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I have frequently been struck this year by how many times Amazon appeared in the magazine index – usually multiple mentions per issue, in every issue (including this one). It has been a similar story for other Faang stocks – or Fanmags as we should now call them – a clear indication of where the biggest investment story of 2020 was to be found.
I have often worried that we, like many investors and particularly those using gamified investment platforms such as Robinhood, had been caught up in the seemingly indiscriminate rush towards the Fanmag story. It is certainly an alluring one – in a world in which we are increasingly dependent on technology, a dependence further highlighted by Covid-19, the big tech companies would only get stronger. But as Christmas approached, and news of vaccine success began to roll in, the narrative quickly reversed – the tech sector’s run would come to an abrupt halt as the world returned to more normal ways and, having ‘stolen’ demand from the future, their growth was set to slow. The value counter-offensive was finally here.
If this Christmas is anything to go by, though, big tech has lived up to its star billing. Post lunch viewing consisted of a further binge of half a dozen episodes of Netflix’s The Crown, rather than gathering round for the real Queen’s speech over on the BBC. Football has been watched on Amazon Prime. Amazon is also said to have accounted for two-fifths of the extra online sales induced by the pandemic – certainly without it there would have been barely a present in sight in my household. And while it managed to deliver everything without incident, it was a nail-biting game of moving delivery dates wondering if those parcels coming via Royal Mail would arrive in time for the big day.
The latter has now struck an agreement with its workers’ union that will enable it to modernise its parcel delivery business, much of which is still sorted by hand. But catching up will not be easy if the story told in The Everything Store is anything to go by, the account of Amazon’s ruthless determination to refine its logistics to become the most customer-centric organisation in the world. Such attitudes seem increasingly rare in UK boardrooms, many of which should be thinking very hard about the existential threat they face from similarly aggressive and expansionist technology companies.
There are, of course, some very good British companies, although they do tend to be either in more traditional industries or in growth areas but without the scale to match their US rivals, or are highly cyclical – meaning they will face lean times regardless of how well they are run. That’s one of several reasons why we’ve reconfigured our Ideas of the Year for 2021. Algy Hall explains the thinking behind it and reveals the company and fund ideas.
Of course, no one knows exactly how the year ahead will play out But there are plenty of clues as to what might happen across various asset classes next year, which James Norrington reviews in this feature. It still feels like much could still go either way – Covid’s persistence or trouble with the EU as the UK departs could still unsettle markets next year. That’s why we’re also introducing a collection of asset allocation models on our website. Making the right call on a share might be profitable fun, but portfolio structure and discipline can make sure we hang onto those profits when the investing seasons inevitably turn against us, and get rich, slowly.
And, if nothing else, thinking about theory offers a useful anchor when trying to make sense of the often very confusing clash of narratives we face as investors. After a year in which narratives have collided left, right and centre, let’s hope 2021 is a little more straightforward.
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