1Yr·

One-decision stocks ("solid buy and hold stocks") will have to take a hit!


Do I have your attention?

Well, (especially with regard to bigTech) I am open to a counter-argument.


Important:

! I am only interested in factual comments without reference to politics

! I am not talking about the decline of big tech, just an "underperfomance", i.e. longterm on average <7% p.a.



I am aware of how incredibly relevant and indispensable the products and services of the most valuable tech companies are right now. right now are right now.

This is also reflected, for example, in a $HMWO (+0.41%) share of over 20%, which is almost economically justified if you compare the companies' profits with the economy as a whole.



Why I will not buy the bluechip shares despite this market dominance:




1. "nifty fifty" shares


Back in the 60s and 70s, some shares were traded as long-term no brainer. Just like our no brainer today, these companies were absolutely indispensable in various areas of life back then.

Almost all of these stocks underperformed the entire decade that followed, as new technologies and new challenges/developments caused institutional capital to flow out of these (old) still-relevant companies into new sectors/companies.

https://en.wikipedia.org/wiki/Nifty_Fifty


There is nothing to suggest to me that development in the following decades will not follow this pattern again.

The now huge companies are slowing down new developments and rapid growth internally through their size and structures alone, as is almost always the case with companies after the growth phase.


I am particularly skeptical about the future of technology companies, as changes such as AI development are interpreted exclusively positively, although the impact on profitability and competition is not yet understood at all.


Size and cash do not automatically lead to a successful future.




2. pending regulation?


In the USA (home to most of the popular buy and hold stocks), among other places, the market is rather lightly regulated, which is not always a bad thing. Ultimately, regulation should only prevent market failure, which is how it continues to be politically justified, but the exact definition of market failure is theoretically broad.


Up until the 0s, large oligopolies/monopolies on the financial market were tolerated at times, but were also influenced by regulation in the long term. More or less emphasis was placed on ensuring that there was still a "free" market (at least one with at least 2 or more players) and as much competition as possible in the individual sectors.


To what extent is a "free market" really still guaranteed today?

Companies such as Microsoft, Apple, Meta and, above all, Amazon span many large industries and have such a huge margin advantage simply because of their size that only the other big tech companies have any chance of long-term competition.


In addition, unlike local or even smaller companies, many of these companies have been subject to different tax rules for a very long time, which only makes the distortion of competition even more pronounced.





tl;dr

I see the strengths and size of the tech giants as a threat to regulation in the not too distant future, and the weaknesses as an opportunity for new companies in similar or identical sectors to gain a foothold in a rapidly changing technological world.



Have a good start to the week.



PS: Since there have been a few panicky posts recently about a 2% correction, please take this post as an opportunity to reconsider your investments if you are unsure. Don't start when you are at - 20% and then sell.


Once again:

Blue chips remain blue chips and are certainly a good store of value when diversified. But I doubt whether you need to buy Apple, Microsoft and Amazon as individual positions alongside a FTSE AllWorld and whether they will outperform it in the future.


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35 Comments

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What period of time is your thesis based on?
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First of all, I share your view on big Tech 1 to 1. nevertheless, small problems: 1. the strong underperformance was strongly observed with too highly priced companies (P/E >50), like today with $TSLA and $PYPL. Nevertheless, many companies of that time also performed very well, like $MCD $KO $ABI. 2. "The stocks were often described as "one-decision", as they were viewed as extremely stable, even over long periods of time." The goal was not necessarily to achieve the highest possible performance, but to compensate for inflation by covering a product range that also represents the inflation basket.


So what you have to realize is that the decision to invest in ultra-large cap is safer, but as a consequence brings less return, just as you make the trade-off with government bonds as well. I can buy Ukrainian government bonds and have regular large fluctuations, or I don't want a heart attack and buy Swiss/German etc over a perpetual maturity. I hope that wasn't too political. The problem is that not enough people understand: safe ≠ high return; safe = low volatility (in sectors like consumption) safe = "too big to fail" (Apple won't go bankrupt tomorrow, but there isn't much room for expansion either).
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Whereby one must say that if one had bought all NiftyFifty companies, even at the all-time highs, one would still have made a solid return to date. (2% of the portfolio in Walmart would have even been enough) As far as my state of affairs at least. 👀
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Absolutely share your view. Just don't think you automatically have to argue against individual stocks in individual portfolios per se. Often yes UNCONDITIONALLY, but not always. The problem is that many retail investors never think outside the box and never question an entire asset class per se, or just as bad, categorically exclude the class. Both without logical rationale.Then your reasoning applies.Without system and rationale it's grotty.Many can't even admit that to themselves and are fine with their "strategy". So nothing can ever change..... I myself, however, consciously hold, for example, also a single share (Deutsche Börse), but in no way for reasons of overperformance. About what role the stock position in my portfolio makes, I have thought in advance, so it actually applies to any x-any stock that I would have chosen. So my strategy is not formed by what I run together or what looks pretty (justification if desired).
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I think that the big techs have already done very well and now the others either have to catch up or the techs have to give way. Consequently, I also think that they will underperform for the time being. But I have already been wrong very often in various topics, so they will continue to run to the moon! 😂
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I see it similarly. That's why I don't have large caps, except Tesla. Small caps love goes out.
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Apple , Microsoft, Alphabet, Nvidia and Amazon
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Have a great start to the week too.
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