Wednesday , July 17 2019
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Victims of Success

Summary:
Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it. But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world. Of all the last couple years’ IPO run-ups, Beyond Meat’s is the one that feels most to me like vintage ’90s. The narrative power of Unknown Growth Potential! is so strong in a largely growth-constrained world that we’re almost all willing to take a small gamble on it, or else bet that others will do so, which works out to the same thing. So I don’t begrudge those that

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Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


Victims of Success

Of all the last couple years’ IPO run-ups, Beyond Meat’s is the one that feels most to me like vintage ’90s. The narrative power of Unknown Growth Potential! is so strong in a largely growth-constrained world that we’re almost all willing to take a small gamble on it, or else bet that others will do so, which works out to the same thing.

So I don’t begrudge those that are trading the thing with those ideas in mind, although I have neither the skill nor attention span to attempt it myself. But one starts to get the impression that there really are true believers here, not just in the long-term potential of meat alternatives (which does seem somewhat inevitable), but in the long-term prospects of the first company to have success marketing an edible beefesque recipe of heavily processed pea protein, canola oil and laxatives. Even among the sell-side, there are those who believe the fledgling franchise ought to be valued in the same range as the largest long-time producer of America’s favorite protein.

But if you’re betting on growth, remember: you’re betting on IP or you’re betting on a brand. It makes more sense in tech-land, which is where you usually see these growth stories, where they can platforms that establish meaningful switching costs and capital-driven barriers to entry. Tyson gave the market a (very) little reminder that that kind of belief in the IP of processed packaged food is perilous. These are not hard-to-figure-out ingredients, folks. Beyond that, the last several years have given us frequent reminders that brand sometimes doesn’t mean what it used to among American food consumers. Somehow, the narrative for Beyond Meat seems to have survived these reminders thus far, perhaps because this is the trade that allows investors smitten with the idea of meat alternatives to view it through a lens of abstraction that makes the ‘idea’ investable as a single stock.

That doesn’t mean you have to be a skeptic on the idea of plant-based meat analogs, much less a fellow like the above-pictured Rick Wiles, who believes that the competing Impossible Burger is part of a satanic plot to create a race of soulless creatures. But if you choose to invest on the basis of a strong narrative – an entirely justifiable approach in many circumstances, we think – take care not talk to yourself into believing your own stories. The longer you dabble in this kind of speculation, the easier it becomes.

Rusty Guinn
Executive Vice President of Asset Management, Salient. Rusty Guinn is the executive vice president of asset management at Salient. He oversees Salient’s retail and institutional asset management business, including investment teams, products, and strategy. Rusty shares his perspective and experience as an investor on the Epsilon Theory website.

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