This year was certainly better than the last. Highlights include moving to a new city, landing in a great church community, and forging meaningful friendships. God has continued to bless in manifold ways, which deepens my desire to bless others. Whenever I speak about the future the 27th Proverb tends to echo, but I aim to have much to share with you by next January.
On the Market
With 2021 officially in the books we now have 5 years of stock picks on this blog:
The market as defined by the S&P 500 grew 27% in 2021. My newer picks from last year cleared that benchmark by wide margins, led by Cloudflare (76%) and MongoDB (51%). Shopify neared that number (26%) while Amazon decided to sit this one out (5%), though perhaps cooling off was rational after its 76% run in 2020.
Visa (0%) and MasterCard (2%) are literally stuck in quarantine, as both companies earn more revenue when people swipe in foreign countries. These stocks will likely surge whenever cross-border travel becomes a thing again, but given how prolonged the global response to covid has been it’s anyone’s guess as to when that will happen. For similar reasons it will be a while before we can truly evaluate AirBnB’s stock (20%).
When I started investing during college, I would never believe there’d be a day I’d feel “meh” about a 26% annual return. Yet here we are 🙃. It’s disappointing not to soundly ‘beat the market’ for the first time in 14 years of investing, but hopefully I’ve built enough goodwill for you to trust these strategies. Here are my picks for 2022:
1. MongoDB: Without getting too technical jargon-y, MongoDB enables companies of all kinds to do really cool things with data. It is almost universally loved by developers and people who influence IT spend. Further, the way Mongo has leveraged open-source policies to compete with larger cloud firms like Amazon is so clever it should be a business school case study. I think the world is changing too rapidly and chaotically to say, “here’s a new blue-chip stock you can buy & hold for a decade” but Mongo is about as close as it gets to that reality.
2. Unity: Unity fulfills a vital role in the gaming ecosystem, enabling games to be built, operated, and monetized across all platforms. Gaming is already the world’s most valuable type of media, generating more revenue than the music, TV, and movie industries — combined. Yet Unity’s ambitions go far beyond its roots.
The company is positioning itself to provide leading graphics technology to businesses across many sectors including TV & movie production, urban planning, construction, and automobile design, just to name a few. A day may come when your social media posts include advanced CGI the likes of which was only available to Hollywood studios, all powered by Unity in the background.
The total addressable market for Unity’s burgeoning platform is much larger than any Wall Street analyst would price into the stock, today. Therefore I expect there to be a time when Unity grows upwards of 70%, I just don’t know if that’s more likely to happen in 2022 or 2023. I’m probably early on this one, and given Unity’s focus on growth (at the expense of profitability) the stock may be a bit of a bumpy ride. However if you’re a patient investor looking for a sound way to bet on the future of gaming, graphics, and even ‘the Metaverse,’ Unity is a great way to do it.
Thoughts on Web3
Remember the part I wrote earlier, about the world changing rapidly and chaotically?
The number of people I’ve seen drop everything — including well-paying jobs — to pursue cryptocurrency projects has been too astounding to ignore. So this year I strived to learn everything I could about the crypto industry (or Web3, which just sounds more sophisticated, don’t it?)
Ultimately I’m now convinced that crypto will transform everything. The potential changes that blockchains enable are already mind-blowing, despite the fact that relatively few things have been built or widely adopted. What will the world be like once seemingly everything is token-ized, in the way that during the last decade everything became digitized?
While it may take another decade for crypto to transform everything, I think many will be surprised by how quickly it impacts most things. Reading any piece of content about the future that doesn’t at least consider Web3 already feels like a waste of time. I wonder how long it will take The Wall Street Journal to publish an article suggesting the new “60-40 portfolio” is 60% stock… 40% tokens.
But people don’t read this blog to hear me postulate about the future, they come for investment advice. For 2022, I recommend Ethereum and Solana. Each has potential to surpass Bitcoin as the most valuable blockchain. Everything I’ve observed about winners through the history of technology indicates that these two projects are building fundamental value. Even if there are massive crashes, or thousands of other cryptos built on speculative value go to zero, fundamental value is something that endures. History tends to repeat itself even as new things are invented. But perhaps the most appropriate statement I’ve seen regarding crypto is that it’s very very late, and very very early.
— Jan 1, 2022