Leave Luck to Heaven and Make Your Own
In today’s Money Morning…invest in innovation…downturns are legacy-making opportunities…Nintendo in the metaverse…and much more…
Last week, I found out a big-name company was much older than I thought.
For a short time, it existed at the same time as the Ottoman Empire. But while that empire ended in 1922, this company is still with us.
But you’ll never guess the name of it, nor the industry it’s in.
I want to bring it up today because, in these tumultuous markets, this company’s history really made me think.
In the midst of all the talk of interest rates, inflation, and central banks, it reminded me there’s one time-honoured way to beat the markets.
Invest in innovation.
Let me explain…
That’s the industry this 133-year-old company is in.
It’s the Japanese company, Nintendo.
But to my great surprise, the iconic ‘eighties’ company actually began life in the 1880s, not the 1980s!
Fusajiro Yamauchi founded the Yamauchi Nintendo company on 23 September 1889 in the serene city of Kyoto.
The company produced and marketed hanafuda — quality, handmade playing cards (there’s a very interesting parallel to a hot trend today that I’ll come back to).
The name Nintendo is said to have meant ‘Leave luck to heaven’.
An appropriate message for a company making playing cards, perhaps. But one that applies to investing too.
Anyway, in this niche space, Nintendo grew and grew.
By the 1960s, they’d cut deals with the likes of Disney to license characters for their popular cards.
Nintendo listed on the stock exchange in 1962 and started diversifying into many different areas.
Taxis, noodles, and even a ‘love hotel’ chain…whatever that is!
But it was its move into the nascent video gaming industry of the ‘70s and early ‘80s that propelled Nintendo into the global phenomenon we know today.
Video game characters such as Donkey Kong and Super Mario Brothers are just as iconic as Nintendo itself.
So what’s my point?
Downturns are legacy-making opportunities
As you know, markets are shaky right now. And in truth, no one can tell you where or when it’ll bottom out.
Such moments tend to bring out the panic-stricken bears.
‘Remember the tech wreck, remember the dotcom crash,’ they’ll cry!
These people make me laugh, really.
Because they congratulate themselves for missing out on ‘the crash’, and yet I’d wager most never took advantage of it to buy up cheap tech stocks.
But that was the real time to make a tech fortune.
Amazon [NASDAQ:AMZN] was trading at less than US$10 at one stage (today it’s at US$2,299) and Booking Holdings [NASDAQ:BKNG] — owner of a number of popular hotel and restaurant booking websites — was also less than US$10 (today at US$2,197).
They’re just two examples, but there were heaps more in the years that followed the 2000 dotcom bust, including companies like Facebook that hadn’t even been founded yet.
So, like I said, congratulating yourself for missing the dotcom bust makes no sense unless you took advantage of it subsequently.
I don’t know any doomsayers that did.
But the point is, moments like this — when everyone is suddenly scared of ‘tech’ — are big opportunities.
Think about it…
Do you think you’re going to see more or less technology in your life five years from now?
Do you think the advances in biotech, artificial intelligence, quantum computing, robotics, space travel, and battery tech are suddenly going to stop because of the impulses of markets?
I think not…
The fact is times like this are when you set yourself up for the years ahead.
My colleague Ryan Clarkson-Ledward laid out in an excellent piece last Thursday that even the ultimate advocate of value investing, Warren Buffett, is buying technology stocks on the recent falls.
Which brings me full circle back to Nintendo…
Nintendo in the metaverse
Is Nintendo a good buy here?
It could be…
It’s a company that’s navigated 130 years of history to get where it is today. It owns huge assets and franchises that can be monetised across platforms.
And the Nintendo Switch console seems to be going gangbusters.
As reported in Polygon magazine:
‘Nintendo Switch is now, officially, Nintendo’s bestselling console of all time. Nintendo announced Thursday that, as of Dec. 31, 2021, the company has sold 103.54 million units, surpassing the Wii’s lifetime sales of 101.63 million units.
‘Switch reached 100 million sales faster than any other console to date, including competitors from Sony and Microsoft.’
This is the kind of platform play that Buffett is always so fond of — like Apple with its smartphones and tablets.
But for my money, the real value of Nintendo lies in its iconic brands.
For example, a character like Super Mario can be monetised through film, TV streaming, gaming, toys, branded clothing, and more.
And in a return to its roots, there seems to be an opportunity emerging for Nintendo in the metaverse and NFT (non-fungible token) space.
NFTs are the modern equivalent of the handcrafted playing cards Nintendo was formed upon. They’re digital tokens of assets that are unique.
And they’re hot stuff right now.
For example, the Bored Ape company just raised US$285 million in a virtual land sale in just a few hours.
Source: The New Yorker
The cartoon apes have become a cult classic in the crypto community, with some selling for millions of dollars. Celebrities like Paris Hilton and Madonna reportedly own some.
While the stuffy suits will sigh and claim it’s yet another bubble — and even I think this space is overhyped right now — they probably aren’t aware that the mighty Nintendo was built on such an idea.
Handcrafted playing cards and NFTs are very similar concepts, except NFTs are in the digital realm.
And one ex-CEO is certainly keen for the likes of Nintendo to embrace NFTs and the metaverse.
Former boss Reggie Fils-Aime said at a recent conference:
‘I’m a believer in blockchain. I think blockchain as a technology is really compelling. I’m also a believer in the concept of ‘play to own’ within video games.’
Super Mario NFTs coming your way?
Racing against Donkey Kong in a virtual reality metaverse?
I wouldn’t bet against it. And if Nintendo can unlock value here, it could be very good for shareholders.
Like Buffett, I sometimes like to invest in ‘boring’, long-established companies too…like Nintendo!
Editor, Money Morning
PS: While scavenging for opportunities in any tech correction is one way to play this market, it’s certainly not the only way. That’s why my colleague Jim Rickards has put together a presentation on how he sees the shifting geopolitical sands.
And, in turn, how you can construct a portfolio to survive the immediate dangers. I’ll certainly be tuning in for it and recommend you do so too. Go here to reserve your spot…