A Reason for Optimism
Deep in the woods of upstate New York, near the headwaters of the Delaware River, lies a 230-acre property characterized by rolling hills and maple trees and sectioned by an abundance of stone walls.
Two centuries ago, when this region was at the edge of a new frontier, these stone walls were the natural result of clearing the land so that it was suitable for farming.
But those farmers are long gone, as the push of civilization westward found superior soil in Ohio and beyond. The fields they cleared are long overgrown, mainly by those maple trees that grow so well in this cold flinty soil. And the main inhabitants of the property now are deer, turkeys, and the occasional black bear—plus my brother-in-law, who bought the property several years ago as a vacation home.
But the stone walls are still there, 200 years after they were built, and the odds are very good that they’ll be there in another 200 years, as well.
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I took a walk on the property one recent weekend, to help set up a tree stand to improve the odds that one of those deer might someday become venison, and took this picture in the gray morning light, just before it began to rain.
And I marveled at the amount of energy that it must have taken, whether human or horse or oxen, to shift all those thousands of stones and lay them in rows—sometimes double rows because the stones were so numerous!
And I thought, as I often do, of the economic history of our country in its early years. From 1800 to 1850, U.S. GDP grew at an average rate of 5% per year as resources gained by continually pushing westward fed our country’s economic progress.
But the push westward ended long ago, so progress has had to come from resources less visible. Yet it has come, even though it has slowed somewhat (and I won’t get into a discussion of why it has slowed here). And the latest growth has come not so much from physical resources as intellectual resources!
So Do the Best Stocks...
Look at the best stocks of the past few decades and what do you find? Famous consumer companies like Amazon, Apple, Facebook, Google, Microsoft and Netflix, and less-famous but still very successful companies like Activision Blizzard, Align Technology, CarMax, Gilead Sciences, GoDaddy, GrubHub, Illumina, Match.com, PayPal, Priceline, Regeneron Pharmaceuticals, Teladoc, Visa, Wayfair, Xilinx and Zillow.
All these companies have been successful because of their intellectual resources, resources that are theoretically without limit. In fact, intellectual resources actually grow as population expands and education blooms—and knowledge of that can be a wellspring of optimistic thought.
So, every day, after I wake up and exercise and do the crossword puzzle and eat breakfast and read the daily news (90% of which has the potential to make a person depressed or fearful or angry), I go to work and surround myself with the stories of companies that are succeeding. And because of this, it’s easy to feel positive about the course we’re on—and which we’ve been on for the past few centuries as a nation.
One of the stocks in my Cabot Stock of the Week, for example, is a young company that’s mastered the art of the Digital Twin. No, this is not genetic engineering, it’s engineering that serves the industrial manufacturing industry, particularly where physics is a major factor, like the automotive, aerospace and heavy equipment manufacturing sectors.
In simplest terms a Digital Twin is a digital replica of a physical object, but it can also be the digital representation of a process. These “twins” are created using a blend of Computer Aided Design (CAD), Computer Aided Engineering (CAE), Machine Automation, Virtual Reality (VR), Augmented Reality (AR) and Internet of Things (IoT).
This company is not a household name, and may never be. But it has customers around the globe, generated $333 million in revenue last year (up 6%) and is on target to grow revenue by 15% in 2018 and 12% in 2019.
As to the stock, here’s a chart.
It came public just a year ago at 13, peaked at 44 at the end of September, and then pulled back to 34 as the broad market collapsed. That also brought the stock down to its 200-day moving average, which often offers a low-risk entry point, so that’s when I recommended buying in Cabot Stock of the Week.
Since then the stock has resumed its upward path and I have little doubt that it will be hitting new highs before long. If you’d like more info on this stock, which I provide updates on every week in Cabot Stock of the Week, you can get started here.
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