We’re already 20 years in, but the 21st century has finally arrived.
PayPal co-founder and early Facebook investor Peter Thiel told Forbes this month that many shares are way overvalued and it would take years for those companies to grow into their valuations.
“But I keep thinking the other side of it is that one should think of COVID and the crisis of this year as this giant watershed moment, where this is the first year of the 21st century,” he said.
“This is the year in which the new economy is actually replacing the old economy.”
And Sydney portfolio manager Michael Frazis couldn’t agree more.
“For all the trials and tragedies of 2020, this was a year when all kinds of technology accelerated,” he said in a memo to Frazis Capital clients.
“This was a year where those taking extraordinary risks to advance the human race were richly rewarded, and for that we can all be thankful.”
Be on the right side of history
He acknowledged investing in new trends and technological shifts is “often uncomfortable”, but investors want to be on the right side of history.
“Balance sheets and income statements are messy, and the extraordinarily talented people that build new businesses are often odd,” he said.
“But it’s far riskier, in our opinion, to be on the other side of these shifts. Simply look at the performance of Tesla Inc (NASDAQ: TSLA) and Carvana Co (NYSE: CVNA) versus the auto industry; Afterpay Ltd (ASX: APT) and Square Inc (NYSE: SQ) versus global banks; and Shopify Inc (NYSE: SHOP), Mercadolibre Inc (NASDAQ: MELI) and Sea Ltd (NYSE: SE) versus traditional retailers.”
Sectors for the new century
Frazis pointed to the extraordinary science behind the development of COVID-19 vaccines as proof that the world has now ticked over to a new era.
“Biology has always had data at its core, but in 2020 this data science reached new heights,” he said.
“Chinese scientists posted the genetic code of the coronavirus online, and within days Moderna Inc (NASDAQ: MRNA) developed the first of what will likely be many mRNA vaccines without any access to the virus itself. Truly science fiction stuff.”
Biological research received a lot of government and investment funding this year, according to Frazis.
“It has never been cooler to be a biological scientist. Talent and capital is a thrilling combination. The next decade should be a good one for the life sciences.”
Non-government space exploration also made tremendous progress in 2020, said Frazis, making private travel out of earth a possibility this century.
“It was also a good year for space, with Virgin Galactic Holdings Inc (NYSE: SPCE) (which we own) and SpaceX (which sadly we can’t) both laying down serious milestones in what will be one of the future’s largest industries.”
He also picked the hydrogen fuel industry as a winner in the coming years.
“In 2020 the use of hydrogen in transportation reached critical levels, much to the benefit of Plug Power Inc (NASDAQ: PLUG), whose fuel cells now transport [about] 30% of US retail food and groceries.”
Frazis Capital has returned more than 92% net for the year to date, according to the portfolio manager.
Frazis told his clients last month that he was calling the peak of “red hot tech stocks” and would be selling them down.
“Longer term yields have begun to rise, tech valuations are at record highs, and we believe a period of serious multiple compression has already begun.”
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Tony Yoo owns shares of AFTERPAY T FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Facebook, MercadoLibre, PayPal Holdings, Sea Limited, Shopify, Square, Tesla, and Virgin Galactic Holdings Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia has recommended Facebook and PayPal Holdings. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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