Want to become a better investor? Learn how to think, instead of what to think.
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The Most Important Thing, by legendary investor Howard Marks, explains this concept in depth.
Specifically, Marks outlines “second-level thinking,” which is probably the first skill set that any investor — especially venture capital investors — should develop.
Second-level thinking is exactly what it sounds like. It’s the process of jumping ahead — not focusing on short term impacts — to see the long-term results of any event.
Successful investors use this kind of thinking to avoid piling into crowded trades. By thinking on the second-level, or second order, you can position yourself one step ahead of the crowd (yeah, that group of people that get average returns).
Some of the best second-level thinking investment opportunities are based around specific, unexpected events. Successful second-level thinking investors love these kinds of situations… volatile times have hidden opportunities.
Today I’m going to share one of those opportunities. We’ve talked about it in these pages before.
No, it’s not as exciting as a new breakthrough biotech or the unimaginable implications of the metaverse and Web3… but it does have the potential to make early investors a lot of money.
Supply Chain Issues Lead to Big Opportunity
The current Covid-19 pandemic is a perfect example of an unexpected volatile event.
At the onset of global lockdowns, many investors piled into pharmaceutical stocks, cleaning companies and other obvious potential winners from a global pandemic.
Second-level thinking investors looked at what the future impacts would be, like impacts to the global supply chain disruption.
In hindsight, the opportunity is obvious.
Global supply chains have been hit from every angle. The originating product manufacturers, the actual product transporters and the last-mile delivery services have all been completely overwhelmed.
Not only did global supply chain capacity demands increase (because people wanted everything delivered to their door), but the actual supply chains also were hit hard because people were unable to go to work.
Supply chain demand has uncovered a mess of problems… problems that look like huge opportunities to entrepreneurs and venture capitalists.
Logistics Startups Are Flush With Cash
I shared this opportunity with you in late 2021. Supply chain and shipping logistics startups were closing on big fundraises from major investors, giving the companies a lot of capital to grow.
Simultaneously, legacy shipping companies like J.B. Hunt (NASDAQ:JBHT) have raked in record-setting profits.
When you have startups with the money to propel business forward and major corporations ripe with cash, it’s the perfect environment for future acquisitions.
2021 was a record-setting year for supply chain management startups.
And it’s more than just the pandemic spurring this growth. As Crunchbase reports:
“The numbers show not just the effects of the pandemic that shocked every aspect of the supply chain, but something more. They represent a building acceptance of tech in an industry known to run on pen, paper and spreadsheets, experts say.”
And the trend doesn’t seem to be stopping…
The Next Unicorn Is Right Around the Corner
This past week, Chicago-based supply chain startup Loadsmart raised $200 million in their series D round, giving the company a $1.3 billion valuation and making it a unicorn.
Loadsmart, founded in 2014, uses a tech-driven logistics platform to help carriers optimize their loads.
Although most of us think of supply chains as shipping boxes from one destination to another, the actual market is much more than that.
Food, auto parts, clothing, medicines and literally everything physical that is sold from one party to another all must get moved somehow.
That’s what makes shipping logistics companies so valuable. The technology these logistics companies are creating is going to move everything we use in our daily lives… faster and more efficiently than ever before.
As the Wall Street Journal reported:
“Logistics companies ramped up hiring in January, in a sign that the sector’s push to add workers is extending beyond the busy year-end season. Trucking, parcel-delivery and warehousing companies added a combined 42,100 jobs in January.”
Supply chain demand usually declines in January after the holidays, but it actually saw an increase this year. Legacy supply chain corporations are hiring as fast as they can, while trying to hold on to seasonal employees who normally leave after the holiday shopping season ends.
And Loadsmart isn’t the only logistics company getting attention from private investors.
This week, Flexport announced a monster funding round of $935 million, launching its valuation to $8 billion!
CEO and founder Ryan Peterson said this funding round “signals that the market recognizes the need for a tech-enabled logistics ecosystem that has the visibility and resilience to handle unexpected challenges of any scale.”
Don’t worry about being late here.
As reported by the Financial Times, DSV CEO Jens Bjorn Andersen describes the situation as one of the worst he’s seen after more than three decades in the logistics industry. DSV is one of the world’s largest logistics groups.
Some experts say the supply chain issues caused by Covid-19 could last another couple of years.
That means there is still plenty of time and room for other privately held logistics companies to step up with tech solutions.
While this isn’t quite as exciting as other trends I track, there is big money to be made in shipping logistics. Here at Venture Capital Digest, we’ll be on the lookout for opportunities in this space.
On the date of publication, Cody Shirk did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
By focusing on megatrends that will shape the future, Cody Shirk uncovers generational wealth in the private investing space. To make sure you never miss Venture Capital Digest, click here to subscribe.
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