While I normally focus on digital and social media, my focus has been completely distracted by the current economic turmoil and political season. The world is facing a very difficult challenge that will likely result in many disruptive changes for everyone. I wanted to get my thinking straight on some of this stuff and I thought I would share. I hope you find it useful. If you have thoughts you would like to add, please leave a comment.
The Seven Trends of the Current Economic Storm
Some preliminary thoughts on what this means
I think that these trends will definitely sway the financial rebound of different companies.
It is clear to me that delays and cut backs in discretionary, high end purchases are bad for the auto, consumer electronics, consumer durables, restaurants and other sectors that depend on these types of purchases. It is time to stay away from this stuff until consumers catch their breath and start feeling some job/financial security.
Companies that can help us cut costs, work out our debt, shop more effectively and help us get credit should be advantaged in this market. Experian looks like a company that should be able to take advantage of this. This is also an attractive potential area for social networking and media to the extent it can help people work out their problems together.
Companies that offer the ability to get results at much lower costs will rebound much more quickly. For example, the extraordinary cost effectiveness of search and online advertising will accelerate the share shift from offline to online. We may not see huge growth online, but offline advertising will get hammered, especially given the importance of the financial and automotive industries to ad spending. Stay away from offline publishers. On the flip side, this makes Google look more interesting and maybe even Yahoo.
This need for much lower costs will also accelerate share shift from costly physical channels to internet based channels. This may be good for eBay and Amazon, but I’m interested in finding companies that are earlier in the process. I’m not sure who to look at here.
Given the extraordinary cost cutting we will see in businesses, they will need ways to keep their businesses running with many fewer employees. This is probably good for effective productivity tools and outsource service providers. I think this is particualarly good for collaborative communication tools that really work, like Go To Meeting. Companies that have cash will spend it very strategically and if you can get in front of that trend it could be a good thing.
If you have cash to invest, it also makes sense to keep some dry powder waiting for opportunistic investment opportunities in distressed assets.
On the government front, it’s less clear to me which investment opportunities are worth exploring. I need to see the outcome of the election to really know who the winners and losers will be. I think I’m going to take a look at donations to each party to see who looks interesting.
Lastly, for those of you looking for venture capital, it is going to be a serious dry spell. It is time to hunker down hard.
My caveat on all this is that I’m not a stock picker. I think good investments are as much about buying at the right valuation as they are about picking the right areas. I have no perspective on whether or not the companies I’ve talked about have attractive valuations or not. At the time I write this, I don’t own stock in any of the companies I’ve written about, but that may change by the end of the day.
I would love to hear you’re thoughts on other major trends that are in play right now and what it all means. Leave a comment.