Tim Cook Agrees With My Thesis
I spent ten years in a role where large institutional investors were my clients. These are the professional managers who many people may have heard about while making selections for their 401K’s or other retirement accounts. The other, arguably more exciting type of investor that falls into this group is a hedge fund. I know that we are not supposed to like hedge funds and we are supposed to be sticking it to the man, but I am going to spill a secret here. For the most part, they are not evil. They are not sitting in their offices plotting how to take out their enemies and anyone else who may be collateral damage along the way. I think that people have been watching way too much Billions on Show Time.
These investors are just trying to do their jobs of finding the best investment opportunities before they become well known to everyone else. In many many calls and conversations, the concept of having a variant perception of a differentiated view was almost always brought up. If I spoke about a stock or a company and mentioned something that was widely known , I would be met with a response that was something to close to “you are so consensus.” You see, being called consensus is an insult. If you think the same way everyone else thinks, you don’t add value.
I still strive to look for ideas before they become really popular. That has been the case with commodities as well as global equities. I have found them early and now more and more people are coming around to my view.
Markets are efficient in that all legally knowable information may be available for all, but we all don’t process the information at the same speed. By being on the right side of a trend early, I am making the bet that I have seen something before others and as they interpret the information, they will come to the same conclusions that I have already. Price goes up, more people interpret the information the way the early adopters have and the trend continues until there is no one left to convince. Of course, there is always the chance that no one ever agrees with my views or the views are just completely off base (I was bullish on the dollar in the Summer and could not have been more wrong).
The same goes for individual stocks. It is hard to make a big return if you recognize something that the majority of investors have already have figured out. Apple is a great example and one that I have used in the past. If you buy Apple because you think they are going to sell a lot of phones and iPads, you are probably right but everyone already knows that. But I have a view that is different. I think Apple is morphing into a health and wellness company. I wrote about that here.
So, I was enjoying a quiet morning of reading over the holiday weekend and I was in the Apple News+ App (another $9.99 / month) and I came across this article in Inc. Magazine with the title “According to Tim Cook, This Will Be Far Bigger for Apple Than the iPhone.” As I was reading, I could quickly see where it was going and then we hit the key paragraphs:
The words of Tim Cook, Apple’s CEO: "I really believe," he adds, "that if you zoom out to the future and then look back and ask, 'What has Apple's greatest contribution been?' it will be in the health and wellness area."
According to the article: The Apple Watch, in particular, has made it possible to track all kinds of data in a way that just wasn't accessible before. That doesn't mean that there aren't other devices that can help you track your fitness, but there aren't any that are as deeply integrated with the iPhone--a device used by more than 1 billion people today.
The article goes on: A recent report from analyst Above Avalon suggests that there are now 100 million Apple Watch users and that 35 percent of Americans who own an iPhone also have an Apple Watch on their wrist.
Tim Cook agrees with my view, now we will see if the the rest of the market agrees. So far, the stock is not running away to the upside, it’s been stuck in a consolidation since September.
I also think that we are going to see more of the wellness trend. Peloton (PTON), Lululemon (LULU), Nike (NKE), Weight Watchers (WW) and others. You can see it in their messaging. These companies are more than their products make them appear to be. I think this could be a big deal.
Phil Perlman writes about the convergence of health and wealth here. This all makes a lot of sense. We are investing to build wealth to have the life that we want with the people who mean the most to us. but what good will it be if we can’t enjoy it? I think Phil is right, these two worlds are going to collide. I’m going for a walk!
Please considering sharing my thoughts with your network if you find them interesting.
*Nothing in these pages should be considered investment advice