Category: Investments

Author: David Yepez

Futurology and its Impact on Value Investing

Date: 07/31/20

As we close out the first half of the year, it is good to reflect on the trends that are evolving and slowly becoming engrained in our society and how they might influence our investment philosophy.


It is fair to say the COVID-19 pandemic created paradigm shifts in societal interaction and daily life. The internet continues to expand its hold on the world as we routinely use it for communicating with friends, education, work, streaming movies, religious services, e-commerce, video games, telemedicine, buying houses and banking, among other things. The adaptability and creativity of global companies have resulted in consumer technology adoption at a level never seen before.


Today, companies that are solving society’s problems and keeping our population safe continue to gain market share at an aggressive rate. In healthcare, for example, the vaccines that used to take seven to 10 years to develop may come to market in less than two years. None of these innovations could have been predicted by traditional value investing techniques.1 It is clear times are changing, and investors should change with them.


The current environment reminds me of a school of investing created by T. Rowe Price called “futurology.” The book “Money Masters of our Time” describes futurology as “peering into the fog a bit farther than the crowd” – in other words, imagining what the future is going to look like and investing in the companies that are likely to lead those trends.


One caveat to this approach is that traditional value investing would consider many of these “stocks of the future” overvalued. However, with a deep dive into industry analysis and some thinking outside of the box, the trends that link every piece of the puzzle together are crystal clear. The other piece of this puzzle however, is the rate at which consumers will adopt these trends into their everyday life – that is when we see real change and disruption. As investors, it’s something we should try and get ahead of.


As Jeff Bezos stated at the IA Gala in 2017, “Invention is not disruptive; only customer adoption is disruptive. At Amazon we invented a lot of things that customers did not care about at all, and believe me, they were not disruptive.


Finding companies like Amazon and Tesla has been our priority because they are not afraid of failure. Failure is just part of the process that makes these companies stronger long-term.


It is important to understand trends are changing very quickly. We are monitoring them closely to ensure we don't miss out on some of the unique opportunities brought about by this rapidly developing climate of innovation.


Sources:
1. Investopedia (7/26/20) – Value investing


PAST PERFORMANCE IS NOT AN INDICATION OF FUTURE RETURNS. Information and opinions provided herein reflect the views of the author as of the publication date of this informational piece. Such views and opinions are subject to change at any point and without notice. Some of the information provided herein was obtained from third-party sources believed to be reliable but such information is not guaranteed to be accurate. In addition, the links provided within are for convenience only and the provision of the links does not imply any sponsorship, endorsement, or approval of any of the content. We do not guarantee the content or its accuracy and completeness. The content is being provided for informational purposes only, and nothing within is, or is intended to constitute, investment, tax, or legal advice or a recommendation to buy or sell any types of securities or investments. The author has not taken into account the investment objectives, financial situation, or particular needs of any individual investor. Any forward-looking statements or forecasts are based on assumptions only, and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. Any assumptions and projections displayed are estimates, hypothetical in nature, and meant to serve solely as a guideline. No investment decision should be made based solely on any information provided herein and the author is not responsible for the consequences of any decisions or actions taken as a result of information being provided herein. There is a risk of loss from an investment in securities, including the risk of total loss of principal, which an investor will need to be prepared to bear. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular investor’s financial situation or risk tolerance. Exencial Wealth Advisors, LLC (“EWA”) is an investment adviser registered with the Securities & Exchange Commission (SEC). However, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. EWA may only transact business in those states in which it is registered, notice filed, or qualifies for an exemption or exclusion from registration or notice filing requirements. Complete information about our services and fees is contained in our Form ADV Part 2A (Disclosure Brochure), a copy of which can be obtained at www.adviserinfo.sec.gov or by calling us at 888-478-1971

About the author

4054781971

DYepez@exencialwealth.com

Oklahoma City, Ok

Senior Investment Analyst

David Yepez joined Exencial Wealth Advisors in 2014. David is in charge of performing quantitative and qualitative analysis of companies in the S.E.L.E.C.T. portfolio. David developed a fascination... CLICK HERE TO READ MORE