The Millennials Portfolio: Applying Peter Lynch's Invest in What You Know Strategy

Joe Goldman |

Celebrated investor Peter Lynch famously said, “invest in what you know.” This method enables investors to profit from local market trends before they become international sensations.

Millennials – those born between the 1980s and early 2000s – are surely familiar with debt and a potentially harmful addiction to media. However, millennials have an uncanny ability to identify and resonate with market trends before Wall Street’s big boys, often giving them an advantage over the Street.

Using Lynch’s investment thesis as a guideline, the following stocks represent the “millennial portfolio.” These companies were identified and popularized by millennials, sending their stocks to new heights.

Apple (AAPL) : iPods and iPhone Revolution

With a $573 billion market cap and $45.6 billion in quarterly revenue, Apple is no longer exclusively a “millennial stock.” However, millennials unquestionably sparked the Apple revolution.

 

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It all started with the iPod release in 2001, becoming a must-have Christmas gift for kids and teens. The iPod’s multi-year success in the mid-2000s rocketed Apple to the forefront of the entire music world, setting the stage for the successful ensuing launches of the iPhone and iPad. MacBooks are also unequivocally the laptop of choice for high school and college students.

Facebook (FB) , Instagram and Social Media Stocks

The Washington Post recently estimated that the average teenager spends 7.5 hours per day consuming media – a significant portion of which is spent on Facebook and Instagram. Facebook recently figured out how to monetize its business, propelling its stock from a then-low of $19 to a high of $72 in one year. Its $1 billion purchase of Instagram in 2012 was perhaps the steal of the decade.

 

GoPro ($GPRO) Cameras

Recently turned public GoPro makes the ultimate camera for extreme sports, amateur filmmakers, and selfies. The device is durable, waterproof, and equipped with easy-to-use editing software. GoPros sells a copious amount of accessories to cater to anyone’s filmmaking needs.

 

 

Given that GoPro is designed for extreme sports, it has become popular within the millennial demographic. With triple-digit growth and 40% margins, the company recently had a successful IPO, popping over 50% from its IPO price.

Lululemon (LULU) and Trendy Athletic Apparel

Thanks to Lululemon, yoga pants have become a fashion trend both inside and outside the yoga studio. Despite recent setbacks, most millennials would say that Lululemon remains the hottest in the game; their pants are expensive but are still desirable and considered top shelf.

Lululemon____Flickr_CC.jpg

The stock has been an absolute disaster over the past year in the wake of their CEO’s controversial departure and their see-through pants scandal. Lululemon’s sales growth is stalling and many believe the yoga pants maker is conceding market share to companies like Gap (GPS) . However, shares remain up 186% from its 2007 IPO price and 577% above recession lows. Based on popularity alone, most millennials would predict a turnaround for the struggling company.

Netflix (NFLX) and Online Streaming

Netflix attempted to separate its streaming service from its DVD-by-mail service in 2011, spinning off DVD-by-mail into an entity called “Qwikster.” The name was corny and consumers reacted negatively to price increases. The Qwikster idea was a horrible favor and will forever be taught in business school as a “how to destroy your own business” case study.

What Netflix didn’t expect was that millennials would separate DVD-by-mail from streaming video on their own. College students flock to streaming because the Internet has become a legitimate substitute for cable TV, an unnecessary luxury for a college student on a tight budget. Other millennials like the idea of having movies and TV shows on demand in the same location as the Internet. Thus, millennials have propelled Netflix to an 800% gain since mid-2012.

Tesla (TSLA) and the Rise of Electric Cars

Millennials may draw their fair share of criticism, but there’s one thing they definitely got right: environmental consciousness. Green is hip, and Tesla is the undisputed king of green.

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Tesla’s electric vehicles are leading the crusade against carbon emissions. With a growing network of supercharging stations and battery swap stations, as well as an expanding portfolio of EV models, Tesla and CEO Elon Musk are hoping to put electric vehicles in the millennials’ driveways for decades to come.

Yelp (YELP) and User-Generated Reviews

When it comes to finding good food, Yelp has fossilized the good ole’ fashioned Zagat guide and traditional word-of-mouth methods. Through its marriage with the smartphone, Yelp enables users to simply search for top-rated restaurants, a certain cuisine, or restaurants at a nearby location.

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Yelp also has a social media element that resonates with millennnials. Users create personal profiles, review restaurants, interact with other users, and view where their friends eat. Yelp is also launching an e-reservation service called SeatMe, an app designed to expedite the reservation process and help restaurant owners manage their restaurants. The stock has been one of the best performers in the NASDAQ, rising 186% since its Mar 2012 IPO.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
GPRO GoPro Inc. 9.23 0.03 0.33 3,808,094
YELP Yelp Inc. Class A 36.09 -0.16 -0.44 1,025,670
TSLA Tesla Motors Inc. 192.18 -0.11 -0.06 2,721,324
FB Facebook Inc. 119.68 0.77 0.65 17,457,033
AAPL Apple Inc. 113.95 1.83 1.63 34,391,869
GPS Gap Inc. (The) 25.94 -0.54 -2.04 5,960,634
LULU lululemon athletica inc. 69.30 0.46 0.67 3,596,862
NFLX Netflix Inc. 122.88 -0.36 -0.29 4,699,255
AYQ.A:CA AYQ.A:CA 1.00 0.00 0.00 0

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