Tech-Savy Millennial Investors Positioned to Thrive in Roaring 2020s-by David Weinstein-DANA Investments

Tech Savvy Millennial Investors Positioned to Thrive in the “Roaring 2020s”

By David Weinstein, Dana Investment Advisors

Dana-Investment-Advisors-LogoWhat a time to be a millennial investor. A chaotic 2020 offered both investment pitfalls and rich opportunities. 2021 should trend toward a more “normal” environment, but disruptive companies, elevated volatility and information everywhere will continue to define the investment landscape. These three themes have millennials positioned to thrive.

Disruption

I define disruption as technology-enabled change with profound effects on legacy business models. 2020 brought us disruptive upstarts like Zoom Video and Peloton. Both burst onto the investment scene and became household names. Combined, these two stocks added $120 billion of value through the year. Stalwarts like Amazon.com, Netflix and PayPal grew by leaps and bounds as consumers spent more time online. All three are big and getting bigger. Speaking of big, Tesla claimed the undisputed throne of a white-hot electric vehicle industry.

Why should disrupters continue to win?

Consider the global advertising industry twenty years ago. The highest impact event was the Super Bowl. It brought a little more than 100 million viewers. Today, an advertiser can reach 2.5 billion global users across Facebook’s platform of apps (which includes Instagram).

Oh, and Facebook can offer this reach every single day, not just one Sunday in early February. Oh, and Facebook is just one of a host of digital advertising behemoths that includes Google, YouTube, Amazon, Snapchat, Pinterest and TikTok. Oh, and these digital advertisers seem to know us better than we know ourselves. Oh, and… you get the point.  These companies are profoundly changing the advertising industry. This change is enabled by disruptive technologies like the internet, smartphones and super-fast connectivity.

The pay-TV industry is another example. Comcast, AT&T and Charter are the largest pay-TV providers in the US with a collective 55 million video subscribers. These companies spent billions on cable and fiber infrastructure to “own” the video feed into the home, building successful monopolies.

Then Netflix came along, enabled by the internet, smartphones and widespread connectivity. Netflix will end 2020 with 200 million global subscribers. Amazon Prime Video and Disney Plus will together exceed 200 million subscribers. More than 400 million subscribers will pay for the top three streaming services! 55 million pales by comparison. Meanwhile, the streaming services grow double digits as they add content and expand internationally.

Millennials are a tech savvy generation. We are often the prime customers of these disruptive companies. We “get” them. This lends an almost instinctual understanding of their strengths and weaknesses. Familiarity is an underrated first step toward making good investment decisions.

Embracing Volatility

Millennials are an open-minded bunch tolerant of change and well-equipped to handle volatility. We grew up with MTV and The Matrix, embraced Call of Duty and iPhones, and graduated to Amazon Prime and Instagram. In 2020, flexible investors did exceptionally well as stock prices fluctuated wildly. This will be a persistent theme of the next several years. Disruption creates winners and losers. The sociopolitical environment is strained. Monetary and fiscal policy sails uncharted waters. Successful investors will balance high conviction with a willingness to admit mistakes and move on.

I see signs of millennials’ adaptability as investors. Bitcoin’s popularity as a digital store of value is one example. Why buy gold when bitcoin is available with the swipe of a fingertip, 24 hours a day, with easy storage (it’s just bits), transferability and security? Why invest in an index fund when thematic ETFs and active ESG strategies are available? If we can customize our investments to our areas of interest, personal preferences and values, why wouldn’t we?

While index funds are the right choice for many people – including some millennials – they are aircraft carriers with limited ability to quickly change course. Passive investing is the rage today, but I expect that to change as millennials embrace the rich opportunity set of the current market.

Information Everywhere

Millennials naturally assume that most questions will have readily available answers (the “Google effect”). This information democratization extends to the investment industry. Companies aren’t just the sum of their financial statements. They are people, products, culture, strategies and execution, shaped and informed by leadership, industry trends, oversight and historical arcs. As investors, we can know more about products, services, companies and CEOs than ever before – more than earnings reports, SEC filings and third-party research have historically offered.

At Dana Investment Advisors, we spend considerable time examining new information sources. Social media is a powerful information tool. Curated Twitter feeds access the daily thoughts of industry experts. In January, J.P. Morgan hosts the industry’s premier healthcare conference with hundreds of companies. Clinical trial data comes fast and furious for a variety of highly specialized therapies. I follow a list of biopharma experts on Twitter for their unique insights. CEOs increasingly utilize Twitter and other forms of social media (Elon Musk is famous in this regard), providing a window into their character, competence and credibility. Podcasts with industry executives are more popular than ever.

For company culture, glassdoor.com is a great tool. Studies have shown that the highest rated companies on glassdoor.com outperform the lowest rated companies. While my experience is anecdotal, I have found that it especially pays to avoid companies with a particularly negative string of recent reviews. Similarly, LinkedIn offers employee turnover data and job posting trends.

The proliferation of product and service reviews and tutorials is also helpful. Understanding the what, how, and why of a software application, for example, has become much more accessible over the last decade. Expert blogs, online forums like reddit.com and YouTube can be valuable sources of information. Curious about Datadog and the fast growing “observability and monitoring” space? Fire up a few YouTube videos and you’re quick to grasp a conceptual framework.

Millennials are more comfortable than older generations engaging with these formats. This can provide an investment edge.

The “Roaring 2020s”

Moving into the “roaring 2020s,” millennials are well positioned to succeed. They are tech savvy, open-minded and naturally curious. It will be important that they develop a sense of comfort and trust with whatever investment strategy they pursue. They should seek out transparency, credibility and a personal connection. This applies whether they decide to invest in individual companies or use a money manager, and it is especially important as investment choices proliferate.

My best advice? Trust your gut, stay flexible and maintain a sense of optimism about the future. These are exciting times full of opportunity.

 

Article by David Weinstein, JD, Senior Vice President, and Portfolio Manager. David joined Dana Investment Advisors in May 2013. He is the Lead Portfolio Manager for Dana’s Unconstrained Strategy and co-Portfolio Manager of Dana’s Social ESG, Catholic ESG and Large Cap Equity Strategies.

He graduated from the University of Notre Dame with an Honors Program degree in Political Science in 2005. David graduated cum laude from the University of Pittsburgh School of Law in 2008 and served as Managing Editor of the Law Review. He returned to Notre Dame and received his MBA in Investments in 2012, graduating magna cum laude.

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