric, but what we’re most interested in are companies that build their assets over time and have attractive value propositions.
Think of it this way: The paradigm of the global economy has completely changed, so our approach to investment has changed along with it.
At the core, that’s our differential approach to investing. We’re bringing new ideas and new innovation.
•••••
Three: There’s an incredible opportunity to participate in the upside of disrupted verticals
The Wall Street “crowd” is generally obsessed with quarterly earnings. We’re not. We believe that an obsessive focus on quarterly earnings as a metric to predict a company’s future value – especially in a period of technological disruption – is a mistake.
That’s because quarterly earnings don’t necessarily offer investors a full picture of the chaos that’s happening behind the scenes of a disrupted vertical.
Our philosophy – and very much inherent to our strategy – is built on the premise we need new, dynamic strategies to evaluate opportunities in the market. This is becoming more important than ever, and it’s something we focus on every day. Why? It goes back to a point I made earlier: In today’s new economy, it’s winner-take-all. Finding the company that will dominate a vertical creates an enormous opportunity for investors.
Now, to be clear: Being a stock picker in today’s market is for people who aren’t frightened away by rapid change and total disruption.
But if you like action – if you’re excited by things like electric, self-driving cars, the cloud, new retail paradigms and technological disruption – then it’s really never been a better time to be a stock picker.
We’re in the midst of Cambrian explosion. You just need to know where to look to find real value.
Disclosures: The opinions expressed herein are those of Nightview Capital, LLC and are subject to change without notice. The company (or companies) identified or referenced herein is an example of a current or potential holding or investment target and is subject to change without notice. This information should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any of the investments or strategies referenced were or will be profitable, or that investment recommendations or decisions we make in the future will be profitable. Past performance is no guarantee of future results. Nightview Capital reserves the right to modify its current investment views, strategies, techniques, and market views based on changing market dynamics. This article contains links to 3rd part websites and is used for informational purposes only. This does not constitute as an endorsement of any kind.
Nightview Capital, LLC does not accept any responsibility or liability arising from the use of this document. No document or warranty, express or implied, is being given or made that the information presented herein is accurate, current or complete, and such information is always subject to change without notice. Shareholders and other potential investors should conduct their own independent investigations of the relevant issues and companies involved in this article. This document may not be copied, reproduced or distributed without prior written consent of Nightview Capital.
Nightview Capital, LLC is an independent investment adviser registered in the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about Nightview Capital including our investment strategies, fees, and objectives can be found in our ADV Part 2, which is available upon request. WRC-16-17
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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Why It’s a Great Time To Be A Stock Picker
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January 2017
Summary
In October 2016, the WSJ penned an article lamenting the demise of stock picking. Titled “The Dying Business of Picking Stocks,” it opened with the line: “Investors are giving up on stock picking,” and continued on with a series of doom-and-gloom sound bites that we’ve all heard before.
Respectfully, I have to disagree.
In my view, there is no better time to be investing in the market than today. Of course, you need to arm yourself with the right strategy – and rethink everything that you thought you knew about investing. But once you do that, you’ll see that it’s actually a stock picker’s paradise.
So let me walk you through this.
•••••
One: Everything is up for grabs
First of all, you have to approach the market right now with a particular mantra in mind: Everything is up for grabs. Repeat that to yourself if you must. Everything is up for grabs.
Why is everything up for grabs?
Because about twenty years ago, the internet came along and triggered a massive
“Cambrian explosion” in our economy.
For the uninitiated, the Cambrian explosion was an event that happened 500 million years ago, back when the earth was just a rock floating around the universe with a relatively few number of unsophisticated organisms. But then, something amazing happened: New life forms started springing up rapidly, and the rate of diversification among animals in the wild grew by an order of magnitude. The key part was this: It all happened really, really quickly That’s what’s happening today in pretty much every industrial vertical.
Disruption, innovation – the Internet – this has led to a Cambrian-style event that is going to dramatically change how companies and entire industries operate. Consider, for a moment, that $1 trillion of IT spending is in the process of being upended by the shift to cloud computing, according to research firm Gartner.
For a stock picker, this presents a massive investment opportunity, but you have to know where to look. That’s because the internet also created a paradigm shift in how industries are distributed, and increasingly, markets are becoming “winner take all.”
Technology and disruption fuels this paradigm.
Think about it in terms of network effects: Once Facebook became the de facto platform for social networking, why would anyone use MySpace or any other less popular network? Same goes for media and entertainment: Why sign up for some random website that has 10 videos when you can log on to Netflix (NASDAQ:NFLX) and watch thousands of your favorite titles?
The answer is that the Internet created a dynamic where entire categories are being whittled down to one company. If you’re picking stocks, why pick the #2 or #3 company in a given vertical, when the #1 company might own more than 90% of the industry market share within the next few years?
Of course, all of this begs the question: How do you know which company is slated to become the industry leader?
Two: The Internet provides an asymmetric distribution of information
If you believe that markets operate purely efficiently, and it’s impossible to beat the market, I hate to break it to you: You’re wrong. There is an asymmetric distribution of information, and you can use that asymmetric information flow to your advantage.
When I approach stock picking, I’m not just reading over the latest analyst report or perusing the CEO’s latest letter to shareholders. That’s just a tiny piece of the research process.
Before the Internet, one might educate himself or herself about a company by reading analyst reports, checking the news, and going through financial statements. But today, there’s about a million more ways to learn about a company. I vacuum up every possible bit of information about the company – from their Glassdoor reviews to publicly-available documents to watching live streams of conferences on YouTube.
All of this is made possible by the Internet.
Again, this is an asymmetric distribution of information: If you’re willing to put in the work, it’s never been a better time to be able to understand and research businesses in a totally new way.
At Nightview Capital, we also use our own unique methods and strategies to identify innovative, future-focused business models. We’ve re-modeled old Wall Street valuation theories for today’s disrupted environment, and crafted our own investment strategies built for the modern day, technology-driven economy.
Think of it this way: The paradigm of the global economy has completely changed, so our approach to investment has changed along with it. Specifically, we’re less inclined to rely on traditional shortcuts to value like earnings per share. EPS is a valuable metric, but what we’re most interested in are companies that build their assets over time and have attractive value propositions.
At the core, that’s our differential approach to investing. We’re bringing new ideas and new innovation.
•••••
Three: There’s an incredible opportunity to participate in the upside of disrupted verticals
The Wall Street “crowd” is generally obsessed with quarterly earnings. We’re not. We believe that an obsessive focus on quarterly earnings as a metric to predict a company’s future value – especially in a period of technological disruption – is a mistake.
That’s because quarterly earnings don’t necessarily offer investors a full picture of the chaos that’s happening behind the scenes of a disrupted vertical.
Our philosophy – and very much inherent to our strategy – is built on the premise we need new, dynamic strategies to evaluate opportunities in the market. This is becoming more important than ever, and it’s something we focus on every day. Why? It goes back to a point I made earlier: In today’s new economy, it’s winner-take-all. Finding the company that will dominate a vertical creates an enormous opportunity for investors.
Now, to be clear: Being a stock picker in today’s market is for people who aren’t frightened away by rapid change and total disruption.
But if you like action – if you’re excited by things like electric, self-driving cars, the cloud, new retail paradigms and technological disruption – then it’s really never been a better time to be a stock picker.
We’re in the midst of Cambrian explosion. You just need to know where to look to find real value.
Disclosures: The opinions expressed herein are those of Nightview Capital, LLC and are subject to change without notice. The company (or companies) identified or referenced herein is an example of a current or potential holding or investment target and is subject to change without notice. This information should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any of the investments or strategies referenced were or will be profitable, or that investment recommendations or decisions we make in the future will be profitable. Past performance is no guarantee of future results. Nightview Capital reserves the right to modify its current investment views, strategies, techniques, and market views based on changing market dynamics. This article contains links to 3rd part websites and is used for informational purposes only. This does not constitute as an endorsement of any kind.
Nightview Capital, LLC does not accept any responsibility or liability arising from the use of this document. No document or warranty, express or implied, is being given or made that the information presented herein is accurate, current or complete, and such information is always subject to change without notice. Shareholders and other potential investors should conduct their own independent investigations of the relevant issues and companies involved in this article. This document may not be copied, reproduced or distributed without prior written consent of Nightview Capital.
Nightview Capital, LLC is an independent investment adviser registered in the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about Nightview Capital including our investment strategies, fees, and objectives can be found in our ADV Part 2, which is available upon request. WRC-16-17
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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Most investors had an immediate, gut reaction to last week’s Tesla’s Robotaxi event, and I understand why. I was there—it was a spectacle.
The Trillion-Dollar Answer to AI’s Biggest Question
(Hint: Look at Tesla and Google.)