Wednesday, November 17, 2010

2011: The Year of the Entrepreneur

In my view, an overarching theme for investing in 2011 should center on the rise of entrepreneurship.
  • Some jobs lost to technology and efficiency will not come back.  These jobs may have continued for years if not for a recession forcing companies to streamline;
  • Some unemployed will have developed a taste for not suffering the abject strains placed upon them by The Man, rather, seeking to leverage their expertise out of the home;
  • Some unemployed may have spent their time learning a new skill, or developing a business, and after a year or two of incubation will be prepared to take the plunge;
  • Some that survived the cuts will realize that their job is only as secure as the next recession, and seek to secure their futures ahead of such a recurrence;
  • The ever present awareness that their nest eggs are too little, as well as the constant delay of Social Security, will drive some of the retiring to side jobs as consultants or craftsmen;
  • We have only seen the beginning of a new industry that is the Cloud and the limitless technological possibilities it will unleash;
  • Globalization means that developing areas need all levels of experience to speed their indoctrination into a world that seems ordinary to most Americans.  The internet avails remote knowledge transfer;
  • Those unwilling or unable to take small business loans, especially those currently unemployed, will take advantage of government initiatives (forcing SB lending, not unlike subprime loan policy) with the understanding that you can't get any broker than broke;
  • American business has lost its way.  The impersonal nature of national companies, and the resulting customer abuses will drive some to business formation with the idea that customer service can still beat bottom dollar;
  • Entrepreneurs relish the challenge.  True entrepreneurs who may have been hobbled or wiped clean by the last few years' economic decimation will get back on the horse to apply what they have learned in new endeavors.
I like Capital Source, CSE, a well capitalized lender to medium and small businesses as one of my most likely to double picks for 2011.  Without a doubt, much of the forced lending to small businesses will be lost by virtue of the fact that a preponderance of new startups fail within the first few years, however, the early stages of loan growth will candy up balance sheets with expanding credit extension and nearly 100% servicing payments.