As those who bought Amazon in the early days of the internet will attest, the best way to play a megatrend is buy in early and forget you own the stock. Early Jeff Bezos fans would have fretted at the 94% plunge in the price of Amazon shares between December 1999 and September 2001. But even those who bought at the peak ahead of the dot com crash are today a juicy 10 times up on their investment.
I’ve tried to follow this approach in the structure of the two Biznews model portfolios. More about that later today (12:30 SA time) when we update the SA Champions portfolio where as a Premium subscriber you are entitled to a seat at the webinar – but you do need to register. If you haven’t done so yet, please click here.
My Biznews colleague Jackie Cameron continues the argument in today’s contribution.
___STEADY_PAYWALL___
Jackie writes: “My 13-year-old son loves it when I rev the engine of my recently acquired little sports car before we take off into the traffic. It feels slightly rebellious to grab the attention of other motorists by disturbing the peace with an unexpected vroom.
He’s looking forward to the time he can get behind the wheel and do it himself. But in the meantime, he badgers: ‘Rev it, mom, rev it.’
I’ve encountered this fascination with deep revving sounds before. I was working for the Saturday Star and interviewed two lovely young women who were so smitten with deep, throaty engine noises that they regularly jetted to Formula One events just to take in the noises first-hand.
One, the sister of a top Cape Town asset management entrepreneur, even kept a soundtrack ‘Gentlemen start your engines’ in her car. When you are an expert in engine noises, as she is, you can differentiate between the various whirs, hums and screams of different cars and drivers. This Johannesburg woman, a public relations professional, could tell whether Michael Schumacher was warming up his pistons or Lewis Hamilton’s carburettor was ready for action.
There was bad news for petrolheads like my Johannesburg friends and my son this week as first Volvo and then the whole of France announced a phasing out of petrol and diesel-guzzling engines. Volvo has announced that in two years it will no longer produce any cars driven by internal combustion engines. France will not allow any petrol and diesel cars on its roads by 2040, and has introduced financial incentives for consumers to scrap diesel cars made before 1997 and petrol cars manufactured before 2001.
Other countries are following suit, encouraging citizens in various ways to switch to more environmentally friendly motors. The UK already penalised owners of older petrol cars by levying them with a higher annual road tax. Norway has set a target of only allowing sales of 100% electric or plug-in hybrid cars by 2025; Germany and India are set to phase theirs out five years later.
These developments are likely to benefit companies like luxury electric car maker Tesla, listed on the Nasdaq, and one of the hottest performers in the Biznews Global Share portfolio. It is aggressively expanding into China to tap into rising demand there for its vehicles.
London-listed mining company Glencore Plc is also positioning itself for an electric car boom that is arriving faster than expected. Its chief executive officer, Ivan Glasenberg, expects the rise of electric cars to turbo-charge demand for minerals such as copper, cobalt, nickel and manganese – heavily used in their production.
The Tesla share price took a hit last week on concerns it had risen too far with the prospect of competition from Volvo used as an excuse for the sell off. FTSE 100 commodities giant Glencore had a great 2016 but is still a long way off the highs reached in 2011. However, some canny investors with an eye on long-term returns are using the recent weakness to accumulate more shares.
Along with these sweeping changes towards environmentally friendly transport, throaty engines are set to become a thing of the past. One day you can expect to only encounter cars like mine at weekend classic car rallies and car museums. My son will have to enjoy the occasional real-life rev while he still can.”
Jackie makes some good points. Here’s another couple. The US horse and mule population peaked at 26.5m in 1915. By 1960, it was down to 3m. And then after growing annually since 1826, in 2005 there were 86bn analogue photographs taken. Six years later that was down to 4bn (against 360bn digital pics). As an investor, you really do want to be on the right side of a disruptive megatrend.
