Multi-Unit Franchisee Magazine Issue IV, 2012 | Page 75
InvestmentInsights
By Carol M. Schleif
2013: Year of “Crisitunity”
Opportunities abound amidst ongoing change
I
n an episode of “The Simpsons,”
Lisa tells her dad that the Chinese
use the same word for both “crisis”
and “opportunity”—to which Homer
replies, “Yes! Crisitunity!” While many
Chinese language experts dispute those
prime-time linguistics, I think Homer is
onto something.
From a macro standpoint, we’re in the
midst of massive change everywhere. Laws
are being rewritten, regimes are being
upended, new technologies are displacing
the old, and societal norms reworked at a
dizzying pace—much like the systemic
shocks induced by such events as the invention of the printing press around 1440,
or the driving of the Golden Spike in 1869
that connected West to East through the
Transcontinental Railroad.
But in those changes as well as those
we face today, opportunities abound. Remember that such torrid growth didn’t
happen seamlessly. It’s a story that involved
the financing of countless start-ups. A few
made it. Most did not. Sources of capital
were created and then dried up. New rules
were written as profit-seeking investors,
speculators, and financiers moved quickly
to gain advantage. Then regulators came in
afterward to clean up abuses in the boom
and bust. Rinse. Cycle. Repeat.
So what’s an investor to do at inflection
points that are, by nature, murky, unpredictable, and uncomfortable? First, remember
that volatility isn’t the same thing as risk.
Stoc ks rise and fall, but companies keep
selling things—generating cash flow and
paying dividends.
Technologies, trends, laws, and politicians come and go while some companies
and industries flourish as others fade. In
short, no matter how we feel about it, the
world marches on… and on… and on. The
choice? Sit on the sidelines and watch, or
steel your stomach and figure out where
the opportunities amidst the “crisis” may
lie. Several opportunities come to mind.
• Emerging markets. According to the
International Monetary Fund, the global
GDP contributions of emerging markets
(on a purchasing power parity basis) will
overtake those of developed countries
within the next year or so. Numerous stock
index, bond, and currency funds give each
of us a way to participate.
Volatility isn’t the
same thing as
risk. Stocks rise
and fall, but
companies keep
selling things—
generating cash
flow and paying
dividends.
• Equity bargains. Low-fee exchange
traded funds (ETFs) and notes that mimic
everything from broad to very specific stock
and fixed-income sectors to currencies
and bank loans are among the diamonds
in the rough left by those giving up on
equities over frustration with Wall Street
and a constant string of scandals. So many
people have washed their hands of European equities and fixed income that these
and other legitimate investments are at
once-in-a-lifetime valuations.
• Innovation-inducing demography.
Our nation’s magnanimous immigration policies have helped give the U.S. a
younger population on average than any
of the other developed countries. A crop
of smart, technologically savvy folks could
continue to drive innovation—especially
as waves of Baby Boomers start to retire
and clear the decks—with long-term positive implications for a wide range of small
cap domestic stocks, growth, technology,
marketing, communications, and health
care discovery industries, to name a few.
• Energy. All sorts of people and businesses already are profiting from the extraction boom in the Dakotas and other
states—whether it’s building contractors,
tradesmen, or farmers in Wisconsin looking to sell “fracking sand.” Substantially
reducing the cost of energy and transporting goods has broad implications, as
does the work of firms exploring ways to
minimize the environmental impacts of
these activities.
These are only a few of many opportunities and don’t even include what would
happen if businesses reported by the Wall
Street Journal to be sitting on a whopping
$1 trillion in cash would come off the
sidelines and start spending again. Pretty
typical Wall Street stuff, I know, but nearly
30 years in the business have taught me to
think broadly, act nimbly, expect the unexpected—and, as Homer Simpson reminds
us, to look for Crisitunity!
Carol M. Schleif, CFA,
is a director in asset management at Abbot Downing, a
Wells Fargo business that
provides products and services through Wells Fargo
Bank, N.A. and its affiliates and subsidiaries.
She welcomes questions and comments at
[email protected].
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