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Will Yesterday’s Winners be Tomorrow’s Winners?

Jason Zweig, author and contributor to the Wall Street Journal who updated Benjamin Graham’s classic The Intelligent Investor, weighs in on how companies make money.

Great businesses, those few who have the uncanny ability to earn high profits for a very long time, have done incredibly well over the last decade or more. They do this because they have “wide moats” which means they have something unique that allows them to ward off competitors.

This has been good for investor in those companies. But one might question whether it is good for the economy.

The economy is built on creative destruction. This means this trend is likely to reverse at some point. An apt time for this to happen is when a radically different leader takes over the most important economy in the world.

On the one hand, President Trump is more business friendly, with lower tax cuts proposed. On the other hand, his intention to “drain the swamp” is likely to upset some of the regulatory advantage companies have enjoyed for decades. This second effect will allow more creative destruction to take place and should be good for small business.

It doesn’t mean we will stop looking for great businesses (globally). But it does mean we think we are doing the right thing being invested in the new order and in emerging markets through companies like Grandeur Peak.

It also means strategies that have worked (like owning index funds like most investors do in their 401k plans) are going to come under pressure.

Read Jason Zweig’s article Disturbing New Facts About American Capitalism here:

http://blogs.wsj.com/moneybeat/2017/03/03/disturbing-new-facts-about-american-capitalism/

 

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Ken’s focus is on investment strategy, research and analysis as well as financial planning strategy. Ken plays the lead role of our team identifying investments that fit the philosophy of the Global View approach. He is a strict adherent to Margin of Safety investment principles and has a strong belief in the power of business cycles.
On a personal note, Ken was born in 1964 in Lexington Virginia, has been married since 1991. Immediately before locating to Greenville in 1997, Ken lived in New York City.

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