Investors are overestimating the impact of disruptive entrants like Amazon on the Australian equities market, overlooking incumbents in the process, says Bennelong Australian Equity Partners.
Speaking in Sydney on Wednesday, Bennelong Australian Equity Partners investment director Julian Beaumont said people were prone to becoming “really excited about innovation and disruption” when selecting stocks.
However, the time it took for this disruption to have a “genuine impact” was often not factored in, nor was “the profitability of the innovator or disruptor”.
“I think that people tend to overestimate the speed with which some of the innovation can work,” Mr Beaumont said.
“I think the old tagline is that people overestimate the impact in two years and underestimate over 10 years, and I suspect that that's probably what's happening.”
Mr Beaumont also pointed to the lukewarm reception of Amazon’s Australian launch when it opened its doors in Melbourne in November last year.
“The yawn on Amazon's entry was deafening compared to what we saw in the run-up to that,” he said.
In spite of Amazon’s launch, companies such as Channel 9, Metcash and JB Hi-Fi represented “some of the strongest performers, particularly over the last year” in Australian equities.
“Not withstanding Amazon's entry, JB Hi-Fi has hit highs more recently with really good results, good business,” Mr Beaumont said.
“Something's been tested, and yet Amazon hasn't done anything to it.
“So Amazon isn't going to be a big killer, at least in the near term as people think.”