Kingsmill's Investment Miscellanea: Friday, November 27, 2020

Nov 27, 2020 | Joshua Kingsmill


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Key Takeaways

  • The consensus is often wrong when looking back at a 10-year performance.
  • It is hard to differentiate between what's important news and the underlying trends for companies and sectors.
  • Some of the largest companies today are likely to be the largest in 10 years, but there will also be new ones: that the “consensus” doesn’t believe in

I came across an interesting table this week. Below are the most “profitable” investments, if held on Jan. 1, 2010, until today:

It’s a fascinating mix of companies. Going through them individually, this is what the “consensus” thought would have been on each of them in 2010:

  1. Tesla: “If electric takes off, it’s the incumbent Auto manufacturers that will dominate the space, no room for a start-up
  2. Netflix: “This is basically a DVD delivery system” (note, Netflix as on-line streaming has only just begun in test markets, and most Televisions weren’t equipped to download the application)
  3. Dominos: “Pizza is unhealthy, fast-food is dead.”
  4. NVIDIA: “Intel is the dominant chip-maker. They will crush competitors like them.”
  5. Amazon: “All they do is sell books and lose money doing so.”
  6. Lulu: “A fashion trend that will just disappear.”
  7. Apple: “The Blackberry is so much better. Apple just sells iPhones, which will be commoditized.”
  8. MasterCard: “So much competition from Amex and Visa, and their business model is broken.”

We all wish we had the foresight to buy these stocks and keep them. But there are a few takeaways from this rear view exercise.

  • Sometimes it is hard to keep our convictions: over the years, we have owned some of these positions, and we get caught up in a quarterly move or might say: well, it's good, but I think I missed it, look how much it's gone up already.
  • Past performance doesn’t guarantee future success. There is no doubt that none of these companies were on the list for the 10 years from 2000 – 2010.
  • How many of the names above will appear on the 2020-2030 list of all-time gainers?

While not an exact comparison, note that the two tech companies, Apple and Microsoft from 2010, appear on the 2020 list:

If there is one takeaway from this: we all tend to get caught up in the day-to-day stock news as it relates to their short-term performance. Having a much longer time horizon and the discipline to differentiate between short term glitches and longer-term secular trends are so critical.

It’s US Thanksgiving, and we wish our neighbours to the South good and happy times and think about those who have families and friends who aren’t able to celebrate together this year. US Thanksgiving also now encompasses Black Friday and Cyber-Monday online shopping. It’s hard to believe that Cyber-Monday was invented way back in 2005: (Link) “Cyber-space” was the term we used to use for the internet “thingy”: seems so quaint. I predict we will look back at this year as a watershed moment for online convergence: the convergence of technologies and our current.