This week I was blown away by coworkers’ responses to my departure announcement. The individuals I spoke with were genuinely supportive, and my manager in particular remarked how excited she was to see me “go and make the world a better place.” The positive responses were warm and encouraging; I can’t wait to use all I’ve learned at the company to tangibly help people outside of it.
On the Market:
As the first week of 2018 concludes here are 3 stocks I recommend for the year:
Visa (V) +46% in 2017
This is the stock I’ve held longest and it remains my largest position. A question I pose to friends is:
If someone gave you $20 million with one condition — that you must launch a new credit card business — would you do it?
Most people decline once they realize how difficult it would be to convince merchants across the globe to accept the new card . . . which would require demand from consumers everywhere . . . which would require the card already being accepted by merchants everywhere . . .
That would be akin to jumping on a merry-go-round already spinning too quickly for you to “process” (pun intended). Hence we haven’t seen a competitor enter this space for decades. Recent innovations (Square, Venmo, Apple Pay etc.) have not been able to disintermediate Visa from the payment path, which is why you generate revenue for Visa regardless of whether you ride with Uber or Lyft, own an iPhone or Android, stream on Netflix or Amazon, or shop at Whole Foods or Walmart.
For years only two things have concerned me about Visa:
- Regulation (due to its virtual monopoly power)
- Technological disruption (the likes of which we’ve never seen before)
In 2018 I think these two things will converge, but behind the scenes and in ways that are actually beneficial for Visa. The cryptocurrency movement — including its underlying Blockchain technology — is the first thing I ever thought had potential to disrupt Visa.
However it appears that the earliest real-word payment solutions will still rely on Visa’s network. Many of the “cards” I’ve seen emerge to pay for things with cryptocurrency still bear the Visa logo, and adoption of truly alternative payment systems — at scale — is likely years away.
Banks and other operators within the traditional financial system are more immediately threatened by blockchain technology. I anticipate there will be increased lobbying to regulate Bitcoin and other entities that have potential to disrupt Wall Street firms. Meanwhile Visa will continue squeezing profits from merchants relatively under the radar, as regulators focus on the blockchain trend that hijacked everyone’s attention in 2017. So until further notice I am sticking with Visa.
Amazon (AMZN) +53% in 2017
The Whole Foods acquisition in 2017 marked a tipping point in the general public’s awareness that Amazon is much more than a store.
I’ve been closely following Amazon’s evolution since investing in the stock several years ago, yet I continue to be amazed by Jeff Bezos, and his company’s ability to lead markets by building toward the future as they foresee it.
In 2017, I learned that Amazon has plans to make prices for goods even lower, by integrating optional advertising into videos on its product pages (a purchase model no other company in the world can really offer). They may also disrupt the venture capital industry by becoming their own fund, and offering startups discounts on computing needs via Amazon Web Services. In my ongoing quest to gain perspective on the future, I read about how the “e-sport” of video gaming streaming is becoming popular across the globe. Many of the articles noted how Amazon purchased Twitch.tv — the world’s largest site in the category — more than three years ago.
It’s this incredibly diversified vision for the future (combined with a long track record of execution) that makes me bullish on Amazon stock. It’s quite plausible the stock will dip at least once in 2018, if Wall Street expectations for earnings get ahead of Amazon’s reported performance. Whenever that happens I will look to buy more of it.
Alibaba (BABA) +97% in 2017
Perhaps it’s an oversimplification to say Alibaba is the Amazon of China (though the latter did partially exit after conceding it couldn’t compete with the former). The business models differ in several ways including how goods are managed and how consumers transact.
However, my bull case for Alibaba rests as much on its market as its mojo. The government of China is able to create long-term plans (Made in China 2025, One Belt One Road Initiative, etc.) and attempt to achieve them with minimal resistance. Compare that to the United States, where a new president seeks to systematically undo the policies of his predecessor (Affordable Care Act, The Paris Agreement, TransPacific Partnership, etc.).
I don’t intend to make political statements on this site, and the Chinese government certainly has its faults, but it stands to reason that a superpower with stable leadership determined to execute long-term plans may perform better economically than one that changes course every few years. In this case, I am willing to bet that China makes significant progress as leader of global commerce in the coming years, and Alibaba stock is one of the surest ways to profit from that reality.
— Jan 7, 2018