Arrival Capital's Summer 2021 Update -- Searching For Excellence

July 2021

In many ways, investing can be a creative undertaking, almost like an artist staring at an empty canvas wondering what colors and shapes to add. The investor's blank canvas is an empty portfolio except for cash that has been built up over years of working, saving and striving by individuals and families. That cash is the raw material, the paint, to then turn that cash into a portfolio by making investments and adding positions, seeking to create a diverse and productive collection of assets that come to make up that investor's portfolio. The process of generating a portfolio consists of many individual decisions, small and large, which starts with knowledge of the investor's (or client's) needs and goals. Then the investor must look out into a world of almost infinite forces, trends and uncertainties and pick out specific investments -- stocks, bonds or other types -- that can fit in with the person and their portfolio.

Of all those investment decisions, some will turn out to be incorrect. Yet there is ample reason to believe that if the investor pursues the investment process in a prudent, methodical and rational way, the end result will be a portfolio that generates wealth and income over time, providing financial freedom and security to its holder. Excellence in investing is not only about the end results, and identifying great or soon to be great businesses, but also about making good decisions based on fundamental principles in a consistent manner.

Sticking with the painting analogy for one more moment, there is one huge difference between creating a work of art with all your technique, experience and hard work and creating an investment portfolio -- once the painting is complete you can hang it up on the wall and admire it. Not so with the investment portfolio, which must be constantly monitored, adjusted and sometimes meaningfully altered based on what's going in the world or with the investor, even if the original portfolio was correct in featuring the companies and industries that were good values at the time of purchase and went on to perform well in the months and years ahead.

At Arrival Capital, we have created successful investment portfolios with the right mix of technology companies, consumer brands and industrial and healthcare businesses.
But what about now, how do our portfolios look and stand up to the pressure of what is going on in the world today? Certainly, technology continues to be a integral part of any successful investment portfolio, as does newly dominant financial firms. Entertainment and the increasing popularity of video streaming and online gaming are areas where investors need to be involved. Healthcare is always a fertile area to explore, but focus is shifting to gene-based testing and treatment development. The importance of industrial logistics, package delivery, and transportation are keys to continued investment success. An investor must also assess how the world's experience with COVID-19 will continue to affect consumers and businesses going forward. Finally, ongoing adjustments of investment portfolios must take into account how different parts of the world are recovering from the pandemic, how political dynamics are impacting different industries and individual companies, and what technological developments might mean both for existing successful companies and new, promising startups.

To be a successful investor over the past few years meant you had to get the broad, bold investment brushstrokes right; the emerging dominance of Apple (AAPL), and Amazon (AMZN) to be sure, but also new payment systems like Square (SQ) and Paypal (PYPl), the importance of streaming stories like Netflix (NFLX) but also online gaming companies like EA (EA) and Take Two Interactive (TTWO), the incredible growth of semiconductor firms like Nvidia (NVDA) but also the crucial position of Taiwan Semiconductor (TSMC). Finally, you needed to avoid the collapse of the shopping mall but not forsake priceless brands like Nike (NKE) or stores like Home Depot (HD). While most of these investment themes should continue to be successful, there are no guarantees except that there are other potential investments out there that will do even better in the years to come and we need, as investors, to have the capability and creativity to be able to see them and evaluate their place in a diversified portfolio. Arrival Capital can help you be a better, more creative investor and invest in the world that is coming and not just the world as it is today.

Enjoy the summertime!

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