Randall Dishmon, Senior Portfolio Manager, Global Equities
What the market is going to do is often irrelevant to the outcome for my clients. The question itself is the real problem. It shows a critical flaw in a person's thinking – the only reason to ask that question is to attempt to time the market…a perfect example of what I call "cyclical thinking". I don’t like cyclical thinking. It is one of the main enemies of the successful investor.
Successful investors have to be expert at recognizing the difference between cyclical and structural. At the core of my investing philosophy is this: I look for structural trends, simply put "how is the world changing?". A perfect example that I’ve been investing in for my entire career is the rise of ecommerce. It was not a cycle that led to 4 years of ecommerce being favoured and then mean-reverted to 4 years of brick and mortar retail outperforming. That's the difference: cyclical change separates markets into growth companies and value companies. Structural change separates the market into winners and losers.
Losers don't mean revert…they go bankrupt. It is important to recognize the difference.
With that in mind, here is my outlook, but not for the market, rather for the structural growth trends I'm currently invested in:
• Move to the cloud
The transition to cloud computing will continue stronger than before: prior to COVID 19 it was considered a "nice to have", it is now considered existential. As one CEO told me very recently, "If I don’t get to the cloud like…yesterday, I don't have a business tomorrow". It is a once-in-a-generation type shift that is changing the way every company on the planet does business. Not many things do that.
• Rise of Ecommerce
In my opinion, Ecommerce will only accelerate even further as it has become the only option in a COVID world. Even in a post-COVID world, we think behaviour will change with physical brick and mortar stores not being used as much. Every crisis in the past 20 years has sped up the market share gains of ecommerce. I expect this time will be no different.
• The Electronification of Money
This actually started in 1950 with the first credit card and has grown globally at a rapid rate for over 60 years. I expect this to accelerate during this environment and continue afterwards. Why…ever look at money under a microscope? Don't.
• Diagnostics and Research
It has been on the rise for two decades and I believe it will again accelerate as a result of this environment.
Everything we own in these areas earns substantially more than their cost of capital – that’s where compounding comes in. We believe this will continue for at least the next decade. That kind of compounding makes short-term concerns meaningless.
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