“Identifying opportunities early is the name of the game”

Clive_Woody

Tourism in North Korea and Twitter being bought out by the Russians.

You heard it here first.

AnotherJoe

aroominyork wrote: »

The title paraphrases a recent post by a regular contributor. I have no idea how to set up a survey so I will ask as an open question: assuming the market keeps ticking upwards, what sector/region/country is going to be the surprise packet of the next three years?

By definition unanswerable, because if you knew, it wouldnt be a surprise !

Bravepants

Some people might be worried more about Quantitative Tightening...but then again some might not and see THAT as an opportunity...who knows?!

darkidoe

Clive_Woody wrote: »

Tourism in North Korea and Twitter being bought out by the Russians.

You heard it here first.

I second North Korea. So much potential there!!

Alexland

Prism wrote: »

I would say the next big thing will be good companies that make more profit than average or poor companies. I don't worry too much about region or sector.

Wasn't that the last big thing? I am not against quality factor investing (hold LTGE myself) but struggle to see it as the next big thing.

Alex

Prism

Alexland wrote: »

Wasn't that the last big thing? I am not against quality factor investing (hold LTGE myself) but struggle to see it as the next big thing.

Alex

Maybe it will be different types of companies. New rather than old? China and India rather than the US? I don't know but investing in the good companies has always been the next big thing - pretty hard to do though consistently.

aroominyork

Voyager2002 wrote: »

Actually, the biggie could be Iran. Not feasible for most of us to invest there, but it offers some fantastic assets that are seriously undervalued. If the lunatics leave government and go back to the asylum where they belong, early investors there will reap the benefits on an industrial scale.

Interesting - an educated country which it would be great to see turned around. Which sectors would do well or do you see it as general economic growth?

Until then, my only investment in that neck of the woods is ITEQ, Israeli tech, which fortunately I bought at the tail end of December unaware that come January Mifid would make it unavailable.

BrockStoker

Where do you see the world going?

I know it's impossible to say with 100% certainty what will turn out to be a successful investment, but I don't think it's hard to predict that a particular investment is highly likely to go one way or the other in at least some cases.

For example, coal. Who in their right mind would invest in it now (for the long term)? It has a limited future at best.

On the other end of the spectrum, there is technology. Why would you not invest in technology? The world relies on tech right now, and that trend can only continue to become stronger, unless you envision an apocalyptic future where we all become like the Amish, in which case it probably won't matter anyway.

The same is true of healthcare and biotechnology in particular. With growing and ageing populations, there is always going to be a need for healthcare and new medicines. The only way is up again, unless we see an apocalypse. The rate at which new cures and treatments are being discovered (thanks to technology) is starting to become exponential, so there is lots to be made, and still time to get in early(ish).

This is one of the reasons that biotech is the core of my portfolio, along with tech and healthcare. Ironically it's actually Japan (small cap) that has made the most gains in my portfolio, although biotech and tech (only invested relatively recently) are also pulling their weight well now.

It's not exactly getting in early, but I also have a significant holding in oil/energy (there is likely to be demand for some time to come, especially due to the same reasons mentioned above - population growth). I did buy in the dip though (early 2016), so that could qualify as "getting in early".

In the case of emerging markets becoming developed markets, all the signs are there for China and India very possibly too, which is why I have invested small but significant portions in them too.

"Getting in early" also suggests you are taking on more risk than normal, in return for a possibly much larger payoff.

Or you could simply invest in small companies. By definition you will be getting in early, but taking more risk for the privilege.

Personally I don't see any of these investments as risky when held together as part of a reasonably diversified portfolio, along with some cash, and over long time scales. It's a very aggressive strategy aiming to outperform significantly, and taking advantage of the natural volatility that comes with the holdings in my portfolio by buying in dips, as well as crashes when they show up. Attack is the best form of defense.

Small caps outperform over long periods of time anyway, so I think when when you are investing for the long them, they are actually less risky than investing in slower growing large caps.

Apart from that, the only real risk if for an inexperienced investor to panic sell at exactly the wrong moment (when they should in fact be looking at buying).


Edit to add: Truly getting in early is probably not attainable without taking in significant risk. The next best thing is what I've suggested above. ie not early, but not late either, and investing in sectors geographies that have a high chance of outperforming, preferably over the long term, although I'm happy to take short-medium term if there's a good opportunity as there was with oil a few years back.

Identifying opportunities for me, just means keeping an eye on the various sectors, and buying in dips. You don't have to take unnecessary risks by investing in something new and un-proven to accumulate significant gains quickly.

Voyager2002

BrockStoker wrote: »

On the other end of the spectrum, there is technology. Why would you not invest in technology? The world relies on tech right now, and that trend can only continue to become stronger, unless you envision an apocalyptic future where we all become like the Amish, in which case it probably won't matter anyway.

Broadly I agree, but I think you need to read up on the 'dot com' boom and bust around the year 2000. Many (most?) tech shares have yet to recover to the values they were at before the 'correction'. Even a fantastic company like Amazon is unlikely ever to achieve the level of earning needed to justify its present valuation.

BrockStoker wrote: »

The same is true of healthcare and biotechnology in particular. With growing and ageing populations, there is always going to be a need for healthcare and new medicines. The only way is up again, unless we see an apocalypse. The rate at which new cures and treatments are being discovered (thanks to technology) is starting to become exponential, so there is lots to be made, and still time to get in early(ish).

Two points:
1. Many members of these 'growing and ageing populations' cannot afford to pay for their own healthcare and so it is their governments that are paying. We have seen the likes of "austerity" across the world, with governments increasingly unwilling to meet these costs;

2. The rate of discovery of new drugs has slowed fairly dramatically, for a host of reasons.

In short, while I agree with your central thesis there are good reasons why, during periods of economic growth, this sector is less profitable than most others and delivers slow or zero growth.

BrockStoker wrote: »

It's not exactly getting in early, but I also have a significant holding in oil/energy (there is likely to be demand for some time to come, especially due to the same reasons mentioned above - population growth). I did buy in the dip though (early 2016), so that could qualify as "getting in early".

Energy is not the same as oil: with the increasing move towards "smart technology" and continuing political moves on climate change, gains related to oil might prove short-lived. Personally I have significant holdings in 'Clean' technologies and am fairly happy with their performance. I would highlight the Greencare Investment Trust for its very low volatility: in lots of ways it is like a UK bond yet with returns that are hard to match for such a low level of risk.

BrockStoker wrote: »

In the case of emerging markets becoming developed markets, all the signs are there for China and India very possibly too, which is why I have invested small but significant portions in them too.

IMHO China presents unacceptable risk levels: it is not possible to know fair prices for assets there. And people who invested in 1992, when that first became possible, have yet to see any return! That is the stance that Aberdeen has taken, although they do invest in China via Hong Kong.

OTOH I have a large single-country holding in India. You need to be careful of pricing: the market lacks information and at various points prices reached unrealistic levels (most recently when investors believed the promises of the newly-elected Modi government).

And of course there are many other "emerging markets": Southeast Asia as a whole offers a low-risk way to benefit from growth in China, while individual countries in the region can be fun bets (I put a fair chunk into Vietnam to see what would happen). Russia offers valuations so low that it is hard to see how they could get any lower, and lots of potential upside. OTOH I have been trying different ways to invest in Latin America over the last decade, and they have all offered different interesting ways to lose money.

Linton

BrockStoker wrote: »

Where do you see the world going?

I know it's impossible to say with 100% certainty what will turn out to be a successful investment, but I don't think it's hard to predict that a particular investment is highly likely to go one way or the other in at least some cases.

Its impossible to say with more than about 50% certainty

On the other end of the spectrum, there is technology. Why would you not invest in technology? The world relies on tech right now, and that trend can only continue to become stronger, unless you envision an apocalyptic future where we all become like the Amish, in which case it probably won't matter anyway.

Investing in tech isnt that easy. The problem I see is that what the market regards as the Tech sector includes companies that get their money from other things with technology being merely an enabler. For example Google and Facebook are primarily sellers of advertising space. VISA, MasterCard and PayPal would arguably be better placed in a Financial sector. Amazon is in retail as is Alibaba.

If you really want tech you then have the problem that most tech companies fail, the lucky investors are those who invest in companies that are bought out after their shares go on the market. The chances of you picking the next Google/Facebook etc are virtually zero.

The same is true of healthcare and biotechnology in particular. With growing and ageing populations, there is always going to be a need for healthcare and new medicines. The only way is up again, unless we see an apocalypse. The rate at which new cures and treatments are being discovered (thanks to technology) is starting to become exponential, so there is lots to be made, and still time to get in early(ish).

Healthcare and biotech are very different investments. Healthcare should be generating cash whereas biotech is as risky as investing in gold prospectors - most discover nothing of any value. And then, different again, are the drug manufacturers.

Or you could simply invest in small companies. By definition you will be getting in early, but taking more risk for the privilege.

I would agree with this. Not only are you getting in early, you are getting into a very diversified range of sectors. There is no need to cherry pick sectors. In fact the reverse - I would advocate rebalancing to quieten down the over exuberance of the market.

Personally I don't see any of these investments as risky when held together as part of a reasonably diversified portfolio, along with some cash, and over long time scales. It's a very aggressive strategy aiming to outperform significantly, and taking advantage of the natural volatility that comes with the holdings in my portfolio by buying in dips, as well as crashes when they show up. Attack is the best form of defense.

One problem with buying in dips is that the price may rise a lot before you get one. Better in my view to invest broadly as soon as you have the money. Investing in a crash needs some nerve - did you take out a second mortgage to buy wildly during 2007-2009? With hindsight its a no-brainer. Doing so with the information available at the time is rather different.

So my growth policy is to remain fully invested in as wide a range of sectors as possible with a strong bias towards small companies. I wouldnt agree at all that !!!8220;Identifying opportunities early is the name of the game!!!8221;.