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Knowns and Unknowns

Austin outlines what matters (and doesn't matter) when it comes to factoring government into his investing process.

October 22, 2020

The role of government is everything

The role of government is one of the most important factors in my investing process. I prefer to invest in companies that are headquartered in and earn most of their sales in countries with stable democracies or governments in which the supreme power is vested in the people.

More than 75% of my portfolio consists of countries headquartered in the United States. Although this presents potential issues from over-allocation to a single country, I believe I understand these companies best and if the United States were to falter economically, it would impact global markets anyways.

I believe there are some great international opportunities and I currently own some companies that are domiciled outside of the United States. In general, when looking internationally, I’ll consider companies in Latin America, Western Europe, Australia, and parts of Asia.

There are a lot of companies around the world. I know I’ll miss some great international opportunities with this approach. However, I’m confident there are enough fantastic compounders in the regions I study to provide incredible returns.

Things I completely ignore

With respect to politics in the United States, I don’t let political leadership, regulations, or macroeconomic policies influence my investment strategy at all.

I’m focused on becoming part-owner (by owning shares) of the best managed, most innovative companies in important, growing industries. I’m looking for companies and industries that I think will grow for 10, 20, or more years and I don’t invest any money I might need in the next three years.

I don’t know who is going to win this election or the one after. I don’t know what’s going to happen to interest rates or policies that impact healthcare and the gig economy. Investing with any predicted outcomes in those areas as my primary thesis would be a complete mistake.

I own companies that I believe will outperform the market regardless of who the president is or what their policies are. Those variables change. But companies like Starbucks, Amazon, Google, Netflix, and others have outperformed regardless of what party was in office or what the interest rates were.

My only economic prediction is that over a long enough time horizon, the best companies will continue to reward long-term shareholders very well.

One company that will continue to outperform the market

To that end, Twilio (NYSE: TWLO) is a leading cloud communications platform that provides software to enable developers to build real-time communications inside of software applications. The company powers remote contact centers and millions of the SMS notifications we have all been getting about the status of our food orders. They also recently introduced a lot of new products at their annual user conference. One of the most exciting being Twilio Frontline — a mobile application that allows deskless employees to securely connect with customers everywhere. This software empowers employees at retail stores to answer product questions for customers in real-time through SMS, MMS, and even WhatsApp which drastically improves the customer experience.

Twilio shares are up more than 200% year to date and I’m sure the share price will be volatile. However, this company has great management, great products, and plays an increasingly important role in helping its customers communicate internally and externally. It’s exactly the type of company I’m confident will continue outperforming over the long-term despite any short-term political turmoil.

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