Sundar Pichai, the CEO of Google and its parent company Alphabet looks ready to play the “evil genius”.
At around 15% of my investments, Alphabet (US:GOOGL) is a major holding in my portfolio. It is my biggest international holding. I first dipped into the stock back in 2019 and have been trying to top up (in small amounts) each year since.
Since Larry Page and Sergey Brin launched Google in 2004 with a killer search engine, the many tentacles of Google/Alphabet have spread into the everyday life of billions. Youtube alone had 2.6 bn annual users in 2022.
(Google’s search and advertising) is Alphabet’s best business, accounting for 80% of Google’s total revenue in 2022 including Google Search and other properties like Google Network ads and YouTube. The remaining 20% comes from Google Cloud (9.4%) and its apps, hardware and content businesses (10.4%).
When the income chart looks like the above showing a track record of growth (prior to 2023) – and projected further growth up to 2025 – I’m interested. A look now at Slack Investors favourite finance indicators. A projected Return on Assets (ROE) of 24.5 in 2025 (well above 15%), a 2025 predicted PE ratio of 17.5 (very low for a growth stock), and plenty of cash on hand for further aquisitions – it all looks good.
Nitpicking
Despite admiring the skill of Alphabet management in aquisition and company growth, Slack Investor is notenamoured with everything this company does. There are some things that I find annoying. Back in 2017, they sudddenly dropped their popular Google Finance Portfolio feature. Slack Investor then migrated to Yahoo Finance to keep track of his portfolio. I note that Google Finance has recently reinstated its porfolio feature – but I have already moved.
To keep growing revenue, many of their channels are being further monetized. I love using Youtube for music, entertainment, and the millions of helpful “how to” guides. However, the ads at the start of the clips are tedious. This is an attempt to get people into Youtube (no ad) Premium at $13.99 per month.
I also had a recent battle to reduce the amount of data in my google account (Photos, Google Drive, gmail) to below the 15 Gb free limit. This is deliberatly not a simple process and seems to be designed to push people into more storage through a subscription starting at $2.49 per month.
These are relatively small quibbles though – and Slack Investor really doesn’t expect “something for nothing”. I continue to hold and a happy buyer of this company using an international e-broking account with CMC Markets – Alphabet, I hope, will be a very long-term holding.
“Life is not a bowl full of cherries, there’s good and bad stuff“
Fuzzy Zoeller (American professional golfer)
Fuzzy Zoeller does not always say wise things, but his quote above is on the money. Slack Investor takes the good with the bad.
The trampoline effect of stinkers becoming nuggets in consecutive years reared again, with REA making the transition this year. Also, Nuggets … might end on the Stinker pile the year after. Slack Investor puts more emphasis on growth over a multi-year period, but compiles the yearly Nuggets and Stinkers list …. because its fun!
Growth stocks (usually high Return on Equity (ROE >15%), as with other stocks, often have cycles of price – bouts of overvaluation followed by a period of undervaluation.
The percentage yearly returns quoted in this post include costs (brokerage) but, the returns are before tax. This raw figure can then be compared with other investment returns. I use the incredibly useful Market Screener to analyze the financial data from each company and extract the predicted 2o25 Price/Earnings (PE) Ratio, Dividend Yield, and Return on Equity (ROE), on the companies below. This excellent site allows free access (up to a daily limit) to their analyst’s data, on the financials tab for each stock, once you register with an email address.
Slack Investor Stinkers – FY 2023
Financial year 2023 was a welcome recovery in the technology sectors. All of Slack Investors followed markets Australia, the UK and the US having gains over the financial year 2023. However, Slack Investor is always ready for lessons in humility and still managed to pick up a few stinkers along the way.
Integral Diagnostics (IDX) -19% (Sold Oct 2022)
(IDX – 2025: PE 18, Yield 3.8%, ROE 10%) Integral Diagnostics provides medical imaging services at a number of urban and regional locations in Australia and New Zealand. This company was also one of my stinkers last year (FY2022 -39%) The sinking feeling that I got during my monthly chart reviews was just too much … and I finally gave into that negative energy in October 2022 – and sold. This, unfortunately, turned out to be the bottom of the market – and IDX has made a modest recovery since.
Computershare (CPU) -18% (Sold May 2023)
(CPU– 2025: PE 16, Yield 3.8%, ROE 29%) Computershare is well known to owners of some Australian shares as they run the registry for many Australian companies. It started as an Australian technology business in 1978 and since has become a major global player in financial services. Slack Investor just bought at a bad time … and I sold in May 2023 to make another share purchase. CPU seems to be a solid global business though – Will look at buying this one again.
Dicker Data (DDR) -18% (Still held)
(DDR – 2025: PE 14, Yield 6.8%, ROE 42%) Dicker Data is the only Australian owned and ASX-listed major IT provider. It is a hardware, software and cloud distributor for most of the well known US IT companies (Microsoft, Cisco, HP, etc). The business is projected to continue to grow and, as the share price seems to have “bottomed out”, Slack Investor will continue to hold on because of the companies excellent projected PE, Yield, and ROE.
BetaShares Asia Technology Tigers ETF -7% (Sold Sep 2022)
(ASIA – 2023: PE 17, Yield 2.6%,) Growth in Asia … What could go wrong! Plenty it seems. These “technology tigers” that make up this ETF have been part of a global selloff of tech-related shares in Asia since 2021 as many US investors take flight from the China market due to US/China tensions.
This company was also one of my stinkers last year (FY2022 -33%) and was “on watch” during my monthly chart reviews. Sadly, the pain became too much and I unloaded near the bottom of the market again … and, it has since made a modest recovery. I have maintained at least some exposure to the Asian tech sector with with Vanguard FTSE Asia ex Japan ETF (VGE.ASX).
Slack Investor Nuggets – FY 2023
Nuggets made a comeback this Financial Year. Slack Investor continues to invest in high Return on Equity (ROE) companies with a track record of increasing earnings, Companies with these qualities sometimes behave as “golden nuggets”.
Technology One (TNE) +48%
(TNE – 2025: PE 37, Yield 1.5%, ROE 34%) This Software as a Service (SaaS) and consulting company continues to be profitable. This great business was also a nugget last year (+17%). A high 2025 PE of 37 (Expensive) is a little scary but, if the high Returns on Equity (34%) remain, on balance, this is OK. I found this company through the writings of Rudi Filapek-Vandyck – a great Australian Investor and writer, when he talks, Slack Investor listens.
Altium (ALU) +40%
(ALU – 2025: PE 34, Yield 2.3%, ROE 32%) Altium is an Australian based developer and seller of computer software for the design of electronic products worldwide. It focuses on electronics design systems for 3D printed circuit board (PCB) design. Slack Investor has part-owned this business since 2009 and has enjoyed the increasing value that ALU has created. This sector is very now … and remains a favourite of Slack Investor.
CarSales.com (CAR) +37%
(CAR – 2025: PE 28, Yield 3.0%, ROE 10%) CarSales.com is the go to for selling cars, boats and other vehicles. It does, in an efficient way, what the classified ads used to do. I have noticed that the Return on Equity is dropping (Now 10%) and will keep this company on watch – but I cant argue with the recent price rises.
BetaShare NASDAQ 100 ETF (NDQ) +36%
(NDQ – 2023:PE 26, Yield 1.0%) Exposure to the powerhouse of US Tech companies with the simplicity of an ASX ETF. Management fees are reasonable at 0.48% – Slack Investor remains a fan.
Pro Medicus (PME) +36%
(PME – 2025: PE 78, Yield 0.6%, ROE 46%) Pro Medicus is a developer and supplier of healthcare imaging software and services to hospitals and diagnostic imaging groups. Slack Investor actually met the CEO and co-founder of Pro Medicus, Dr Sam Hupert, at an investment seminar last year. His modesty, US foothold, and debt-free approach to expanding his business impressed me – I’m obviously glad I bought in – but the very high PE ratio (+78) is worrying – expensive.
REA Group (REA) +30%
(REA – 2025: PE 39, Yield 1.5%, ROE 29%) Like Carsales.com, REA has dominated the space left by the old newspaper classifieds in selling real estate in Australia. REA has expanded into India and other global locations. A high PE ratio (39) but while projected Return on Equity (ROE) remains high (29%), this is OK.
VanEck Wide Moat ETF (MOAT) +30%
(MOAT – 2023: PE 19, Yield 2.6%,) The Wide Moat ETF run by VanEck is a rules-based selection of “attractively priced US companies with sustainable competitive advantages” Sounds good doesn’t it. The management expense ratio of 0.49% is OK for such curated US exposure.
Slack Investor Total SMSF performance – FY 2023 and July 2023 end of Month Update
After a difficult 2022, FY 2023 is described by J. P. Morgan as being “kinder to balanced portfolios”. True That! The growth stocks that were punished last year bounced back strongly. In the Australian superannuation scene, the median growth fund (61 to 80% in growth assets) returned +9.2%for FY 2023. The ASX 200 chart shows a gradual climb for the financial year.
After a tough FY 2022, the FY 2023 Slack Investor preliminary total SMSF performance looks like returning to form and coming in at around +18%. The 5-yr performance is a more useful benchmark to me – as it takes out the bouncing around of yearly returns. At the end of FY 2023, the Slack Portfolio has a compounding 5-yr annual return of around 10%.
The new financial year started of positively for Slack Investor markets. The ASX 200 + 2.9%; FTSE 100 +2.2%; and S&P 500 +3.1%. He remains IN for all index positions.
All Index pages (ASX Index, UK Index, US Index) and charts have been updated to reflect the monthly changes.
It has become quite fashonable, worldwide, for new ETF’s to be launched onto the market with a “theme”. Robotics, Alternative Energy, Cryptocurrency, Battery Tech, or Artificial Intelligence are just some examples of themes where an ETF provider will bundle a number of companies together with a catchy ticker.
This trend seems to be also happening in Australia. Investsmart has been following the performance of a few of the new Australian thematic ETFs e.g. HACK (Cybersecurity), ERTH (Climate Change Innovators), ACDC (Battery Technologies and Lithium), ESPO (Gaming and eSports), CRYP (Cryptocurrency), CLDD (Cloud Computing) and DRUG (Healthcare). Their results, since the ETF inception dates, are a mixed bag. ACDC, DRUG and HACK outperformed the ASX200, while ERTH, ESPO, CRYP and CLDD have underperformed.
The two main problems with themed ETF’s is that they are generally expensive – have high management costs relative to other broad index ETF’s and, they concentrate risk in just one part of the market – the theme might suddenly fall out of favour e.g. ARKK.
The themed ETF’s generally have management fees of over 0.50% p.a., wheras broad Index funds have fees closer to 0.10%p.a. – Financial Times
In a comprehensive study (over 25 years) of US ETF’s, The Ohio State News concludes that these new themed ETF’s are based mostly on “hype” and they tend to lose value in comparison to the general market very soon after they are launched.
… specialized ETFs lost about 6% of value per year, with underperformance persisting at least five years after launch.
Thematic ETFs are often launched near the top of the market when interest in that theme is at a high. As a result, the stocks in the thematic ETF can start overpriced, resulting in underperformance.
Slack Investor has also not been immune to the “hype” and has bought a number of themed ETF’s, as well as a few broad-based index-type ETF’s. The latter, of which, I am generally happy with their long-term performance. My thinking was to get onboard, in a relatively easy way, to some exotic investment themes.
With hindsight, I can see the trap that I have fallen into. For example, E-Sports. I had read about E-Sports in the press and didn’t know much about them – except that they were popular, and they were the new “thing” – and growing fast. I didn’t know any individual companies in the field, as most of them were based in the US. When VanEck Bundled together a few of the E-Sport companies into a themed ETF, VanEck Video Gaming & eSprts ETF (ESPO) I was excited and bought into it. The trouble was, I was late to the party. As the chart above shows, by the time I entered the market, there was already a lot of hype, and the entry price paid was probably over-inflated.
The BUY-SELL price history of the themed ETF’s that Slack Investor has added to his portfolio. The first dot for each ETF is the BUY price and the second dot is either the SELL price, or the CURRENT price. If the lines keep going to the end of the chart (01/01/2023), then I am still holding the ETF.
When I plot out the price history of the themed ETF’s that I have bought over the past few years, the theme was not a dream. With the exception of the MOAT ETF, the flat or downward lines indicate a less than lustrous performance. Ideally, all my BUYS would slope upwards from left to right over time.
This chart is a good look in the “house of mirrors” for Slack Investor, I will continue to buy themed ETF’s in a small way to expose my investments to interesting sectors. However, I will modify my purchases of these themed ETF’s in the future – Or at least, wait a few years after launch for the excitement to settle down … and then invest.
Not all is lost, there are some bright lights amongst the themed ETF’s. The Morningstar Australian ETF’s top ten performers over 5 years ar a mixture of both themed ETF’s, and broad-based ETF’s. Over a realistic 5-yr time frame, where there is enough time for “our flowers to grow”, the top 10 annualized average 5-yearly growth is shown in bold. Over 10% p.a. is impressive – but you have to be lucky – or a great ETF picker.
“So the last shall be first, and the first last: for many be called, but few chosen“
Matthew 20:16 – King James Version of the Christian Bible
Slack Investor is not a very religious person – but he is a numbers man and 84% of the global population identifies with a religious group – so I have to go with the flow here. This sort of majority demands respect. The Christian disciple Matthew was reporting on one of Jesus’s teachings. Biblical scholars think that Jesus was trying to point out that Heaven’s value system is far different from earth’s value system.
The “Last first and First last” might also be applied to how some of the Slack Portfolio stocks have been going over consecutive years. There seems to by a cycle of last years Nuggets … might end on the Stinker pile the year after – and vice-versa. Growth stocks have many virtues … but they are not immune to the cycles of price – bouts of overvaluation followed by a period of undervaluation.
The percentage yearly returns quoted in this post include costs (brokerage) but, the returns are before tax. This raw figure can then be compared with other investment returns. I use Market Screener to analyze the financial data from each company and extract the predicted 2024/2o25 Return on Equity (ROE), Dividend Yield and Price/Earnings (PE) Ratio on the companies below. This excellent site allows free access (up to a daily limit) to their analysts data once you register with an email address.
Slack Investor Stinkers – FY 2022
Financial year 2022 was the Pepé Le Pew of all of Stinktown for Slack Investor.I hold mostly growth shares in the technology and healthcare sectors. These sectors have been heavily punished across the world so far in 2022.
This is the first time I have had a negative result for my investments over a financial year since 2009. Slack Investor is a great believer in long term investing returns – usually evaluated over a 5-year period – so this year’s result, while painful, does not change my overall strategy.
Three of my “stinkers” this year were actually “nuggets” from last year. For FY 2020, Codan +161%, REA +59% and IDX +37%. Such is the cyclic nature of some growth stocks.
Codan (CDA) -58% (Still held)
(CDA – 2025: PE 14, Yield 3.8%, ROE 25%) Codan is a technology company that specializes in communications and metal detecting. This company was one of my big nuggets last year (+161%) – so I should not have been really surprised that there could have a bit of a pullback. The decline hurt, but the fundamentals of the company remain sound. Holding on.
Xero (XRO) -41% (Sold)
(XRO– 2025: PE 81, Yield 0.3%, ROE 15%) Xero is an innovative cloud -based accounting provider for small business. Every business owner that Slack Investor talks to say that Xero is a boon to their business. This sort of “word of mouth” got me over-excited this year and I just held my nose and jumped in – against all my rules of avoiding the excessively high forward PE ratios of over 50! It is these high PE companies that are usually punished first in a downturn – and that’s exactly what happened. I still look at it and think its a decent growing business – but I can feel the recent bite!
Integral Diagnostics (IDX) – 39% (Still held)
(IDX – 2024: PE 16, Yield 4.5%, ROE 12%) This medical image company provides diagnostic image services to GP’s and specialists. IDX was another of my nuggets from last year (+37%) that has just shed all of last years gains. The Return on Equity of this company is starting to get a bit low (<15%) – But the PE and yield seem OK. Will keep this company on watch for the moment.
BetaShares Asia Technology Tigers ETF -33% (Still held)
(ASIA – 2022: PE 14, Yield 0.7%,) Growth in Asia … What could go wrong! Plenty it seems.
These “technology tigers” that make up this ETF have been part of a global selloff of tech-related shares this year.
A lot of the Chinese companies (such as Alibaba) have been marked down because the Chinese government imposed its will on a few industries. Also the US government has hinted at action on Chinese companies that have listed on American market. However, the ASIA ETF has large holdings in such monsters as Taiwan Semiconductors, Samsung and Tencent Holdings – so I will accept the current pain and stick with this as a long-term holding
REA Group (REA) -33% (Still held)
(REA – 2024: PE 29, Yield 1.8%, ROE 32%) The owners of RealEstate.com.au. which is the go to portal for house selling and buying. 65% of Australia’s adult population are checking the site every month looking at property listings and home prices. Another long-term holding.
I have only listed the stinkers that lost over 30% this year … sadly, there were many more rogues that lost over 15% for the Slack Fund. They include PPK Group (PPK) -28%; Altium (ALU) -25%; Nick Scali (NCK)-20%; Pushpay Holdings (PPH)-16%; and A2 Milk (A2M)-15%.
Slack Investor Nuggets – FY 2021
Nuggets were few and far between this year. A great benefit of investing in companies that have a high Return on Equity (ROE), and with a track record of increasing earnings, is that they sometimes behave as “golden nuggets”.
Technology One(TNE) +17%
(TNE – 2025: PE 34, Yield 1.7%, ROE 36%) This Software as a Service (SaaS) and consulting company continues to be profitable. This year is the 13th year in a row of record half-yearly profits. A high 2025 PE of 34 (Expensive) is a little scary but, if the high Returns on Equity (36%) remain, on balance, this is OK.
Macquarie Group (MQG) +10%
(MQG – 2025: PE 25, Yield 4.0%, ROE 13%) Macquarie is a complex business with a range of banking and financial services, and plays in global markets and asset management. Once again, the management seem to know what they are doing – Slack Investor remains a fan.
Honourable mention to the only other company that ended in the black – Coles (COL) a decent +8% in these troubled times.
Slack Investor Total SMSF performance – FY 2022 and July 2022 end of Month Update
In a year that Chant West describes as “a rough year for markets”. Following FY2021, which was one of the strongest years for Super funds (+18% for FY21), things have now lurched south with the median growth fund (61 to 80% in growth assets) returning -3.3% for FY22.
The FY 2022 Slack Investor preliminary total SMSF performance looks like coming in at around -14%. However, the 5-yr performance is a more useful benchmark to me – as it takes out the bouncing around of yearly returns. At the end of FY 2022, the Slack Portfolio has a compounding 5-yr annual return of over 13%.
Despite a breach of the stop loss for the ASX 200 last month, Slack Investor remains tentatively IN for Australian index shares on a dramatic rise of 5.7% this month. The FTSE 100 also had a good month (+3.5%)and I remain IN. The US Index S&P 500 eclipsed them all with a remarkable 9.1% gain – and I am now a BUY back IN.
Last month the ASX 200 price went below its stop loss. Slack Investor tries not to exit a stock against the momentum of the market, so I have been off the couch and closely watching the ASX 200. It has remained above the rising trend line and emerged above the monthly stop loss. I am tentatively still IN.
After a sell, it is important to have a notion when to get back IN to an Index or a stock. When trend trading, my main tool for finding a buy signal is a trend following (or momentum) system called the Directional Movement Index. There are many ways of setting up this system. Slack Investor likes the “smoothing” that is enabled by a system that looks back over the previous 11 periods – but the complexities are best left for the Resources page.
In addition to the BUY signal from the Directional Movement Index for the S&P 500, the charts show a triggering of the “Wedgie” pattern where the stock price breaks through a long term down-trend. This reinforces the BUY.
All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).
Slack Investor tries to diversify his investment risk by keep a 70% growth oriented investments portfolio with a 30% stable income portion. So far this financial year, my Investments portfolio performance has been a bit lacklustre – so I have gone to the “hall of mirrors” and had a long, hard look at myself. I decided to do a sector analysis of my investments portfolio. The biggest revelation is the large proportion of Investments in the Information Technology (INFT) and Healthcare (HLTH) sectors.
A breakup of the Slack investments portfolio by sector. Dominated by Information Technology (INFT) and Healthcare (HLTH) – but a scattering of Financials (FINL), Broad Index-type funds (INDX), Consumer Discretionary (COND), Communication Services (COMS/TELS), and Consumer Staples (CONS)
Both of my main sectors have had a rough time these last few months – as can be seen by the monthly sector performance chart below. Materials (Resources) and Energy have done well – But these are sectors that I do not own.
Monthly Sectors heatmap for S&P 500 Sectors – Click on Image for better resolution – From Livewire
Slack Investor is not too old to learn new tricks … or, at least, evolve a little. so I was interested to see how my sector analysis compared with the US S&P 500 (below). I chose the S&P 500 f0r comparison as it not dominated by Financials and Resources like the ASX 200. My weightings are very different to the S&P 500.
I came across a great graphic showing how each sector of the S&P 500 performs annually
10 yr excerpt from the annual S&P 500 Sector Performance ranking – Click on the Chart to get the full interactive experience – From Novel Investor
Some explanation of this beautifully coloured quilt is in order. The vertical columns represent each of the last 10 years performance of each sector of the S&P 500 in ranked order. The right hand column is for 2021. The 2021 sector leader was Energy (ENRS) after a long period in the doldrums. Next is Real Estate (REAL), Financials (FINL), Information Technology (INFT), S&P 500 (S&P), Materials (MATR), Health (HLTH), Consumer Discretionary (COND), Communication Services (TELS), Industrials (INDU), Consumer Staples (CONS) and Utilities (UTIL). The full glory of this graphic is found on the Novel Investor website with a bit of interactivity.
Some things that I have gleaned from this graphic
Every dog has its day – Depending on the year, each sector can have it’s day in the sunshine.
If you want neither the best of returns or the worst sector returns – buy the S&P 500 Index.
Often … if a sector tops the rankings in one year, it usually performs much worse in the next year.
The Information Technology (INFT) sector, to which Slack Investor is heavily exposed, is in the top four rankings for performance for 7 of the last 10 years. This year is not one of them.
Should I change my sector allocation?
There are good arguments for passive investing and, if I did not enjoy investing in individual companies, and my 5-yr results were not OK), then that is what I would do. To completely diversify my investment portfolio to match the S&P 500 would mean that I would be investing solely in an S&P 500 Index fund. This has been an excellent idea for the past 50 years.
Berkshire Hathaway has tracked S&P 500 data back to 1965. According to the company’s data, the compounded annual gain in the S&P 500 between 1965 and 2020 was 10.2%
However, Slack Investor still thinks that the S&P 500 is over valued. Regardless of the current cycle, to invest in the whole index would be lumbering my portfolio with some cyclical and low growth companies.
I will continue to skew my investments portfolio with growing businesses – regardless of which sector they are in. I will not always get the company selection right – and will suffer the occasional whack. That’s fine, as long as I get it “mostly right”.
At the moment, many of the high P/E, growing businesses that Slack Investor owns are being sold down as analysts adjust down future earnings because of anticipated inflation. But the companies I own were usually selected for their ability to set their own prices and increase their earnings … these are the qualities of businesses that will prevail – regardless of short-term fluctuations.
Pizza scissors – The new “Must Have” – These highly rated Kitchen Maestro Pizza Scissors were available at Amazon for $12 USD, but sadly, for pre-Christmas shoppers – currently out of stock.
Fish swim, birds fly, humans think, create and innovate. Thinking is not something that people do because we like it, we do it because it is our way of surviving.
An amazing trait that we humans have is the ability to innovate. Slack Investor admires the innovators and the intellectual capital that they bring to businesses. Ideas and research are a vital part of a growth company. Research and Development (R&D) may lead to more efficient production processes or better products that give a company future growth. I have long been a big fan of companies with a high spend on R&D and I am happy to invest in these stocks.
According to the data from EFPIA, in the percentages below, the big spenders are in just a few sectors. The survey looked at 2,500 companies around the world. Technology companies usually have a big R&D budget, but the pharmaceutical and biotechnology industry lead by spending 15% of revenue on R&D. NASDAQ figures for specific companies, show R&D expenditure for Google (Alphabet) was 15% of its revenue in 2020, CSL about 11%, and Microsoft 13%. Apple was a relatively low 7% – but they have a very small range of products.
Proportion of Revenue spent on R&D by each Industry sector – EFPIA
Just because a company has a high R&D spend does not always guarantee success. As well of the discovery of ideas that might be useful in the business, a company must be really good at the Incubation, and Acceleration of these ideas. It is important to look for an established record in the way a business brings new products to fruition.
However, there is a broad link between innovation and value. The Boston Consulting Group(BCG) compile a yearly list and map the performance of the 50 most innovative companies. In 2021, they found that the more innovative businesses had an average Total Shareholder Return (TSR) premium of 3.3% over the MSCI World Index.
Outperformance of the most Innovative companies – From the VisualCapitalist
“If I have 1,000 ideas and only one turns out to be good, I am satisfied.”
Alfred Nobel
Top 10 Most Innovative companies – published in the Visual Capitalist from BCG data.
The full list of top 50 innovators is worth a look and is a reminder that these are the companies that a lot of people interact with every day.
I have been a continual investor in theBetashares NASDAQ ETF(ASX: NDQ) that gives me access many of these great innovative companies. Every time that Slack Investor looks at the businesses that make up the NASDAQ 100, I think that this technology area must be where growth is still happening – and I want to be invested here.
According to GuruFocus the 12-mth forward PE of the NASDAQ 100 is 27 (A bit expensive) but the Return on Equity is at 18% – and growing (This is good).
Slack Investor also owns a slice of the Asian Technology giants with BetaShares Asia Technology Tigers ETF (ASX: ASIA). The heavy hand of Chinese government interference in some tech stocks has led to a pullback in price this year. But I have maintained my holding because Chinese companies like the search engine Baidu, the e-commerce giant Alibaba, and the technology beast Tencent will not be held back for long.
A good compromise, if you want a more whole world approach, is the ETFS Morningstar Global Technology ETF(ASX: TECH). This ETF has holdings distributed across the United States (89.6%), Australia (5.8%), Japan (2.4%), and Germany (2.2%) and has a “moat” filter that will only select companies that have built a competitive advantage around their businesses. All of this for a Management fee of less than 0.5%.
Innovative company shares do not always go up. An example of this is is the new Cathie Wood disruptive innovation stocks ETF – (ARKK). Early investors are very happy, recent investors not. However, with a 3-5 year time frame, exposure to the whole NASDAQ index – the top 100 of the (mostly) great NASDAQ companies must be a good thing.
This is not advice, but if I cant buy pizza scissors for Christmas – I might as well top up with some more NDQ or ASIA, or expand into TECH.
