Baby and mama are fine and well, but we’ve been at the hospital for a few days here a few hours from where we live and won’t get home til later this week. Hug your parents and/or your children tonight!
I’ll be back in full swing sometime next week. In the meantime, don’t forget to let us know if you’re interested in investing in the upcoming Scutify/Wall Street All-Stars offering (we’ll be closing it on February 15) and exactly how many shares you’re interested in buying at $3 each. It obviously should be considered a very risky and illiquid investment. Email us at email@example.com for more info. Don’t forget I granted each of you TWC subscribers the rights to 10 shares of the company upon a liquidity event. Email us at firstname.lastname@example.org for more info on that too or go read this –
SPECIAL GIFT – Existing TradingWithCodys subscribers to get rights to ten shares of Scutify’s parent company
Now onto some meaty analysis for you.
The key to long-term success in Revolution Investing is, as I always remind us, to invest in the best companies that are getting in front of hugely revolutionary secularly-growing sectors. Conversely, you want to always sell companies that are going to be disrupted by those technological revolutions. You can, as I have over the years, have a lot of success by pairing up the two. Over the mid- and long-term, the fastest growing revolution-driving technology companies will outperform those slower growing tech companies on the wrong side of the revolution.
The other day, I noticed this very cool new feature here on Marketwatch, which publishes my Revolution Investing newsletter – Here’s what you’ll save by ditching cable TV – MarketWatch. That’s a neat feature for consumers, but investors needed to be in front of this digital video and cable cord cutting revolution long before consumers were benefitting directly.
Back in the mid-oughts (around 2005, 2006), my investors and I got way out in front of the ongoing digital video content revolution. I wrote these very words, predicting exactly the trends we’re now seeing today.
How long before we start seeing people start to cancel their cable subscriptions? It’s coming sooner than you think. And in five or 10 years, we’ll be talking about how most youths don’t bother subscribing to cable, just as we talk today about how most don’t bother getting a voice landline.
If you see can’t-miss tech trends burgeoning before they’ve become mainstream to consumers, you can ride the wave to huge profits. Back in 2006, I had already been holding both Google and Apple for several years, but I still saw the future of video content delivery and how things like AppleTV, Google’s YouTube and Microsoft’s Xbox and the platforms they were providing for consuming video content would eventually displace cable television as we had always known it.
You could clearly see back then how incredibly inefficient cable television pricing was and how ready it was to be disrupted:
The future of TV isn’t a competition between cable and telco. The future of TV will be about delivering video content from the Internet, where users can create and share their own programming, where you can instantly watch any show, any clip, anything that you might ever think to type into Google.
In that world, there will be no reason to pay the cable company or phone company hundreds of dollars a month for 100,000 hours of programming of which you watch less than one-tenth of one percent. How in the world are the cable companies and telcos going to get a return on their head-end and broadcast investments in that environment?
The answer: They won’t. Verizon is at least taking fiber to the home so it can continually increase the broadband capacity into each home. When Verizon is offering Internet services at 1Gbps speeds, which is about 1000 times faster than your current “broadband” connection, it will at least have a competitive advantage over the other telcos and cable companies, which won’t be able to scale as fast to the ever-higher speeds. If you have to own a telco, own Verizon for that reason. But really, just stay away from these loser companies that can’t even realize that they’re building into an industry that is in a secular decline.
Cable is dead. Long live TV.
Google and Apple, in 2006, were already up double, triple or more than where I’d first started investing in them just a couple, three years before. But I’d been having to pay up for them and didn’t mind doing so along the way, as they continued to disrupt new markets for them that were ripe for the taking.
Fast-forward to today and you can still say the exact same thing about Google and Apple. They’re up huge from where I’d first started investing in them, if you haven’t yet started a position in those two and you’re looking to build up a Revolution Investing portfolio, I’d still consider these two as starting blocks. You might look to start slowly by taking a 1/3 full position in each for now and buying more over time, but the revolutions that these two companies are driving are not over yet.
On another, but somewhat similar, note, I’m going to do the disciplined thing here and cover my Pandora short position. The stock is wildly bubbled at this point, but it was already wildly bubbled when we entered the short too, and there’s no telling when that Pandora bubble will pop. I’ll look to re-enter this short at some point when it starts to break down. Mea culpa in the meantime.