Facebook could quickly become the accepted standard for communication – text, voice and video interaction.Chris Ratcliffe/Bloomberg
Chris Umiastowski is the growth investor for Globe Investor's Strategy Lab. Follow his contributions here and view his model portfolio here.
This coming calendar year marks my 20-year anniversary as an investor in common stocks. The most important lesson that I learned, starting back in 1996, is still equally true today.
That lesson is to take a long-term approach because most people significantly underestimate the magnitude of change that will happen over a decade or two. This is particularly true in the technology sector, and I'm lucky to have learned this lesson early on.
In 1996, as a young engineer working in Ottawa's technology sector, I formed an investment club with a few friends who shared an excitement for investing opportunities that the Internet would bring. At a time when digital cellphones and broadband Internet connections were in their infancy, we thought we were thinking big.
We dreamed about high-definition video on demand. But we only scratched the surface of what was truly happening. We had no clue that people would wind up, in many cases, spending more time on mobile devices than traditional computers. We never imagined a world where multihundred-billion-dollar valuations would rise out of the advent of mobile technology and social media.
So here we are about to roll into 2016. I'm older, smarter and I have some investing success under my belt. But I still can't possibly imagine what's to come over the next 20 years. I have some ideas that seem obvious to me, but I'm sure that in the year 2035, when I look back at what actually happened, my mind will be blown. All I can really do in 2016 is continue to invest in companies that are best positioned to create this immense change.
I'll continue to hold shares of Tesla Motors Inc. (TSLA) because two major trends are clear to me. First, I believe cars are going to go fully electric. Second, I suspect that most new cars will be capable of autonomous driving most of the time inside of a decade.
Tesla is the unquestionable leader in electric vehicles, but also has a fleet of tens of thousands of cars on the road right now that are gathering about one million miles worth of driving data per day. This information is being harvested to improve the self-driving algorithms so future Tesla cars can drive themselves even more accurately and safely.
But this could have value far beyond just selling cars. Tesla could wind up owning the most detailed road maps in the world. How do you put a price on that?
Facebook Inc. (FB) is another must-own stock in my opinion. I think Facebook could quickly become the accepted standard for communication. I'm talking about almost all text, voice and video interaction possibly happening through Facebook. I'm already seeing many small businesses using Facebook for customer support. I think there is a huge runway for this to keep growing. All of these things have potential revenue streams and serve to improve the number of digital ads Facebook can sell. Two years ago, I never would have imagined I'd say Facebook is a significant threat to Google. But today I think it's obvious, and I can only imagine what I'll be thinking in another four or five years.
Netflix Inc. (NFLX) is the final company I'll quickly mention here. Twenty years ago, when my friends and I were dreaming about high definition on demand over beer and pizza, we had no idea how disruptive this could be. Netflix can sell an incredible service almost anywhere in the world for just a few dollars a month.
They can raise their prices slowly, re-investing that additional revenue into new content until they are an absolute no-brainer part of the entertainment budget in practically every broadband-connected household where they operate. I can only imagine what new lines of business they might add to the mix over time. Gaming? Live events?
The opportunities for Netflix are still incredible and I'm staying invested in the stock.
It's easy to write about what will happen in 2016 if we stick to the obvious stuff by just extending what is already happening. But the real money, in my experience, is made by stretching your imagination and investing in the companies best positioned to execute on those exciting ideas. Just don't expect the ideas to be right. As has happened to me, you'll probably be shocked by what actually happens over a 20-year investing window.