2022-06-16 – Uncover The New Kings Of Tech – Seeking Alpha Webinar featuring comments by Beth Kindig
In 2021, Alphabet (Google), Amazon, Apple, Facebook and Microsoft were the largest capitalized companies in the world. They were the Kings of Tech. A company’s capitalization is determined by multiplying its market price times the number of shares outstanding. It represents the amount of money that would be required to buy the entire company.
“Being early to identify which companies can take over this coveted status is how generational wealth is created. An investor needs to only identify one company that can hold a top 5 position to see life-changing gains.
Every 10 years, the list of the world’s most valuable companies changes. So, there’s ample opportunity for investors today to find the winners of 2030.
I’d also like to point out that what puts a company in this list is not if you’ve heard of the name before. You were probably buying your books on Amazon, but did you know that AWS (Amazon Web Services) was going to power every startup and every business moving forward?
Did you know that Microsoft had the catalyst of a hybrid computing strategy, which combines on-premise servers with cloud computing to narrow the gap with AWS?
Were you aware that it was not the iPhone that drove Apple’s growth, but rather the developer ecosystem that created such a defensible moat that nobody could ever shake it? That ecosystem was what “put the world in our pockets.”
You were already using Google’s search engine, but did you know that by putting an operating system in everybody’s smart phone, that there would be hockey stick trajectory growth for that search engine?
You were probably already on Facebook, but did you know there was a catalyst called third party data that once Facebook realized how to collect it across mobile, it would create such a defensible moat that it would be called a walled garden?
So again, it’s not a matter of if you’ve heard these names . . . you’ve heard lots of tech names, they’re household brands. They are used every day. The difference is can you identify the catalyst that drove each company’s dramatic stock market growth?
So hopefully I’ve made it clear that it is the catalyst that creates the top five most valuable companies list. It is not the product. It is not the management team. It is not whether you’ve heard the brand. You should know the brands that are going to become the top five. But the question is out of the 50 tech brands you know, who will it be? And that’s the key that we’re discussing today.
The difference between Google and Yahoo is that Google identified this catalyst and they quickly bought up Android and YouTube. And they started things like Google Maps. And so that strengthened their data collection. And they have a very clean user interface on mobile for their search engine. They identified that catalyst and they went full speed ahead.
Before I move onto the catalyst for the next 10 years, I’d like you to take note of how big the mobile market was. It was $1.5 trillion. The serviceable addressable market was about 4 billion people.
The next catalyst, however, is going to be four times bigger. We will still have a $1.5 trillion mobile economy,
So, obviously if we can have five of the world’s most valuable companies come from a $1.5 trillion market, we can certainly have AI/ML (Artificial Intelligence/Machine Learning) drive the next wave of the world’s most valuable companies with a total addressable market that is four times larger.
Well, not only will AI and ML be driving the accelerated computing, the training and the inference around automation for every human on earth using all software, but it will also be powering over 100 billion machine to machine connections.
So that is in a nutshell, what automation is. There will be 100 billion connections that will be automated through artificial intelligence and machine learning. So, we have a massive addressable market.
Also, consider that the FANGs did not budge GDP, quite like AI will. AI is set to double GDP in the United States by 2035, with similar growth potential in many European countries and Japan. And it will do this by increasing worker productivity by 35%.
That is a massive move that technology has never seen before. What we need to know is how much bigger will AI be than the mobile economy that gave us three FANGs. It’ll be large enough to give us the next top five is my point.
There are two things that will catch investors off guard and that they will not be prepared for, in my opinion. The first one is that enterprises are going to drive forward the gains over the next 10 years, it will not be consumer.
Investors have gotten too comfortable with consumer. They get to use their iPhone. They get to use Google search. They are on Facebook. They’re making their investment decisions based on the products that they use, and they are going to entirely miss the next move in technology because they will come from companies that consumers do not use. It’ll be enterprises (larger corporations) that drive forth the next major trend.
Mobile’s CAGR was 24% during the period that the iPhone was launched through 2019, which would’ve been the saturation level. Machine learning’s CAGR is projected to be 38%. And AI acceleration ships are around 45%. So every which way we look, this trend is bigger than the previous trend.”
A possible path forward for you, the individual investor
Beth’s above report is reminiscent of the seminal book The Second Machine Age by Brynjolfsson and McAfee which provided the cornerstone for UV Metric’s investments in the emerging Digital Transformation which primarily featured stocks in the mobile economy.
To demonstrate the efficacy of our methods for stock selection, in July 2018 we launched a model portfolio, funded with a hypothetical $500,000. Our focus was stocks that were either contributing to or benefitting from the digital transformation.
By the end of 2021– a mere three-and-a-half years later – the original $500.000 had grown in market value to $1,626,516.10. Full disclosure requires the admission that the Bear Market of 2022 eroded much of those gains, but the model portfolio still outperformed both the S&P 500 and the Nasdaq Composite during the same period of time.
While we will continue to monitor and manage that digital transformation portfolio, we are about to launch a second model portfolio, this one focused on stocks contributing to and benefiting from artificial intelligence and machine learning.
Over the years we have identified and subscribed to extraordinary external sources of research – Beth Kindig being but one. We remain confident that those sources, combined with our resolute focus on revenue growth and ancillary metrics such as free cash flow, in combination with the substantially larger AI market size, will enable us to achieve a similarly exemplary investment performance as was achieved over the past three-and-a-half years.
If this new and exciting emerging market opportunity piques your interest, you can try my service, free, for one month. There is no obligation, and no credit card information is required. All I need is your email. If you have not subscribed by the end of the month, I will simply delete your name from my mailing list.
Send your request for a trial subscription to: paulchristi@gmail.com
Here’s the performance of our original portfolio from launch to the market close on August 31, 2022:
S&P 500 + 46.2%
Nasdaq Composite + 58.6%
EGS Portfolio + 84.7%
In dollar terms, the portfolio has grown from the original $500,000 to $923,264.