Tech Stocks Lead the Way in a Revolutionary Economic Climate

Looking at what’s ahead has always been the way.

I am personally a massive fan of companies like Microsoft, Nvidia, and Amazon. My portfolio is built on these staples, but also on many smaller names in the technology sector as well. Personally, my buying philosophy revolves around digital trajectories. I believe that ease of access and consumer loyalty are central to healthy growth in the form of stock pricing.

Often when speaking of investments, I harp on about how my dad taught me to seek out products and services that I would actually use. My approach tends to expand this to include services that others loyally abide by as well.

For instance, Facebook and Twitter don’t factor heavily into my personal routine. I don’t check in daily, and seldom return even on a monthly basis. But each platform enjoy an enormous following of 2.6 billion and 330 million monthly users, respectively. Each platform has transformed itself from its initial use case and now function as online spaces for the meeting of minds alongside their newfound prowess as advertising platforms and trusted news sources.

They each have become major influences in the daily lives of people all around the world. It is said that Facebook was inadvertently instrumental in singling out Myanmar’s Muslim population and the sparking of genocide. And the President of the United States routinely takes to Twitter to present his (in my opinion, ridiculous) ideas, as well as to declare official statements from the Executive Branch.

These and other companies have approached the cutting edge of what the internet has come to represent, they deliver content to a massive audience and do it quickly. This is also why I like Microsoft as an investment.

I personally preferred the older distribution model for software such as Office, arriving in the form of a disk that could be reused without maintaining passwords or download keys. However, the ability to purchase monthly subscriptions or immediate downloads without the necessity of a physical product has formed the lynch pin of Microsoft strategy moving forward.

The shift away from physical stock has overwhelmingly enabled explosive growth in market share, particularly strong in cloud and data center computing, and the stock price as a result.

Similarly, I am not a huge fan of Apple products, or the stock. Apple has performed better over the past year than Microsoft (70% versus 44% growth) but head-to-head over the last five, there is no competition. MSFT is approaching a 300% increase whereas APPL has added value by about half that.

As well, the price comparison is another selling point. Apple rests today at $314 per share, far above Microsoft’s $182 tag. The bang for your buck lies squarely in Windows’ corner.

As well, my impression is that the cliff iPhones seem to fall off performance-wise after two to three years drives higher hardware sales in the short term, but turns away users as they continue to progress through the sequence of models.

There’s got to be a reason why the iPhone is ubiquitous among younger users but seemingly nonexistent in the hands of their parents. It can’t still involve the hype surrounding their initial release back when I was a lowly Freshman, competing for that all-important JV spot.

Loyalty is essential to long term growth, and I am betting on high value technology creators to continue to provide value across large sections of user’s lives. To me, this is value in the stock market. That’s why I seek out large companies that cross traditional market borders and smaller vessels that have made a niche for themselves in the gaps formed by larger mainstream enterprises lacking the foresight or boldness to cross over themselves.

In this arena, I like entities like Booz Allen Hamilton or Verisign. Both leverage technology to provide routinely novel solutions to problems that are on the precipice of consumer activity. BAH provides mainly intelligence and analytic products to corporate and government users, but they are quite possibly the go-to problem solver in the industry — certainly in the space of outsourced intelligence products that drive American policy.

Of note: On 08 May 2018, President Trump announced the end of American participation in the previous administration’s efforts to curb Iranian nuclear weapons development. In the two years since, BAH has doubled in value.

Admittedly, this is can be a high risk strategy. When corporations take on a new market they often face stiff competition and don’t always succeed, leading to considerable sunk costs that negatively impact earnings, and therefore stock prices. But for young investors, the risk is absolutely worth it. My own life expectancy places stocks owned in my portfolio at just under a 50 year horizon. The market has increased by 400% over the last 50 years, amid a series of bear trading periods, recessions, and bursts; it has flourished at war, peace, and everything in between.

The market is a survivor and aggressive traders thrive on its day to day inconsistency stacked up against the overwhelming upward trajectory that persists across the lifespan of its investors. To mitigate risk in the short term though, I do place value in manufacturers, banking, and healthcare. Though if you were interested in reading about opportunities to buy safety, you’d have already left this tidbit behind.

I firmly believe that the technology sector leads the way forward, and companies at the forward edge of user problem solving stand to net portfolios like mine the highest potential for continued growth. It’s just one way to approach the market, but I think it will pay out in the end.

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