3 Investing lessons I learned in Italy
Companies / Microsoft Jun 15, 2023 - 10:17 PM GMTBy: Stephen_McBride
My wife and I took a birthday trip to Tuscany over Memorial Day weekend.
There was love, laughter, and lots of wine.
I’m always on the lookout for investing ideas on my trips. You often find inspiration in the strangest places, and Tuscany didn’t disappoint.
Today, I’m sharing three investing lessons I learned from the trip… and how you can use them to make money.
Lesson #1: Invest in crazy ideas
Marchesi Antinori didn’t know it at the time, but he started a revolution.
If you’re a wine nerd like me, you know Italian winemaking is heavily regulated. It has strict laws regarding which grapes can be used. For example, Tuscan winemakers could only produce wine using mostly sangiovese, the native grape of Tuscany.
Marchesi Antinori knew it didn’t have to be this way.
In 1971, he introduced Tignanello, a wine that broke the rules. Tignanello was made using some French grapes, so it had to be labeled a Vino da Tavola (table wine).
But this wasn’t some crappy vino that comes free with a meal. Tignanello’s exceptional quality soon won it a slew of awards.
Fast-forward 50 years, and it’s one of the world’s most sought-after wines. A bottle will set you back at least $150.
Making Italian wine with French grapes wasn’t just a crazy idea. It was basically against the law. Yet it helped Antinori build a multimillion-dollar empire.
Here’s the winery’s impressive barreling room, which we toured last week:
Investing lesson: Many of the greatest businesses in history started as nutty ideas.
In 1980, Bill Gates had a vision to put “a computer on every desk and in every home.”
This seems obvious now, but it was a wild idea 40 years ago when computers were huge clunky boxes and you had to be a coding whiz to use one.
Microsoft (MSFT) made computers accessible to everyone and made early investors rich:
In the ’90s, we warned teenagers not to talk to people online and to NEVER get into a stranger’s car. Ditto for sleeping in a stranger’s house.
Yet all three of these “nutty” ideas turned into multibillion-dollar empires that handed early investors huge gains.
Facebook (META) allowed you to talk to billions of people online.
Uber (UBER) normalized getting into a stranger’s car.
And tens of millions of people book Airbnb (ABNB) rooms each year.
As disruption investors, it’s our job to see the future. To invest in ideas everyone thinks are “crazy” today, but tomorrow will be billion-dollar businesses.
Ethereum and uranium producer Cameco (CCJ) are two of my top “you’re out of your mind” investment ideas today.
Lesson #2: Own the winners
My wife and I had a fabulous dinner high in the Chianti hills last week.
This restaurant was literally on top of a mountain. We had to drive 25 minutes up windy, narrow roads to reach it. We arrived and were surprised to find it packed… with English-speaking foreigners like us.
How did we all end up at the same place in the middle of nowhere? It was one of the top-rated restaurants on Google. It didn’t matter that this place was tucked away in the Tuscan hills; we all found it by clicking a few buttons online.
The internet created “winner-take-all/most” markets online.
Over half of digital ad dollars flow through two companies: Google and Facebook. Uber and Lyft (LYFT) control 95% of the US ridesharing market. Google totally dominates search.
Now, the web is creating “winner-take-all/most” markets in the real world, too.
For example, the restaurant owner told me the restaurant is fully booked every weekend until October… mostly by tourists. And it’s all thanks to its high rating on Google and Tripadvisor.
Investing lesson: Own stocks dominating winner-take-all markets.
Back in 2019, I said: “Buying Uber is the dumbest thing you can do with your money.” But I did a 180 on Uber last September.
It’s jumped 40% since then, and my research suggests it has room to run.
Nvidia (NVDA), which controls over 90% of the AI chip market, is another winner I’m continuing to buy.
Lesson #3: Buy “magical” technologies
We drove over 300 km up and down mountains, through tiny villages, and along rocky roads while in Tuscany.
It was our first time visiting, but we didn’t once get lost. Google Maps told us exactly where to go at every twist and turn.
My childhood vacations involved running my finger along giant fold-out maps to avoid getting lost… which were then eventually replaced by clunky GPS trackers.
Before phones, getting lost on road trips was a constant worry. You stopped to ask for directions. And you squinted at road signs to avoid taking a wrong turn.
Now, unless your phone dies, Google Maps will accurately guide you home… like magic.
I’d easily pay $100/day for Google Maps while vacationing. It’s a life-saver.
Investing lesson: Invest in companies making “magical” technologies.
I’m no fan of Google stock today. But I am buying the company making every modern-day, magical technology possible: ASML Holding (ASML).
Longtime readers know chips are the “brains” of computers. And each one contains billions of “brain cells” called transistors.
The more transistors on a chip, the faster it is. For example, did you know your smartphone is more powerful than the NASA computer that sent Neil Armstrong to the moon?
Chips inside NASA’s computer had 2,000 transistors. There are an incredible 16 billion packed onto the chip inside the latest iPhone. (Keep in mind, the chip is no bigger than your thumbnail.)
ASML is the only company in the world capable of producing the machine that makes the latest and greatest computer chips.
And get this: The beam on its machine is so precise, it’s equivalent to shining a laser and hitting a quarter… on the moon.
I’ve been recommending ASML since 2018, and I’m still buying it today.
Stephen McBride
Chief Analyst, RiskHedge
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