Following the post-COVID stimulus hangover in 2022, the bull market has continued to run. One of the key factors was the Federal Reserve’s decision to
Navigating the Waves in Individual Stock Investing
Published Date : November 2, 2021
November 2, 2021
So far in 2021, the equity market has embraced more themes, memes, and extremes than have been seen in the public markets in recent history. If one were to compare the 2021 oscillations of the stock market to a movie, it might be difficult to agree on a genre, but most would agree it’s been an upbeat story with a few twists. One way to gain exposure to the twists in an investment portfolio is to use individual equities to incrementally tilt towards areas which could be expected to resonate well into the future.
Whereas we don’t chase a meme with an investment, we do pay attention to themes which represent a shift in consumer behavior. Typically, emerging themes have been percolating below the surface, often supported by private companies who have been allocating capital to secure a foothold. Just as in downhill mountain biking (where the key is not to look at the front tire, but rather several feet ahead), individuals should be investing in the path forward rather than what’s behind.
A couple new areas where we have added some public market exposure to emerging themes includes the “buy now, pay later” sector and the cryptocurrency industry via stock positions in Affirm Holdings (AFRM) and Coinbase Global (COIN). In both cases, the companies have long had a mission to build enduring platforms supported by leading technology developed by a growing team of talented personnel. Although both are large-cap, U.S.-based companies, investors are not getting exposure to these sector pure plays in traditional equity index funds as neither AFRM nor COIN are yet in the S&P 500.
An aspect we like about AFRM and COIN is that they are leading companies in nascent industries where there is some healthy skepticism in their future quarter-by-quarter path. As uncertainty wanes, investors can gain confidence that these companies are well positioned to stay a boat length ahead of their peers in sectors with an expanding total addressable market opportunity. Recent proof points helping to build more certainty include the announcement that Amazon (AMZN) and American Airlines (AAL) are teaming up with Affirm while the NBA struck a multi-year partnership with Coinbase, making them their exclusive cryptocurrency platform partner. In contrast, if either company isn’t able to master a jibe (i.e., if they don’t effectively react to a turn in their industry), then we would expect some turbulence along their journey as they fight to stay above the waves.
Navigating the ocean in a single hull boat versus an ocean liner provides a different experience just as investing in individual stocks versus a mutual funds and ETFs. At Sand Hill, our focus on diversification drives us to embrace multiple pathways to gain exposure in your investment portfolio, including individual stocks where appropriate. Thank you for trusting us in your financial journey as we continue to maneuver the markets.
Please reference this chart and disclosures, which should be reviewed prior to or contemporaneously with this article. This article is not a recommendation or endorsement of either security, but an analysis of how securities in these sectors can enhance a portfolio.
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Other Posts By This Author
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- – When Macro Overwhelms the Micro
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