YWR: The 'Unsustainable' Trends Fund
After last year’s successful launch of the ‘Dirty Dividends Fund’ we are today announcing a new strategy. The Unsustainable Trends Fund.
YWR has been investing its proprietary capital in high dividend yield stocks in sectors institutional investors were unwilling to own (mining, energy, banks, autos, tobacco, insurance). This has worked well and has been generating consistent dividends with low overall volatility. But our CIO, thinks it’s time to start reinvesting these dividends into higher growth stocks for the long-term.
She believes there is a unique opportunity to invest in strong investment trends other active managers believe are ‘unsustainable’ or ‘expensive’. She believes in hindsight we will find these trends were very sustainable and their future growth opportunities were under appreciated. Investors typically over estimate the importance of valuation and under estimate the effect of high growth rates compounded over long periods of time.
YWR’s CIO understands the risk of a large drawdown in growth stocks because of higher interest rates, but intends to start with small positions and take advantage of any large sell-off by continually adding to growth stocks through the cycle from the dirty dividends.
YWR’s Unsustainable Trends Fund will make concentrated investments in the following 7 themes:
Rise of the Upper Class (MC FP, CFR SW, RMS FP): Enormous global debt creation, excessive regulation and high levels of immigration from low income countries mean a higher share of future income will accrue to businesses owners, and owners of real estate and investment portfolios. Or, put another way, owners of capital benefit disproportionately relative to labor. We will see a further rise in the Gini coefficient and luxury goods stocks will continue to outperform.
The rise in the US Gini coefficient over time.
For these ultra wealthy customers there is no price which is too high. In fact, it’s the opposite. The higher the price of the luxury good, the better.
Price of Kelly Bag and Chanel Medium Classic over time.
The fund also expects luxury goods companies to benefit from the additional 700 million aspirational consumers in China and India over the next decade.
Continued Outperformance of Big Tech + AI (AMZN, MSFT, GOOG, TSLA): The ‘digital transformation’ trends catalysed by the COVID pandemic will have ramifications for years to come and are currently underestimated.
After years of hesitancy about giving up control of their tech infrastructure during COVID corporate CTO’s rapidly shifted their entire IT capabilities to just 3 cloud providers (MSFT, GOOG, AMZN). This rapid shift amazes us. While celebrating their ‘shift to the cloud’ on social media, the real story is these companies have locked themselves into an infrastructure service from which they can never leave.
The addition of AI services increases the lock-in even further. Companies can no longer operate without the big 3 cloud providers, but will also not be able to think without AMZN, GOOG or MSFT. It is checkmate for corporate customers who have moved their entire business to the cloud. These three companies are building an oligopoly the likes of which the world has never seen. We are highly overweight these three stocks in the fund. We expect these stocks to continue to outperform and cause misery for fund managers who are underweight and don't see the full picture of what is happening.
Our research also shows that by 2030 Tesla will make more from AI and Robotic software (Dojo) than from cars. It will be the equivalent of the Microsoft operating system for AI robots (cars, home robots, etc). We consider Tesla one of the best AI investments in the market.
The Rise of the Lower Class (AAPL, META, MCD, COST): The flip side of our luxury trade is that we expect 90% of the population to get progressively poorer in real terms.
Increasingly, the only experience the 90% will be able to afford will be virtual reality on their phones. It is for this reason that YWR is extremely bullish on the metaverse and sees any sell-off in these stocks as an opportunity.
It is reassuring to see Paris Hilton, a cultural trends genius and pioneer of reality TV and social influencing as a business, launching her own world on Roblox. Paris is ahead of the game and we want be investing alongside her.
Paris Hilton creating her avatar. Source: American Meme Apple’s VR headset will be the new iphone and Meta will be the dominant platform for metaverse experiences, similar to Facebook and Instagram.
In the area of consumer goods the fund will also own core positions in McDonalds and Costco which we expect to continue to gain share of consumer wallet as consumers trade down for food essentials.
More to go in Private Equity (BX, KKR, CG):
