Thoughts of Technology on Investing

Going to share some of my thoughts on technology and its impact on companies and how this will affect the way that we view these companies as investments.

(Image source: https://pixabay.com/en/code-technology-software-internet-459070/)

Technology has been able to shake up different industries. Companies have to keep on innovating to be able to stay relevant and to continue generating good profits for its shareholders. But then some companies may be displaced by new companies making use of things such as the Internet to market and sell their services. One example that I can think of is the cable business in Singapore. Companies overseas such as Netflix, if expanded into Singapore, would be a serious threat to their business as it is convenient and cheaper.

Almost no company seems impervious to the onslaught of new, young companies that are able to adopt and develop new technologies. Companies such as Tesla, Google and Apple have brought about new technologies that are able to displace their huge predecessors. The iPhone contributed to the decline of Nokia, the electric car is competing with the traditional internal combustion engine and even the newer hybrid cars.

Now, huge multinationals do not have an advantage over the small, young startup and may even be at a disadvantage. With the bureaucracy that takes root as some companies expand, the rate of progress and adoption of new technology would be much slower.

Companies have to be quick to adopt new technologies in order to stay relevant and be able to keep reaching out to their consumers. Social media is allowing companies of all sizes to reach out to a large group of potential customers, a privilege previously only available to large companies with huge advertising budgets using the mainstream media.

With the rise of the Internet and social media, information is much more readily available and word-of-mouth advertising is becoming an extremely effective method to advertise a company's products. Companies have to provide good products and services to keep customers that are now better-informed, so the business environment has definitely been changed, which would "kill" off companies that are unable to adapt.

Even blue-chip companies will face this threat. Comfortdelgro and SPH are two of the companies that I can think off the top of my head, facing the threat of car-renting apps such as Uber and Grabcar while SPH would be facing the threat of new news-sharing websites (not just local ones but overseas ones as well).

Technology makes investing both more difficult and more exciting. The profits of these blue-chips are not as safe and guaranteed as they used to be but now, new small- and mid-cap companies are also able to grow and provide exceptional returns for those who are able to spot them early on. We cannot rely on the blue-chips to provide steady and guaranteed returns as they may be displaced by their smaller competitors, but picking out these small growth companies would be difficult for the most of us

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