Monthly Newsletter – May 2019

We begin May’s newsletter by addressing the failed China-US trade negotiations.  We believe continued failure to reach an agreement is a great risk to investors for the remainder of 2019.  However, we still remain hopeful an agreement can be reached because we ultimately believe both parties understand a comprehensive trade deal is in the best interest of the global economy and financial markets.

We also introduce the concept behind disruptive innovation investing and why we believe long term, growth oriented investors should strongly consider taking advantage of this opportunity.

We also share the latest monthly commentary from Pacific Asset Management.

Trade War Renewed

Despite the delay and tariff increase, it is still possible that talks continue and a trade agreement may still be ready for signing at the G20 summit in Japan on June 28.  For more information on US-China tariffs and the other key geopolitical risks, please read the following market commentary from Charles Schwab:

Geopolitics: Examining The Top Five Risks

Disruptive Innovation Investing

Disruptive innovation strategies invest in companies focused on developing technologies to displace older technologies and/or creating new markets.

The best example of a disruptive, innovative company is Amazon (AMZN).   Founded in 1994 as an online book store, Amazon has evolved into the largest e-commerce marketplace and cloud computing platform in the world as measured by revenue and market capitalization.  From Whole Foods to Prime, Amazon has disrupted and innovated commerce and technology in so many profound ways.   This explains why Amazon’s stock price has risen approximately 120,000% (!) since it began publicly trading in 1997.  To put this into context, below is a chart showing how much a $100, $1,000, and $10,000 investment in 1997 would be worth today (Source: Investopedia.com):

Initial Investment Today’s Value (Estimated)
$100 $120K
$1,000 $1.2 Million
$10,000 $12 Million

Modern advancements in technology are allowing companies in various sectors to create the disruption and innovation that leads to substantial long term investment growth.  Specific areas believed to be poised for disruption and innovation are as follows:

Robotics

Autonomous Vehicles

Machine Learning

3D Printing

Energy Storage

E-Commerce

Blockchain Technology

Bioinformatics

Molecular Diagnostics

Source: ark-funds.com

The challenge, of course, is selecting the right area’s/companies that will fulfill the desired disruption and innovation.  As a result, there are unique risks involved with this investment approach, such as:

Regulatory hurdles

Rapid pace of change

Political or legal pressure

Competitive landscape

Exposure across sectors and market cap

Uncertainty and unknowns

Source: ark-funds.com
Monthly Market Commentary

Our partners at Pacific Asset Management share their latest Market Commentary.  Please click the link below to read the latest monthly commentary:

Pacific Asset Management – May Commentary