It constantly amazes me how quickly technology advances. I've been managing the model growth portfolio as part of Strategy Lab for just more than four years. I think that it's fair to say I made good calls on macro industry trends and did a pretty good job of picking stocks that would benefit from those trends.
But in some ways, I completely missed big changes. I didn't initially see mobile Internet traffic as particularly valuable. I knew video content was important, but I didn't think it would become vital to almost everything we do on mobile devices. I understood that big-screen TV content would transition to an Internet-based delivery model (such as Netflix), but I didn't understand the true value of owning the content to build a competitive advantage. I had firm opinions on the optimistic outlook for electric vehicles, but would have laughed at anyone who told me these cars would also soon be self-driving and could threaten the car insurance industry.
It's not as if I just woke up today and realized how much I got wrong. Of course not. By watching what was happening in these industries, I slowly learned new things and formed (I hope) better opinions. That's the beauty of investing – which requires a long term focus – in high-quality companies that are leading in important, emerging industries. The engineers and management teams at these companies can work their magic and I can benefit as an astute, but clearly imperfect, observer.
Heading into 2017, I feel like I'm just continuing to watch incredible industry growth unfold in the areas that I've chosen to invest. If I had to pick just four of my model portfolio stocks to keep for the long term, I would choose to keep Facebook, Netflix, Tesla and Amazon. Each company is an absolute leader in an industry that still has incredible room for growth.
Facebook is doing a better job than Google, in my opinion, when it comes to the marriage of mobile, video and groups. I believe the next major leg of growth for Facebook will be business services. My views seem obvious and simplistic. In another four years, I wonder just how much I'll realize I didn't see coming.
Netflix is crushing its rivals when it comes to creating its own library of original TV programming. It's obvious to me that the value of this original content, combined with Netflix's global offering, is a winning combination that almost nobody else can offer. There's so much more Netflix could still do beyond TV programming, and I'll patiently wait to see what they do next.
Tesla, I think, has an enormous advantage over every other manufacturer when it comes to the future of self driving cars. Specifically, they have a large and quickly growing fleet of vehicles that are all Internet connected and gathering real-world driving data that feed the company's computer-learning "Tesla Vision" system. Tesla is probably the riskiest pick among the bunch, because they're involved in solar power, battery manufacturing, vehicle charging networks, car manufacturing and autonomous driving software. It's a borderline insane scope of engineering work for one company. But if they are successful, the results for investors will be tremendous.
And finally we have Amazon. This company practically started the e-commerce industry and is still busy growing and improving what can be done to the point that Amazon is the no-brainer choice for buying just about anything online. When they first started talking about using drones to deliver packages to customers, it seemed like something out of science fiction. But today I'm firmly of the opinion that Amazon will disrupt the global delivery business, and I can't wait to find out what else I'm missing about this exciting story.
We may be heading into a new year, but remember the calendar is arbitrary and the best investing ideas usually require a bigger picture and longer time period.