RM's 2021 Predictions
Generally speaking, these predictions are barely worth the paper they’re printed on. HOWEVER, it’s a fantastic way to keep oneself honest.
|Jan 5|| 5|
In the Investment Management field, it is customary to do something similar to what happens on Sportscenter - in the same way that they do 2020 recaps and the best plays of the year, investors and analysts love to make new year predictions. We are investors and money managers so I bring you…
🍾The Reformed Millennial Predictions for 2021🌎
1. Oil Has Bottomed and it’s going to Roar Back in 2021
Even as energy company executives cut estimates for long-term growth, near-term opportunities are increasing. The return to “normal” increases both industrial activity and mobility, and the price of West Texas Intermediate oil rises to $69/bbl. Rig counts increase and energy high yield bonds rally soundly. Energy stocks end up among the best performers in 2021.
Note on energy to consider: there may be very interesting geopolitical consequences in the decade ahead to America’s newfound energy independence. We could easily see, for example, the US deciding they actually don’t need an alliance with the Saudis after all, considering they are journalist-dismembering savages. If the US pulls out of Saudi Arabia, war between the Saudis and the Iranians becomes likely. This means oil shipments to Asia get disrupted. Which means global chaos. This Zeihanesque scenario is only a scenario, but we’re watching for it.
2. Weed 2.0
US Cannabis: 2020 was the perfect storm. The triple lindy of COVID-19 (tax revenues and jobs), social justice, and the elections (including a five-state sweep) shape-shifted the narrative and put an end to the War on Drugs.
The fast retail money was betting on the election and the smart money was focused on the fundamentals. Third-quarter 2020 earnings reinforced the strength of the underlying business trends with results that were even more impressive given the onerous tax structures and double-digit cost of capital.
As continued state adoption increases the total addressable market, the industry’s forward growth is looking fairly sustainable and ends up being one of the hottest new investable ideas for investors in 2021.
3.Berkshire Hathaway > S&P500
It is well documented that Warren Buffets BRK.B has underperformed the US market for over a decade. In 2021 this changes. Rotation out of bubble stocks and back into cash-generating old market companies and a shift in investment styles, as the new guard takes over propels this stock forward.
4.Heath Revolution - $TDOC Booms
The US healthcare system is broken. They spend more on healthcare than any other country but aren’t seeing comparable outcomes. 25% of healthcare spending is considered waste. Fixing it is one of the greatest opportunities that exist. The path to a better healthcare system starts with value-based reimbursement which aligns incentives by making health systems accountable for the quality of outcomes and forces effective cost management. TDOC is well-positioned to be the infrastructure enabling these models.
There are trillions of dollars in opportunity here. Amazon and Walmart are moving into this space through acquisition, thereby fighting the largest proxy war in the business world: healthcare. Walmart has the scale and incentive to make an impact, as well as some inherent advantages. Rural Americans are closer on average to a Walmart than to a hospital, and as the largest private employer in the world, Walmart’s healthcare costs are its biggest expense after wages. The Bentonville firm already operates primary care clinics where an adult can get a physical for $30; it acquired Carezone, a prescription management app, in June. Look out for more.
5.FB is the best performing of the FAANG stocks in 2021
Everyone on Facebook hates Facebook. Regulators hate Facebook. The only person who likes Facebook is your grandparents. However, so many of the things that we view as negative about Facebook are positives if you put on your investor hat and hold your nose.
Monopolistic. While most acquisitions fail, Zuck and Sheryl have been so good at acquiring companies that the government is stepping in post-hoc to try to undo them.
Tax on the Internet. That same “40% of all venture dollars raised” stat that’s rough for eCommerce businesses is great for Facebook. eCommerce needs Facebook to grow.
WhatsApp Unmonetized. WhatsApp is the most popular messaging app in the world, and Facebook has barely started monetizing it.
Zuck Has Too Much Power. If you think he’s an evil sociopath, that’s bad. But if you think he’s also a genius with a hard-to-grasp, long-term vision, that’s really good.
Copycat. While it feels gross, it doesn’t really matter that Facebook copies from a business perspective. It owns distribution.
Privacy Regulation. Paradoxically, the regulations meant to protect users from Facebook and Google just deepen Facebook and Google’s moats.
6.Cloud and Infotech Infrastructure Goes Supersonic - Semiconductors
Custom silicon is going to be huge. The rave reviews for Apple’s new custom system-on-a-chip platform demonstrate its inevitability. For machine learning, Cerebras has a full wafer-sized SoC. Almost all computer hardware—anything that has any scale to it—will move in this direction, because the performance benefits are so large. In a way, it’s a repetition of what happened before in semiconductors: individual transistors gave way to the integrated circuit. This change is simply taking integration another level further.
7.Metaverse Companies Continue to Expand their TAM
If you’re an interested investor looking at where to begin learning about this space, I must recommend the ILTB podcast with Matthew Ball. On our podcast, we have long talked about the importance of the Metaverse and to gain exposure to this idea -Tencent has positioned itself as the company to usher in and profit the most from the Metaverse and potentially mega-lucrative evolution of the internet. When you look closely at Tencent’s portfolio, you’ll find a group of companies across gaming, eCommerce, and social that will bring the Metaverse to fruition and share in its massive upside. Tencent’s structure and strategy -- provide capital and traffic -- is the perfect model to profit from the decentralized, competitive, creator-friendly ecosystem that the Metaverse is likely to be.
8.Reliance Industries Raises Money In the US
Reliance IPO in America solidifies India’s decision to mate with the west instead of the CCP. The 2010s were China’s decade. Tencent and Alibaba, with a combined market cap of $1.4 trillion, are now household names. They’ve parlayed strong core businesses into unparalleled global equity portfolios.
The 2020s will be India’s decade. And unlike China, which features a fierce competition at the top between Tencent and Alibaba, in India, Reliance is the main game in town.
Reliance Industries Ltd is indias Exxon, Dow Chemical, Walmart, AT&T, and Comcast all rolled into one. If it fulfills its Jio vision, it will add Shopify, DoorDash, Zoom, WeChat, Square, AWS. Its $200 billion market cap is the largest in India.
Why should you Love India?:
The world’s second-largest country by population with 1.3 billion people.
The fifth-largest economy in the world by Nominal GDP at $2.94T.
The second fastest-growing trillion-dollar economy behind China.
Expected to grow mobile users by 40% to 800 million by 2023.
Not China. The Indian economy has similar characteristics to China’s without the CCP.
9.COVID Ends in Q2 and The Western Economy Opens
The Covid Pandemic will end in the developed world in 2021. I think we will see the end of the Covid Pandemic in the US sometime in the second quarter. I believe the US will work out the challenges we are having getting out of the gate and will be vaccinating at least 40mm people a month in the US in the first quarter. When you add that to the 90mm people in the US that the CDC believes have already been infected, we will have well over 200mm people in the US who have some protection from the virus by the end of March. By the end of the second quarter in the US, anyone who wants to be vaccinated will have been able to do so. All of this will be aided by at least two additional approved vaccines in the US in January and new and improved protocols, like emphasizing the first dose over the second one.
10.AT&T Doubles and Creates the Worlds Most Valuable Rundle
See Scott Galloway’s podcast for his take here.
Imagine – the world’s largest telecom combined with some of the world’s best media content. AT&T’s announcement that it will release movies simultaneously on HBO Max and in theaters predictably pissed off Hollywood players, who make millions off the current system. AT&T CEO has realized the market favors recurring revenues and narrative over transactional revenues and EBITDA. AT&T is poised to recognize an increase of $100 billion or more in market cap in 2021 on its transition from a conglomerate that makes no sense -- to the world’s largest recurring-revenue firm.
How is this going to happen? How will AT&T add 40% to its market cap? It will go from trading 2.4X sales to trading closer to Netflix’s – 8.2X sales.
In any case, 2021 will be a year of returning to normal, but it will be a new normal and not like one we have experienced before.
Happy New Year everyone.
All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. For our full disclosures and disclaimer, visit our website: https://gold-im.com/disclaimer/