Part of the legacy from the tumultuous 1980s, from a financial industry perspective, was the increase in non-professional investors playing in what was once a professional-only sandbox. Larger numbers of everyday people were participating more frequently, often in more complex investment opportunities.
Certainly, Hollywood's romanticized view of Wall Street's Gordon Gekko, the man we hate ourselves for loving, played a part. It was at the end of this decade and, arguably, in response to this tectonic shift that Peter Lynch penned "One Up on Wall Street: How to Use What You Already Know to Make Money in the Market," which quickly became a go-to guide for this new breed of investors.
Lynch made everyone who read the book feel that they, too, possessed the skill and acumen needed to return a profit on Wall Street investments. But much of Lynch's own success was based on his distinguished educational and professional credentials, which almost none of us can match.
Still, a lot of us decided this man knows what he's talking about -- and allowed ourselves to believe that we were good enough to take a share of the profits, too.
So here we are... Many years later, non-professional investing is a natural part of our lives. Some of us are old-fashioned "Buy and Hold til Death" investors. Others are rabid retail day traders who flip investments faster than heartbeats. The rest of us fall in between.
The one thing that we all have in common is that we are seeking an answer to one question: "Where can we put our money so that it will increase in value?" Or, to play off one famous 1984 burger commercial, "Where's the value?"
To answer that question, I'm offering 10 predictions on where to find value in 2012 and beyond. These are not specific companies. Rather, they are areas in which I believe that an astute and educated investor might find regular and sustainable value (in my humble opinion). Note, because these are offered in the spirit of Peter Lynch -- meaning they are insights from a common man -- there may be some "No-Duhs," but I hope that there are also some "Ah-Has."
10. Clean technology. The public is ready for clean products, particularly in the renewable energy space. I mean, who doesn't want to stop buying boxes of AA batteries for their game controllers? Despite setbacks from the bankruptcy of a certain solar panel manufacturer, companies are continually closer to delivering to this market and, thereby, producing real value. Besides, our elementary school children have already had their minds conditioned to be Clean and Green, so the mantra will be part of our future!
9. Social media. The joke about social media is that it's very difficult to calculate an ROI. The punch line is that the joke is on the people who don't get it. Social media continues to change everyday life by putting social evolution into turbo mode. Get it? If so, then find companies that are implementing a social media plan in an industry that is resistant. That's value.
8. Social gaming. Did you know a recent Japanese social game added 1 million users in six days? That's almost seven thousand people an hour for 144 hours straight! Like it or not, the way we socialize is changing, and games will be part of the future. For investment options, think outside the IPO box, like game developers or virtual sales.
7. Mobility. Do you remember where you were when you learned that you could bank from your smartphone? I didn't think so. Increases in Mobility (i.e. the ability to do whatever from wherever) aren't usually viewed as seismic shifts, but they do happen regularly and it won't stop. Think flexible screens, but don't limit yourself to smartphones. Entertainment content providers of all kinds will also be greatly affected.
6. Customization. Another way to say customization is unlimited inventory. If you had every permutation of a product, then you could deliver exactly what the customer wants. Not a new idea, I know. Certainly, Amazon (Nasdaq: AMZN) and its subsidiary Zappos have come close by merging online stores with quick delivery. But I don't think it stops there. Customers are ready for more customization in everything from cars to cellphone plans. Companies that can deliver add real value. (Note: Customization is not to be confused with personalization. That's a post for another day.)
5. Entrepreneurs. Whitney, Bell, Ford, Edison, Jobs, Gates, Zuckerberg. Entrepreneurs have been and always will be a driving force in the American economy. Entrepreneurial thinking and ingenuity has been amplified due to the recession; yet, the ability to produce has been temporarily stifled. As a consultant, I've seen a lot of ideas that, under more capital-friendly environment, would be value-additive. Interestingly, investors may have more of an opportunity in Angel or Venture investing than ever before because of liquidity constraints. My only caution is to think in terms of portfolios.
4. Education. I hate to make Education about financial returns. But the truth is that there will be changes in our educational thinking that will propel some companies to significant financial returns. People are asking questions about the value propositions of a college degree (not the knowledge or learning, mind you, but the degree), or at least the private kind that costs $35k or more per year. If you've heard of Khan Academy or noticed the increase of public acceptance of online degrees, then you'll know to seek value here.
3. Financial industry. Most people are going to say I'm crazy for this one, but hear me out. I know that every day the Wall Street Journal (Nasdaq: NWS) brings another description of the woes of the finance industry, and banks in particular. I am keenly aware that it is an industry in contraction and retrenchment. However, having spent a lot of time in the industry, I can tell you that there is great value in this sector when it works as it should. The current correction has taken the inherent value of many finance companies below the levels where they should be. It'll take a knowledgeable (and lucky) investor to know when to invest, but I firmly believe that there is value to be harvested.
2. Science fiction. OK, so you might think I have my head up my ASCII. No one has ever delivered on the flying cars and personal jet packs we've been promised since the 1930s. However, world-renowned scientists are on record attesting to the impact that Star Trek had on setting their scientific goals. Today's science fiction is tomorrow's reality, and when the technologies of our movies and TV come to be, we will welcome them as old friends. Intelligent investors would do well to explore Near Field Communication (NFC), Radio Frequency Identification (RFID), robotics, and, as stated, the bridge between the virtual and physical worlds.
1. Adjacent innovation. The "adjacent possible" was a phrase coined by theoretical biologist Stuart Kaufman in his work on the origins of life. However, the concept became popular among social scientists attempting to describe the process of innovation and creative thinking. Defined simply, adjacent innovation is taking an innovative idea that is not in your immediate line of thinking but nearby, and applying it in a new, creative, and unexpected way. Examples abound, but 3M (NYSE: MMM) is likely the unsung hero of adjacent innovation, simply with the development of the Post-It Note, which is a great story of lateral thinking.
So why is adjacent innovation my number one for investors looking to find value?
Even the best and brightest are limited by in their unique view of the world. The world has accepted Moore's Law of exponential improvement as the rule, and perhaps ceiling, of innovation, technological or otherwise. This may be true if we are innovating in one area, but when you integrate innovations across disciplines, progress will be greater than you ever thought possible.
Adjacent innovations are more exciting now than ever before simply because there are more exciting innovations (possibilities) than ever to put together. Investors need to be aware of this and to look for those companies that are open to ideas outside their own industry. I view it as the most significant way to create value in 2012 and beyond.
— David O. Taylor, is the founder of Ohrn Consulting, a management consulting and strategic advisory firm. He previously worked for 14 years in investment banking sales and management, as well as consulting for small businesses and entrepreneurs.