"Thanks Adam ,ticker is PPL ,presentation says it all and Coffee Microcaps youtube.Truly a one off year for disruptive microcaps like BMT/FKP and the gains their s/p's have made despite/ because of Covid.Will we ever see the likes of it again or is it a new norm for a while yet?."@Dejavoo,
100% certainty that disruptive microcaps is the new norm.
Technological advancement has always been an enabler, and the rate of technological advancement is occurring at accelerating rates.
When I first started out my investing career -in a pre-mobile phone, pre-internet age - starting a business and getting it to a point of self-sustaining commercialisation was jolly difficult - not just in the activity of manufacturing, but even in service sectors (banking, insurance, health care, professional services etc.) it took a long time and also required significant investment in marketing and branding in order to attract growing custom.
And that's just for localised business; to go national - and forget about international - required a mammoth effort and plenty of capital.
By contrast, in today's digital age, thanks to the internet, and especially cloud computing power, a business idea can be launched, and if it is a good one that addresses a need, it can become commercialised within a matter of 2 or 3 years.
Why, I consider myself a bit of a techno- Luddite and yet today more than one dollar out of every five of my family's capital is invested in companies that could not have existed as recently as 5 years ago, because the technological capability to facilitate the existence of those businesses simply did not exist at the time [*].
When I think about it, one-in-five is a startling proportion, given my investing "DNA", which can be described mainly as "traditional, old-school value investing".
When I started out investing in the 1990s, the Australian equity market had decidedly cyclical characteristics; dominated by miners and mining services (commodity cycle), banks (credit cycle), insurers (premium cycle), retailers (consumer cycle), building materials stocks (construction cycle). The part of the market which could be described as "structural growth investments" was negligible.
About 8 or 10 years ago that all started to change, and the change has accelerated since then, with a plethora of new businesses being formed and listed - businesses that owed their ability to exist to the rapid developments in technology.
To adapt from "understanding the determinants of cycles" to "understanding the determinants of structural growth" has required a fair degree of reinvention on the part of traditional old-school investors like myself.
But I find investing in the world of "disruptive microcaps", with their structural growth attributes, to be far more enriching than investing in the world of multi-billion dollar cyclical companies that don't grow their Revenues and Earnings.
Of course, there's no such thing as a free lunch in the world of finance and business, because just as easy as it is for new businesses to start up as disruptive microcaps, so too is it for someone to invent a better mousetrap which could end up disrupting the disruptor.
Which is why first mover advantage and customer retention are critical.
The "new world" of investing, as I see it, offers higher returns, albeit with somewhat higher risk.
But the net result, I find, is
higher risk-adjusted returns being on offer today, compared to twenty or thirty years agoIn my view, there has never been a more exciting time to be investing in stocks because of the structural changes that are occurring.
[*] BMT is exactly such a business: even if the technology was sufficiently advanced to support BMT's business model just a few short years ago, the company's targeted customer base was not ready to accept BMT's service offerings.
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