{"id":408,"date":"2010-05-01T10:18:00","date_gmt":"2010-05-01T14:18:00","guid":{"rendered":"http:\/\/www.intuitiveinvestor.com\/web\/?p=408"},"modified":"2018-08-19T10:16:04","modified_gmt":"2018-08-19T14:16:04","slug":"big-trends","status":"publish","type":"post","link":"https:\/\/jasonapollovoss.com\/web\/2010\/05\/01\/big-trends\/","title":{"rendered":"Big trends"},"content":{"rendered":"

One of the best ways to make money as an investor is ye ole “top down” approach to investing.\u00a0 Top down means that you begin with big macro-level trends and work your way down to identifying investments that potentially can benefit from these trends.<\/span><\/p>\n

Advantages of a top down approach include:<\/span><\/p>\n

* Being able to benefit from immutable trends that continually make money even in the face of short-term obstacles.<\/span><\/p>\n

* Surfing the wave of rich returns for many years.<\/span><\/p>\n

* Being able to invest in many different investments that all benefit from the same trend; sometimes benefiting from\u00a0different parts of the overall trend.<\/span><\/p>\n

* Ease of finding investments that are positioned to take advantage of the trend.<\/span><\/p>\n

Disadvantages of a top down approach include:<\/span><\/p>\n

* Often times the trends are so obvious that many millions of investors have already positioned themselves to take advantage of the trend.\u00a0 Therefore, actually making money from the trend can be difficult.<\/span><\/p>\n

* Long-term trends sometimes take decades to play out so they require tremendous patience on the part of investors.<\/span><\/p>\n

* Not being able to find a “pure play” investment to take advantage of the trend.\u00a0 Say you identify your big macro trend but you cannot find a company to invest in that is solely in the business of taking advantage of the trend.<\/span><\/p>\n

I almost never talk about specific investments on the blog because my goal is to provide you with discerning information so that you can make your own choices.\u00a0 My goal is to help you become responsible for your financial future by teaching you how to fish, not to keep handing you fishes.\u00a0 However, I wanted to identify several long-term, big trends that I feel are immutable.<\/span><\/p>\n

1.\u00a0 Technology.\u00a0 Every aspect of the modern world is permeated with technology.\u00a0 Even in rural, very poor third-world countries the local community often has a cell phone or a local computer lab with an Internet connection.\u00a0 Additionally, even though the pace of change seems slow at the scale of\u00a0a single generation, the world is getting richer.\u00a0 The number of people below the poverty line is shrinking.\u00a0 When people emerge from economic subsistence to economic persistence and have food and shelter taken care of, they usually want technology.\u00a0 This takes on the form of televisions, cell phones, computers, refrigerators, microwave ovens, etc.<\/span><\/p>\n

Potential investments:<\/strong> makers of technological devices (duh!); distributors of technological devices; and sellers of technological devices.<\/span><\/p>\n

Chance that you can take advantage of this trend:<\/strong> 4; because technology is so sexy to investors the fact is that most technologies are\u00a0super well tracked by the media and analyst communities.\u00a0 So it is very hard to make money above and beyond what other investors are making by investing in technology.\u00a0 This is another way of saying you have to get lucky or buy when prices are artificially low.\u00a0 My wife and I bought Apple last year circa March 12, 2009 and nearly doubled our money in less than a year.\u00a0 This kind of buying opportunity is very rare.<\/span><\/p>\n

Backdoor way of taking advantage of this trend:<\/strong> Invest in companies that repair high technology or that sell equipment used in the manufacturing of high technology.<\/span><\/p>\n

2.\u00a0 Electricity usage.\u00a0 This trend covers both breadth and depth.\u00a0 The fact is that more and more of the tools we use in life are powered by electricity.\u00a0 From electric tooth brushes to electric coffee grinders to electric post-hole diggers to electric heat.\u00a0 If it used to be manually powered, chances are that you can now buy an electric version of the same thing.\u00a0 This is a growth in the breadth of electronic devices.\u00a0 On the other hand, as the world’s population continues to grow and as that population becomes wealthier, they use more and more electricity.\u00a0 This is an increase in the depth of electricity usage.<\/span><\/p>\n

Potential investments:<\/strong> power companies, especially those that generate and distribute power around the world; companies that make electricity use more efficient;<\/span><\/p>\n

Chance that you can take advantage of this trend:<\/strong> 8; most investors have overlooked the providers of electricity at the same time that they obsess over the creators of technological devices.\u00a0 Investing in power generation is a very long-term investment (10+ years).<\/span><\/p>\n

3.\u00a0 Natural gas.\u00a0 All of that electricity has to be created by some sort of fuel source.\u00a0 There is coal, oil, nuclear, hydroelectric, geothermal, wind, solar, fuel cells,\u00a0and natural gas.\u00a0 When evaluating these different sources of fuel used to generate electricity you have to consider the cost per unit of electricity generated.\u00a0 You also have to consider the long-term environmental effects\/costs of a fuel source.\u00a0 Furthermore, you have to consider the amount of infrastructure already in place that makes the fuel cheaper to extract and distribute.\u00a0 The fact is that natural gas remains the cheapest, cleanest and most abundant (in the U.S.) of the fuel sources.<\/span><\/p>\n

Natural gas benefits from a fixed supply in North America with increasing demand.\u00a0 Natural gas, unlike oil, is very, very expensive to import.\u00a0 This is because natural gas extracted anywhere else has to be liquefied using equipment that costs billions of dollars.\u00a0 Then it has to be transported across oceans and then re-gassified.\u00a0 The problem is that no one wants a re-gassification facility in their backyard.\u00a0 So the supply of natural gas in North America is largely fixed.\u00a0 Yet our population continues to increase, therefore using more electricity; and our population continues to use more electronics, therefore using more electricity.<\/span><\/p>\n

Potential investments:<\/strong> natural resource companies that focus exclusively on natural gas; natural gas pipeline companies; natural resource service companies; natural gas rig companies; ETFs that track natural gas prices<\/span><\/p>\n

Chance that you can take advantage of this trend:<\/strong> 10; most investors are not patient enough to take advantage of this immutable trend.\u00a0 Until the cost per unit of energy comes down for alternative energies, natural gas will remain the preferred fuel.\u00a0 It’s my estimation that this will remain true for at least 15-20 years.<\/span><\/p>\n

4.\u00a0 Healthcare.\u00a0 Baby boomers are getting old.\u00a0 They need healthcare.\u00a0 Even with the most recent healthcare legislation healthcare remains a viable and deeply profitable business.<\/span><\/p>\n

Potential investments:<\/strong> hospital companies; drug manufacturers; biotech firms; healthcare technology manufacturers; mental health hospital companies;<\/span><\/p>\n

Chance that you can take advantage of this trend:<\/strong> 5; this trend has been so obvious for so long that most excess returns have been priced out of the financial markets.\u00a0 However, one area that seems undervalued are the makers of expensive healthcare technologies, such as CAT scan machines.\u00a0 Effectively, these companies are arms dealers in the\u00a0battle against ill health.<\/span><\/p>\n

5.\u00a0 Financial services.\u00a0 Baby boomers are getting old.\u00a0 They need financial services.\u00a0 Even with the most recent financial industry meltdown the industry remains the life blood of the economy.\u00a0 The fact that the financial services firms were bailed out by our government despite their many failings is evidence of its importance.<\/span><\/p>\n

Potential investments:<\/strong> banks; investment banks; mutual fund companies; trust companies; pension fund managers; insurance companies<\/span><\/p>\n

Chance that you can take advantage of this trend:<\/strong> 6; right now many of the financial services firms are trading at discounts to their long-term fair values.\u00a0 Some, however, are not.\u00a0 Any firm tinged by scandal is likely to trade down, but survive any public scrutiny.\u00a0 Buy on any dips.<\/span><\/p>\n

*****<\/span><\/p>\n

I hope that this guide was helpful.<\/span><\/p>\n

Be well,<\/span><\/p>\n

Jason<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

One of the best ways to make money as an investor is ye ole “top down” approach to investing.\u00a0 Top down means that you begin with big macro-level trends and work your way down to identifying investments that potentially can benefit from these trends. Advantages of a top down approach include: * Being able to […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[3],"tags":[],"class_list":["post-408","post","type-post","status-publish","format-standard","hentry","category-the-blog"],"_links":{"self":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/408","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/comments?post=408"}],"version-history":[{"count":0,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/408\/revisions"}],"wp:attachment":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/media?parent=408"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/categories?post=408"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/tags?post=408"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}