Bitcoin & Nvidia: The Next BlackBerry?
MODERNIST’S ASSET CLASS INVESTING PORTFOLIOS ARE STRATEGICALLY INVESTED WITH A FOCUS ON LONG-TERM PERFORMANCE OBJECTIVES. PORTFOLIO ALLOCATIONS AND INVESTMENTS ARE NOT ADJUSTED IN RESPONSE TO MARKET NEWS OR ECONOMIC EVENTS; HOWEVER, OUR INVESTMENT COMMITTEE EVALUATES AND REPORTS ON MARKET AND ECONOMIC CONDITIONS TO PROVIDE OUR INVESTORS WITH PERSPECTIVE AND TO PUT PORTFOLIO PERFORMANCE IN PROPER CONTEXT.
BlackBerry Trailing 12-Month Sales per Share February 2004–January 2024
The financial media loves to get excited about the flashy winners in the market, especially if there’s an Artificial Intelligence theme to talk about too!
During 2023 and now into 2024, the “Magnificent 7” are a group of 7 megacap technology stocks (not Akira Kirosawa’s classic film 7 Samurai or the 1960 or 2016 US remakes) that have been the top performers, moving US equity indexes ever higher due to the explosive momentum of these few stocks.
Some investors attribute the Magnificent 7 stocks’ dominance to a “winner-take-all” environment in which a handful of companies achieve sufficient market share to hinder competition. (1)
In businesses where gaining users drives success, establishing a strong market share may be like building a moat around profitability. But that doesn’t guarantee these companies can stay on top.
Artificial Intelligence in 2020s = Mobile Phones in the 2000s
Think about the state of mobile phones 15 years ago. In all likelihood, you would have been reading this on a BlackBerry, such was that device’s dominance of mobile business communication. Then, along came iPhones and Androids and suddenly BlackBerry’s foothold was eroded.
History is littered with examples of household names that were usurped by the Next Big Thing. Remember, Sears was a Top 10-sized stock in the US once upon a time. AOL was synonymous with internet access in the 1990s. And in 2003, the most popular social media network starting with the letter F was Friendster.
Even the biggest companies have uncertain futures, highlighting the need for broadly diversified investments. And even if these companies stay at the top of the market, that’s no assurance higher returns will continue if their success is expected.
This Forbes cover reminds us that picking hot stocks is a fool's game; in 2007 no one would have chosen Samsung or Apple or Google over Blackberry and Nokia. This is why we buy the whole market instead of gambling on guesses.
Diversification is ESSENTIAL
This is why our Investment Methodology confirms that diversification is essential.
Diversification has been called the only free lunch in investing. This is because using a single stock, strategy or investment type is riskier than mixing lots of different types of investments. Holding multiple investments reduces the risk that any single investment will cause a drag on portfolio performance.
When we see the returns of the Magnificent 7, we’re grateful our portfolios broad diversification includes these positions, but aren’t overallocated to them just because they’re exciting.
