Four trades that could look obvious in hindsight

This is a companion piece to Monday’s “When is obvious actually alpha?” post. Monday was the framework; today I want to put some actual names on it.

Historically, if you had told me something was obvious, I’d have told you it’s more than priced into the stock. Yes, we all know America is aging and there are a ton of structural beneficiaries of an aging population (healthcare, senior living, etc.)…. but everyone knows that, so the related stocks tend to trade with a “structural tailwind” premium and there’s not really alpha to be made in placing such obvious bets. Now, if you wanted to bet that America ages faster than consensus, or that healthcare spending amplifies for some reason…. well, that’s the type of large scale bet you could get paid for!

Twelve months ago, if you had said “AI is going to be huge; buy everything AI related,” you’d be reading this post from a beach despite reaching what I think was a pretty obvious conclusion (from the moment ChatGPT was launched and became the fastest growing app in history it was pretty clear AI would be massive). Now, that trade probably benefitted from AI inflecting (I think even AI bulls from ~12 months ago are surprised at how quickly coding and agentic tools are getting adopted), so perhaps you could say the insight caught a windfall…. but, still, it’s a generational trade on an “obvious” insight!

I’ve been thinking about trades that worked well / look obvious in hindsight. I mentioned my friend’s Apple / iPhone trade from the early 2010s in part 1; if you want that trade on a more institutional level, Buffett’s Apple investment in the late 2010s probably qualifies. Apple was really cheap at the time, and the iPhone was still the dominant smartphone. If you put those two together, you could have bought Apple without knowing anything else and made a generational return (25%+ annualized over almost a decade with >10% outperformance over the S&P is the stuff of legends!).

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So I’ve been pushing myself with two different questions:

1. Where is the line between a trade that is so obvious that it’s priced in and an insight that actually generates alpha?

2. What are some things that, three to five years from now, will have generated massive alpha and seem “obvious” with the benefit of hindsight?

On the first question, I think the answer probably lies in the second question. A lot of these trends seem “obvious” to talk about with hindsight…. but in the moment they weren’t so obvious. For every Apple that smashes it over the next ~decade, or AI trade that delivers generational alpha as AI continues to accelerate, there is a counter example. Buffett’s Apple trade has mirrors of his disastrous early 2010s investment in IBM; IBM was cheap at the time and Buffett was very much betting on brand + financial engineering. The AI trade now certainly has mirrors of the dotcom bubble; in the same way that it’s obvious now that AI will be massive, it was obvious in the late 90s that the internet would be huge….. but if you bought basically anything internet related in the late 90s you had your face ripped off if you didn’t sell into the huge rally / bubble. Not saying that will happen with AI from here, but the parallels are striking. And some of the AI bottleneck trades now certainly have rhymes with historic squeeze plays (to name one, oil in 06-07 or again in ~2013, though you can basically pick any commodity).

Again, not saying any of those are clean parallels or are what will happen here, but just pointing out perhaps the “obvious” trades that worked are just obscuring the obvious ones that did not.

That said…. I have been thinking hard about some things that might do well from here that will seem obvious a few years from now. I’ve tried to limit these to really large companies / big themes; it’s hard to say a $200m microcap that does incredibly well was “obvious” in hindsight in the same way that Apple (roughly the largest company in the world) was “obvious” when Buffett was buying it in the late 2010s!

The themes / companies I’ve settled on are: