It's All Logistics: Shipping Becomes a Pandemic Hero

Amit Raizada

December 27, 2020

As an investor and venture capitalist, I’ve always sought out logistics investment opportunities in the firms, products, and industries that produce returns and improve peoples’ lives. Over the course of the COVID-19 pandemic, we have seen a number of new industries rise to prominence, while many former economic giants have contended with rapidly evaporating market shares and changing consumer behavior.

While the rise of streaming services and tech firms during the pandemic has been well documented and frequently discussed, little conversation exists around the industry I think has truly powered the economy during this difficult time—logistics. As we continue to navigate the pandemic, I can’t help but think how logistics investment opportunities embodies the ethos of my central investment philosophy.

With COVID-19 confining millions to their homes, Americans have relied more deeply than ever on logistics and delivery services—from the Postal Service to Postmates—to acquire the goods and services they need. Whether we have noticed it or not, the logistics industry has played a significant role in our lives over these last few months.

The demand for efficient, quick deliveries first began to skyrocket during the onset of the pandemic, when restrictions were at the tightest and national anxiety at its most acute. With nearly all nonessential retail closed in major markets like New York and Los Angeles, millions of Americans took to Amazon to acquire items from consumer goods to face masks to household essentials. When many Americans felt unsafe traveling even locally to pick up groceries or medications, micro-delivery platforms like UberEats and Postmates filled in a crucial void.

With the holiday season fast approaching, countless Americans are again counting on logistics and shipping firms to move their gifts from point A to point B. As many consumers conduct the entirety of their holiday shopping online, delivery services have increasingly taken on the role of Santa Claus.

Even more importantly, logistics will play an inextricable role in our nation’s mass vaccination campaign. Now, as pharmaceutical firms like Pfizer and Moderna have obtained emergency FDA approval for their COVID-19 vaccines, the logistics space is tasked with getting millions of vials of the vaccine from factories to health care clinics around the country, no matter how remote. Even air carriers, one of the pandemic’s most salient victims, have begun to contribute, retrofitting passenger airplanes to transport vials of the vaccine around the country. With vaccines on the way, our capacity to recover from this pandemic will be good as our logistics capabilities.

In many ways, we would not have made it through this moment without logistics firms and providers. Our well-being depends on them.

While accelerated by the pandemic, the logistics and shipping industries have grown over the last few years. And where there’s growth, there’s opportunity to service that growth. Over the last few years, I have gotten in on the ground floor of this trend by investing in warehouse space within ten miles of the nation’s major airports, which helps store key inventory for online retailers.

In this very moment, logistics perhaps most appropriately embodies my principal investment philosophy of supporting the ventures that generate social and economic returns. I would encourage aspiring investors to look for innovative opportunities in this field.

IPO Mania: Tricky Investments and Long-Term Strategy

Amit Raizada

October 12, 2020

If you have been paying attention to the stock market at all these last few months, odds are that you’ve seen skyrocketing IPOs that seem to defy all logic. Snowflake (SNOW) IPO’s at $120 a share, then closes at $254 after reaching $319 at its highs. Lemonade (LMND), a tech/insurance hybrid, opened its big day at $29 and traded to highs of $64—a 132% gain on the day. These are the kinds of jumps investors dream about seeing once a year, let alone in one day.

Even in the midst of the deepest economic crisis we’ve seen in decades, IPO’s are having a banner year. September was one of the best months on record for IPO funding, and all signals are pointing to an October defined by the same astronomic impact. In fact, IPO tracker Renaissance Capital found that IPOs this year are enjoying 2.5x more first-day pop than the historical average. These head-turning debuts are exactly what financial bloggers and stock market reporters salivate over, creating headlines that catch even the most casual investor’s attention. Pair that with the meteoric rise of easy-to-use online, app-based brokers like Robinhood—which has an $11 billion valuation itself—and you have a recipe for quick success (and in many cases, ensuing disaster).

Gains of this magnitude can paint a rosy picture over a rough canvas, highlighting the outliers while ignoring the true reality of the underlying economy. This primes amateur investors and get-rich-quickers to enter into IPOs purely based on the initial event, ignoring the inherent value of the company and long-run considerations. As I have frequently cautioned in the past, investing with a long-term time horizon in mind beats fast, speculative trades. Every. Single. Time.

As a venture capitalist and entrepreneur, I’ve long pursued opportunities in the economy of the future. At Spectrum Business Ventures, we see the world differently, closely monitoring the preferences of young consumers and emerging market trends to gain footholds in the firms and products that will come to define our economy in ten, fifteen, or twenty years—even if doing so means incurring short-term losses. I urge aspiring investors to do the same.

IPO deal hunters have the right idea—they just need to refine their approach. Investing in IPOs requires meticulous research and assiduous reading of market trends. Rather than funneling this energy into boom-and-bust stocks, though, look for the ventures promising to deliver innovation for the long-run.

FOMO-induced surges

The allure of 200 percent overnight gains has attracted many aspiring investors, and while some may have realized gains from these one-day pops, most are being dragged down by the subsequent crashes. As the legendary Jim Cramer says, you never have a gain until you actually take it.

Take hydrogen-powered vehicle company Nikola (NKLA), for example. After a significant run-up to $80 a share in early June, very shortly after its IPO, the stock now sits at a cool $24.15. This means that there are some people out there who got trapped at $80/share who are now sitting on nearly 75 percent losses. Those who bought at the top were not making decisions based on long-term considerations—they were jumping in on a short-lived rocket ride.

Shades of 2000-2002

The 2020 IPO landscape is demonstrating remarkable similarities to the tech melt-up of 2000-2002. Driven by simple online investing, unrestrained optimism, and manic buying, the current valuations of some tech stocks have soared through the roof.

I urge aspiring investors new to the stock market to look toward fair or underpriced businesses whose products or services have the potential to change the way we live. Some of these IPOs even have these traits, but make sure you are getting a good deal on any stock you get into. And if that means pinning the stock to your watchlist and buying in after a sharp decline, then waiting is the way to go.

Those in search of lucrative IPOs have the right idea—they’re searching, ultimately, for innovation. But I caution aspiring investors to look toward the long term. Search not for lucrative stocks to purchase for cheap and sell at a profit a few weeks later, search for the ventures and opportunities that are popular among young consumers and in emerging markets and that deliver innovative new products or services that improve peoples’ lives. Investing in these opportunities for the long-haul is when venture capital truly becomes worth it.