Fifth Era/Blockchain Coinvestors Update #21

What should we make of stocks that seem to be capturing the imagination and the investment dollars of the world's investors ahead of all others? Wall Street and the value investors of the world are looking at the market capitalization tables with shock as the technology and innovation powered companies continue to rise in the rankings.

We have shown you this table before but the dynamics continue to strengthen. As of this week, 9 of the 10 most valuable companies in the world are focused on the emerging digital age that we call the Fifth Era, and no less than 19 of the top 30 are too (more if you include the biotechnology companies that are powering the life sciences revolution and the values of their acquirors - formerly old line pharmaceutical companies). For good measure we also include Bitcoin which joins the ranks at number 34 - though it is not a centralized corporate structure, of course.

We believe this investor sentiment reflects some important tailwinds, and a time of unprecedented innovation and wealth creation that we are all living in the middle of and that are central to our own investment thesis at Fifth Era and Blockchain Coinvestors:

1. We are moving into a digital world, but the journey is at best halfway completed. Digital monies and digital assets are still down the road.  

2. The millennial generation (In our book The Fifth Era - click for free copy - we call them Generation C) are moving into their prime earning years, are actively investing on digital platforms like Robinhood, Linqto and Uphold and love companies that are changing the world in ways that they care about:

  • Companies that are disrupting established, low service, high priced industries

  • Companies that are leading the charge towards digital monies and digital assets

  • Companies that seek to make the environment cleaner and are doing so at scale

  • Founders and CEO's who are leading the disruption and who are becoming global celebrities

3. Platforms that offer fractional stock purchases provide access that makes investing in 2. attainable for all, allowing millennial digital investors to put together portfolios of their favorite technology companies while only spending a few hundred dollars each month.

4. At the institutional level, there is also a deepening appreciation that value is accruing to those public companies who are embracing the future rather than those who are resisting it (Aided by some very large investors like Softbank who are betting heavily on this trade).

So we see micro investments that are driven as much by the vision as the value. Indeed, the latter may not matter that much to many who are more mission driven. So platforms like Robinhood and Uphold soon find Tesla to be the number one trade with tens of thousands buying it. Since 'Industrial Era' stock markets value stocks based on the marginal trade (and make no account of dollar weighted trades) then the vast global interest in Tesla creates a powerful price discovery mechanism that simply drives the value up above what "sophisticated intrinsic traders believe makes sense."

The result is the power curve of the technology stocks.

Does this make sense?

Well we are in no doubt that lots of other elements of traditional investing make no sense at all:

  1. Setting prices on marginal trades and not dollar weighting them

  2. Creating indexes like the Dow which simply average the share prices of the constituent parts and take no account of respective market capitalization

  3. Valuing stocks with NPV models that put most of the value in the terminal calculation when the company and its industry are being disrupted

  4. Putting all your money into old world stocks, while even the world's most famous investor (Warren Buffet) eschews his own wisdom and puts all his into Apple to cover up the sclerotic performance of his core investment portfolio

  5. Continuing to support paper based investing for most asset classes when the world has entered a digital phase

Lots to think about. But we are convinced that those companies that are building the future and already transitioned to the digital economy and the Fifth Era are going to continue to be those that forward-leaning investors focus on.

Please talk to us if you want to participate as an investor in our own investment strategies including Blockchain Coinvestors.

It's a great time to be a technology investor.

Thank you for reading.

Alison Davis

Matthew C. Le Merle

Matthew Le Merle