It’s a classic thought experiment. “Which came first: the chicken or the egg?”
Clearly, the egg came first; that’s where chickens come from! But, wait. Who laid the egg?…
There’s a similar conundrum found in our work. In business and investing, we like to look for strong companies—ones that spend wisely, save well, and try to build an enterprise that can remain durable across changes in the economy. Often, these companies must have a strong balance sheet (i.e., more cash than debt) in order to grow to the size of an industry leader.
Clients, in the early stages of the pandemic, we invested in some companies leading their industries. Our original investing thesis was that even if the virus took its toll and a worst-case scenario occurred, people would still need the staples.
People would still need groceries.
People would still buy meat.
People would still order prescriptions.
While we were sure these everyday items would be impacted by pandemic life, we also believed they would likely survive—in one form or another.
Now many of these market leaders have been able to use the resources of a market leader to continue to evolve and transform organically. They may seem like “boring” companies on the surface, but in times of challenge, they are acting like growth stocks: many have been the first-movers among their peers, making plans that could shift their whole industries.
And believe it or not, we bought some of these companies as bargains. So which came first?
It’s fun being us. Clients, we are always looking for opportunities. Are you seeing anything that we should be watching? Let us know. And when you want to know more about what this all means for your portfolio, call or write.
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