Artificial Intelligence.
Fintech.
Ecommerce.
Automation.
The Internet of Things.
These are, among others, some of the biggest, most exciting and most disruptive trends of our time.
They will destroy some industries, and wreak havoc through others, rendering them almost unrecognisable.
Horses and buggies? Gone.
Typewriters, faxes and pagers? Gone.
Internal combustion engines? Endangered.
Free-to-air TV and newspapers? Threatened.
Taxis? Endangered.
Landline phones? All but gone.
And it's not just the usual suspects.
Banking is now essentially 99% electronic. Yes, we use cash (in ever decreasing amounts), but the vast bulk of that is dispensed by ATMs.
Retail is increasingly online for consumers (was anyone really, truly, surprised Harris Scarfe went broke?) and the 'back-ends' are powered by some of the most impressive tech in the country.
There are even bricklaying robots being trialled.
Technology — or, more broadly, innovation — is disrupting and remaking every part of our economy, and our lives.
So it mightn't surprise you to know that, excluding dividends:
- The ASX is up 32% over the past 5 years
- The S&P 500 is up 59% over the same time frame; but
- The tech-heavy NASDAQ 100 has gained a whopping 103% in that period.
Tech for the win.
And it's not just 'bits and bytes' technology that has investors excited.
Reports abound that we're all now changing our diets.
Veganism, vegetarianism and 'flexitarianism' (whose followers are vegetarian or vegan… sometimes) are apparently on the rise.
One of 2019's most followed IPOs was — and still is — the fake-meat (sorry 'lab produced' meat) purveyor Beyond Meat. The shares went to market at US$25 a piece, and are now, six months later, selling for triple that. (They hit US$235 at one point… it's been a helluva ride).
More disruption.
Poor old McDonald's.
Over the last 5 years, the company's shares are, well, only…
… up 122%.
Yes, believe it or not, good old Macca's is showing even the NASDAQ a clean pair of heels.
Of course that's an arbitrary timeframe. Over different periods, the results are probably different.
But it's an interesting datapoint, no?
Isn't the mainstream commentary telling is that we're all more health-conscious these days?
That more people are going vegan/vegetarian?
And yes, some of the fast food joints are adopting fake meat products.
All true. And yet…
And yet, Macca's would have been a better investment to make, 5 years ago, than the 100 of the largest and most impressive tech businesses on the planet.
Hindsight Harry? Sure. Guilty as charged.
Everything is easy with the benefit of history.
And yet it would be silly of us to ignore that data.
If you bought Macca's 5 years ago, you've more than doubled your money (plus dividends) and beaten the Australian and US indices by a wide margin.
If you bought Beyond Meat 4 months ago, you're down by more than two-thirds.
So much for economic and social trends, right?
Yes… and no.
As an investor, those trends can be useful as a starting point.
Just not as an endpoint.
They can be interesting ways to uncover growing industries and growing companies. And those in terminal decline.
But they won't tell you whether you should invest.
They certainly won't tell you what price you should pay.
And they are important questions every investor needs to answer.
Beyond Meat is a very, very young company. For all we know, today's price might be cheap, with the benefit of hindsight.
This might be Macca's last hurrah.
Or, like this time five years ago, it might be the beginning of another half-decade of outperformance, demonstrating the value of its brand, consumer appeal, dominant store network and menu.
It might never be where the 'cool kids' go, or what they talk (and write) about, but it's delivering a quality offering for its customers.
Yes, trends matter. But fundamentals trump trends every day of the week.
Take Flight Centre, a company whose shares have been whipsawed by the changing appetites — not of consumers, but of far more, ahem, flighty investors.
After all, the trend toward booking everything online was supposed to kill Flight Centre, right?
I think I first heard that story in 1999. And again in the mid 2000s. And every so often since.
Meanwhile, the company's shares are up almost exactly 10-fold in the last 20 years. Not bad, huh?
Flight Centre happens to be a current Buy recommendation for us at Motley Fool Share Advisor, the investment service I run with my fellow Fools.
Some of our recommendations fly in the face of current trends — because the businesses are capable of standing against the tide, or because the prices are just too good to ignore — while others — like recent recommendation Australian Ethical — are harnessing some quality tailwinds to go with their innate quality.
(Yes, I have some issues with 'ethical investing' — that's a topic for another article — but I reckon this business is on a winner.)
And, of course, we're always looking to pay a good price. Not necessarily a dirt cheap price; we'd take it, but sometimes it's worth paying up for a bright future.
I'm a big fan of innovation — people who know me will tell you I love a new gadget — but as an investor, I try to quieten that part of me, to make sure I'm not getting carried away (or left behind) by the headlines, but instead buying quality for the right price, regardless of the hype — or lack thereof.
Fool on!
