Investing Without Being Swayed by Trends

When it comes to what has been attracting particular attention in the stock market recently, wouldn’t it be AI?

Due to the rapid spread of AI, related companies such as those in semiconductors and data centers are receiving significant benefits.

In fact, the growth potential of AI-related companies is remarkable, and I believe they have the potential to significantly change society in the future as well.

However, there is something I am conscious of when I invest.

That is, jumping on a trend and investing in companies that grow over the long term are not necessarily the same thing.

The benefits of a boom are great. But there are also risks.

Companies that specialize in a specific field receive great benefits when that field is growing.

In terms of the AI boom, companies related to semiconductors and data centers are likely prime examples.

If demand surges, sales and profits can grow significantly, and stock prices can also rise sharply.

On the other hand, if market expectations get too far ahead or capital investment slows down, it is also possible for stock prices to plummet.

Of course, it is not that companies specializing in a specific field are bad. I think there are also companies that possess overwhelming competitive strength and continue to grow over the long term.

However, rather than looking only at the momentum of a boom, I want to understand the competitive advantages and profit structures that the company possesses.

What I like are companies that have strengths outside of AI as well.

What I want to invest in for the long term are companies that, while benefiting from the growth of AI, also have a solid revenue base outside of AI.

For example, Microsoft and Alphabet.

Microsoft is developing not only its cloud service Azure and AI business, but also software businesses such as Microsoft 365.

Alphabet is also focusing on the AI field, but it has multiple revenue sources such as Google Search, YouTube, and Google Cloud.

Such companies can not only capture the growth of AI, but also generate revenue from their existing businesses.

Of course, it is possible that existing businesses could be affected by the spread of AI, and there is no guarantee that the current revenue base will be secure in the future.

Even so, a profit structure where the company’s future is less likely to be swayed by a specific trend alone holds great appeal for me.

I want to see the essence of a company rather than chasing trends

In the stock market, various trends emerge in every era.

If you can ride those waves successfully, you might be able to earn significant profits.

However, rather than chasing short-term trends, I prefer to focus on identifying companies that can generate long-term profits and maintain a competitive advantage.

To that end, I want to pay attention to points such as the following:

• Is revenue and EPS (earnings per share) growing over the long term?

• Does it have a competitive advantage that is not easily imitated by others?

• Does it have a revenue structure that does not rely solely on a specific field?

• Is there a reason why customers will continue to choose it in the future?

• Is the stock price not too expensive relative to the company’s growth potential?

No matter how wonderful a company is, if the stock price is too high, you may not get the investment results you expected.

That is why I want to be conscious of not only the company’s growth potential but also the purchase price.

Summary: Don’t be swayed by trends, look for companies you can stick with for a long time

I believe AI is an important technology that will significantly change society in the future.

That is why I want to invest in companies that can benefit from that growth, rather than avoiding AI.

However, I want to choose companies that can grow long-term and have a solid revenue base outside of AI, rather than concentrating on companies that rely solely on AI.

For me, long-term investing is not about chasing companies that are currently the talk of the town.

It is about continuing to hold companies at an appropriate price that will still be needed by society and continue to generate profits 10 or 20 years from now.

I want to continue long-term investments in companies like Microsoft and Alphabet while discerning the essence of the company without being swayed by trends.

How do you perceive the current AI boom?

Companies specializing in AI versus companies with strengths beyond AI. Which do you find more attractive?