Beat the System: CES 2017 revealed to me the dirty secret of tech investing


Beat the System: CES 2017 revealed to me the dirty secret of tech investing
  1. Beat the System: CES 2017 revealed to me the dirty secret of tech investing
    marketwatch.com
    Value stocks actually beat Next Big Thing stocks in the long run, writes Brett Arends. …
    Finance
Honeywell Honeywell’s so-called Evohome Radiator Zone Kit lets you add wireless control of your radiator.

LAS VEGAS (MarketWatch) — Stop right there.

Before you invest another nickel in the Next Big Thing or in the high-tech company that’s going to “win” in the “virtual-reality space” or the “augmented-reality space” or the “drone space” or the “smart-home space” or any other future “space” — including outer space, I guess — you really need to get a ticket to a big high-tech conference and just walk around.

The Consumer Electronics Show that just ended here in Las Vegas is the industry’s No. 1 annual jamboree. This year’s was the biggest ever. And spread across multiple separate venues all over the city were more than 4,000 reasons to think twice, or three times, or even more about investing your money in high-tech.

Tech ventures that succeed will nonetheless find their profits washed away — by competition, bad management or just bad luck.

You think you’re going to make money on the next VR headset? Everyone is already developing better ones and cheaper ones. A Chinese startup offered to sell me a virtual-reality headset for $10 that folds up and fits in your pocket. No, it’s not as good as the competing $800 HTC Vive. But give it time.

You think there’s going to be big money in drones? I lost track of all the drone manufacturers. There are “white-label” drone makers who will run one off for you and slap your company’s name on it.

You want a Bluetooth speaker you can play at the bottom of the pool? They’ve got dozens. You want a “smart” toothbrush or a “smart” hairbrush or a “smart” mirror, table, desk, bag, or purse or doorbell? They’ve got them all. Yes, really. Many times over.

My favorite sign was for “the world’s smartest radiator valve” (“based on Bluetooth”). Not just a “smart” radiator valve, but the “smartest.” These days even radiator valves have got to be top of the class.

Yes, it’s all very exciting and very impressive.

But here’s the dirty secret.

Investing in this stuff over the long term has almost always been a bad idea. Most tech ventures fail, of course. But even those that succeed will nonetheless find their profits washed away — by competition, bad management or just bad luck.

MSCI, the stock market data company, has been tracking the information all the way back to the early 1970s, at a time when the giant “can’t fail” high-tech powerhouses were Xerox XRX, +1.65%  and Polaroid.

Bottom line? Since the end of 1974, you’d have made about 50% more money — with far less stress, I might add — by investing in the index of boring so-called “value” stocks than you would in the index of exciting, dynamic, Next Big Thing “growth” stocks.

No kidding: $100 invested in the MSCI USA Growth Index would be worth $8,300 today, but the same amount in the MSCI USA Value Index would be worth $12,187. (Those are so-called gross total shareholder returns: They count dividends reinvested in more stock and ignore taxes, which, of course, are another story.)

None of this means that tech stocks are always a bad idea, naturally.

Many years ago I made a lot of m…

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