Preview: Exclusive look at January’s Disruption Investor
This article appears courtesy of RiskHedge, LLC.
Happy New Year from myself (Stephen), Chris Wood, and the whole RiskHedge team.
I hope you had a wonderful holiday break with family and friends. I certainly did.
We had Christmas dinner at my wife’s parents’ house this year. Pigs in blankets… honey-glazed ham… and sticky toffee pudding washed down with a glass of Burgundy. What’s not to like?
I don’t enjoy taking much time off, so I was back at my desk on December 27.
Kenyan marathon runner Eliud Kipchoge holds the world record time of 1:59:40. That’s 4:35 per mile… for 26 miles.
But Kipchoge never celebrates. He sees it as something sinister, something dangerous… a self-indulgent act that might derail his mindset.
I feel the same way about vacations, which is why I always cut them short. I’m lucky I’ve found work I truly enjoy.
This past year was awesome in many ways.
We bought a house here in Ireland. But it’s more of an investment, as we’re planning a big move later this year.
My wife and I have lived on four continents. Now, we’re targeting continent #5: Asia. We’re preparing to move to the United Arab Emirates sometime in the next year.
Relocating my family out of Europe has been a big goal. I’m excited and will keep you posted.
It was also a fantastic year for the markets.
The S&P 500 jumped 24%, and our Disruption Investor portfolio performed even better. We finished the year up 50%—more than 2X the return of the S&P.
Wall Street strategists expected stocks to FALL this year. Not us. We stuck to our strategy: Investing in great businesses profiting from disruption. And it paid off.
2023 was also a “win” for the world:
- ChatGPT reached 100 million users in record time (this was artificial intelligence’s iPhone moment).
- America and other countries did a major U-turn on atomic energy.
- The first-ever gene-editing (CRISPR) treatment was approved.
- The Las Vegas Sphere opened. It’s a call to action for artists to build beautiful, cool things once again.
- Diabetes drug Ozempic burst onto the scene... and could single-handedly end the obesity epidemic.
- Elon Musk is launching 400 ft. rockets into space that will eventually get us to Mars.
- College tuition prices DROPPED for the second year running...
- And we continued to see a major backlash against political correctness culture.
Future’s bright!
I recently sat down with one of my heroes, Matt Ridley. His book, The Rational Optimist: How Prosperity Evolves, changed my life. It helped me see what was right with the world instead of getting bogged down in the constant doom and gloom.
Matt and I are optimistic because of the entrepreneurs who continue to innovate and improve our lives. Everything great was built by someone. And thanks to the stock market, we can piggyback on their successes by investing in their companies.
While 2024 is setting up to be another great year, I’ve learned to expect the unexpected.
Everyone and their mother thought stocks were going to fall in 2023. We took the other side of that bet and made a lot of money. Now, it’s time for some prudence.
With the S&P 500 inches away from new highs, I see a lot of people getting very bullish. Speaking from experience, that makes me nervous.
Our research suggests 2024 could be rockier than last year. The biggest “known” risk is the US presidential election.
This will be the most extraordinary US election ever, and not in a good way. Prepare to be depressed by the rhetoric, especially heading into November. This will likely weigh on the national psyche. Investors will go “risk-off.”
I wouldn’t be surprised if stocks sell off heading into November’s political “Super Bowl.”
For perspective, stocks typically go up in election years. Since 1928, US stocks were positive 90% of the time—gaining 11%, on average.
Our research suggests this time could be different.
This is a great time to get rid of any stocks you’re unsure of.
Imagine something crazy happens, like one of the presidential candidates gets assassinated or inflation jumps back to 10%… and stocks plunge.
Own businesses you wouldn’t be afraid to buy in these highly unlikely scenarios: Stocks you’re happy holding regardless of what happens.
But while the going is good, it may be time to sell that stock you only “kinda, sorta” like.
We’re preparing for potential volatility by continuing to own only great businesses profiting from disruptive megatrends.
These are great disruptors that will sail through stormy seas. They don’t care about volatility. They get after it and stay after it.
My advice: Focus on great businesses; take profits on everything else.
Whatever 2024 has in store for us, Chris and I will be here to guide you every step of the way.
Stephen McBride
Chief Analyst, RiskHedge
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