Monday, August 3, 2020

Investing with Tailwinds

October 2015
Peter C. Thoms, CFA

For our clients who are comfortable owning individual stocks, we like to invest for them where we can find “tailwinds.” A tailwind is a strong secular trend or change taking place in an industry that will likely persist whether the economy is good or bad. (Examples are below.) Once we have identified a strong tailwind, we seek to invest in the top-performing company (or companies) in that industry.

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Our portfolio companies typically feature:

  • An entrepreneurial, shareholder-friendly management team with a proven track record of success
  • A profitable business model with credible growth drivers into the future
  • A competitive edge that is difficult for competitors to replicate or compete against

Here are three very strong, but very different, tailwinds with which we are investing for our clients:

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Internet of Things (IoT)

A massive change taking place in the computing and communications industries is the rapid growth of the “internet of things.” The “internet of things” (IoT) refers to the burgeoning network of devices that are connected to each other via the internet and can collect and exchange data. McKinsey estimates that the IoT will contain 26-30 billion devices by 2020, up from about 12 billion today. We are invested in two smaller companies that have leading positions in machine-to-machine communications (M2M), a technology that is helping to enable the IoT.

Medical Staffing

As Baby Boomers retire, a looming and very serious shortage of doctors, nurses and other healthcare workers in the U.S. is providing a strong tailwind for medical staffing companies. Over the next five years, around 5 million additional health care workers will be needed both to replenish the positions of those that have retired as well as to fill the new positions required for the many more healthcare workers that will be needed to provide care to the aging Baby Boomers. We are invested in a large and fast growing medical staffing company that is focused on both permanent and temporary placement of healthcare staff.

Aircraft Leasing

The commercial aircraft leasing industry is enjoying a confluence of factors that suggest the industry will remain very robust into the future. First, the global airline industry, which typically grows faster than the global economy at large, is very strong. Second, there is a strong trend among airlines toward renting planes rather than buying them. Third, low fuel costs are contributing to significant profits for the airlines—and profitable airlines lease more planes. Fourth, in emerging markets, where most of the people on earth live, the air travel industry continues to growth strongly off a low base. And fifth, the industry is in the midst of a replacement cycle for its older planes. We think these factors combine to form a very strong tailwind for the aircraft leasing industry. We are invested in the aircraft leasing company that we believe has the best and most experienced management team in the industry.

Please do not hesitate to contact us if you would like to learn more about our investment strategies and options.

Peter C. Thoms, CFA

www.orioncapitalmgmt.com
Orion Capital Management LLC
1330 Orange Ave. Suite 302
Coronado, CA 92118
Tel: 619.435.1701
Email: thoms@orionportfolios.com

About the Author:

Peter C. Thoms, CFA, is the founder and managing member of Orion Capital Management LLC, an independent Registered Investment Advisor based in Coronado, California. The firm manages assets for individuals, families, trusts, corporate pension plans and non-profit organizations.

Disclosure:

This document is for informational purposes only. Nothing in this report is to be construed as a specific investment recommendation. This document does not constitute the provision of investment advice, which is only provided by Orion Capital Management LLC under a written investment advisory agreement and only in states in which Orion Capital Management LLC is registered or is exempt from registration requirements. Orion is not a tax advisor and does not provide tax advice. For tax advice individuals should consult their CPA.

 

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