Investing Themes

All investments I put into my portfolio are built off of an underlying theme.  These themes usually are something I see going on for a minimum of twelve to eighteen months and helps provide a form of fuel that provides reason that certain stocks will out perform the market over time.  While the actual purchase of stocks has much to do with valuation and timing, I still need the support of the theme to build conviction that the stock will go higher.  Below are the current themes I see in the markets as well as our ongoing daily life and societal adjustments that affect those markets.


1. Global economic recovery:  It seems to me that we're finally getting out of the phase of world-wide economic strife and shifting towards growth.  This is certainly a view that doesn't have a vast following at this point, but the US has had a falling unemployment rate for years now, people are starting to see some wage growth and the GDP is starting to expand as well.  This causes inflation, interest rate hikes, increased demand, and increased trade.  Just as the Great Recession rippled across the globe with its effects, I believe you're about to see the same with growth.  That's not to say there aren't areas that will continue to suffer, have problems or do worse.  Nor is it to say that there aren't political risks such as the rise of protectionist populism that we've seen over the last two years.  But in general, and in the long term, I believe people are starting to and will eventually feel much better about things as a whole.  This leads to increased spending and drives higher demand on the markets.

2. Convenience and experience orientation:  I've determined people are shifting away from the concept of possessions being important towards the idea of family and community.  I interpret this to mean a few things.  First, anything that reduces "wasted time" (i.e. drive time to accomplish regular tasks) will get leveraged heavily.  Second, people go out and gather for experiences.  This may mean dining, but more so this means other forms of entertainment - trips, amusement, anything that can be captured in a picture to show you're "living life".  Finally, more time is also spent at home - be it with friends, neighbors, or just family.

3. The 3 As - Analytics, AI, and Automation: There are a few angles to this one.  First, because of the first theme, companies are looking at ways to mitigate cost increases that incur through wages.  This is done by trying to automate anything that can be.  Second, they're looking to prevent costly downtime by predicting what will happen before it does and addressing it in a controlled manner.  Finally, they're trying to predict what their customer base wants and/or needs, and serve it to them as fast and in the best way possible.  This relies heavily on the 3 As to accomplish it and those 3 As have varying impacts to the markets in each sector.