Does what goes down always come back up?
It’s a reasonable question. At Charter we invest on the basis of “mean-reversion.” That’s a fancy way of saying that what goes up comes down, and what goes down comes back up. So we reduced our weighting in Tech stocks in the late ‘90s because of all the silliness, and we bought financial stocks in ‘09 because of the irrational gloom.
But sometimes that downward trend isn’t coming back up. Some industries, like the buggy-whip, are destined for the dust-bin. Over the past ten years, there are trades that have proven that they don’t have what it takes anymore. In the interest of providing advice to prospective graduates about where NOT to start a career, here’s a partial list.
Number one is record stores. Revenues are down 80% in the past 10 years. We all know why. Number two is clothes manufacturing. Apart from a few specialty items, they’re all made in China. Third is photo-finishing. Kodak just stopped making Kodachrome film. Then there is wire-line telecommunication. Revenues are down 50%; they’re probably going down more. Finally there’s newspapers. When I saw kids tapping the paper to see if the page would turn, I knew that this medium had missed the message.
All of these industries have been superseded by technology or trade: they’re not coming back. Sometimes means don’t revert. They’re just mean.
Douglas R. Tengdin, CFA
Chief Investment Officer
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