(Veteran tech columnist Jon Markman publishes Strategic Advantage, a popular daily newsletter about the great digital transformation of business, entertainment and society -- and how to invest in it. Click here for a free two-week trial.)
The national election might be nearly settled but investors are making the same mistake they always make: setting objectives based on who sits in the White House. Spoiler alert, the occupant does not matter.
Bespoke Investment Group published an informative graphic showing which stocks have performed best since President Trump was elected four years ago. The winners were electric cars, semiconductors and artificial intelligence. The losers are oil, natural gas and coal producers.
That list is the inverse of the original Trump agenda. It should also serve as a bigger lesson about identifying the factors that really matter vs quick takes that should be forever thrown asunder.
Presidents are powerless to alter the course of megatrends. These forces are set into motion by innovation and simple business economics.
One of the first big choices President Trump made was to go after the federal subsidies to companies making electric vehicles. Later, to the consternation of climate activists, he pulled United States out of the Paris Climate Accord and rolled back regulations on coal companies.
Shares of Tesla ( (TSLA) - Get Report), the largest EV maker in the world, have risen 984% since the surprise Trump election win. In a note posted to Twitter, Bespoke notes that shares of Nvidia ( (NVDA) - Get Report), one of the leading chip and AI companies in the world, jumped 627%. Its competitor, Advanced Micro Devices ( (AMD) - Get Report), is ahead 990%, despite strong ties to China, another Trump bogeyman.
Other surprises on the list include Amazon.com ( (AMZN) - Get Report). The stock is up 288% since November 2016, earning shareholders a remarkable $1.5 trillion in value. This is despite very public attempts by President Trump to send shares of the online retailer lower.
The president in March 2018 tweeted that Amazon pays little or no state and federal income taxes, and has treated the United States postal service and a delivery boy, causing great losses. Axios, a news outlet, later reported that President Trump told associates that he hates Jeff Bezos, the founder of Amazon.com.
Bezos, like other forward thinking tech executives, is building core competencies in artificial intelligence. Wholly owned Amazon Web Services, the biggest cloud computing company in the world, offering access to AI processing to all of its enterprise clients.
It’s no coincidence that a lot of the next generation microchips running in AWS data centers are built by Nvidia and AMD. This custom silicon, coupled with software, attempts to process information like the human brain, quickly and efficiently.
The White House has been no friend to AI businesses in general. The Commerce Department blacklisted Huawei and its affiliate companies. American semiconductor companies were forced
to get a special licenses to sell chips to the Chinese telecommunication equipment company.
Still, Nvidia, AMD and others continued to grow. The AI trend is bigger than politics.
The rise of Tesla flies even more in the face of politics. The Trump administration has studiously worked to ease fuel efficiency standards and to eliminate the $7,500 federal tax credit available to most EV buyers.
Fortunately the Palo Alto, Calif.-based company is riding an electrification megatrend that not even the President can knock off stride.
Ford ( (F) - Get Report) in January 2018 announced an $11 billion fund to electrify 40 vehicles by 2022, including its best-selling F-150 pickup. Earlier this year General Motors ( (GM) - Get Report) showed off its new EV platform as managers talked about plans to sell 1 million EVs by 2025. And Volkswagen will spend $91 billion transforming its entire fleet to EVs.
Electrification is coming to most automaker fleets. The green energy dream Tesla founders imagined more than a decade ago looks more plausible than ever. Shares have reacted accordingly.
On the flip side, energy and coal businesses have performed abysmally since President Trump was elected. They have been a victim of the shift toward clean energy sources like wind, solar and natural gas.
The Energy Select Sector ETF (XLE) is down 42% since November 2016. The VanEck Vectors Coal ETF (KOL) is 28% lower.
Policies and good intentions on the part of the President could not change the bigger trend. Companies are simply moving away from dirty energy sources and “work from home” trends have resulted in lower demand from consumers.
The consensus opinion among financial pundits is a Biden presidency will benefit green energy and technology. That may be, however, those trends have been in effect since before President Trump.
Investors should know what trends are working and why. In my view, the focus should be on digital transformation and innovation. One single ETF that covers both bases is ARK Innovation ( (ARKK) - Get Report), which is buyable on the current pullback.