When winners are taking all, it's often time to buy the winners
The one thing that unites everything I’ve been writing
about in this paper is the golden rule of investing: no asset (or strategy)
is so good that you should invest irrespective of the price paid. If when
buying a house the mantra is “location, location, location,” when thinking
about any investment (be it an asset or a strategy), the equivalent refrain
should be “valuation, valuation, valuation.” We would argue that one of the
myths perpetuated by our industry is that there are lots of ways to generate
good long-run real returns, but we believe there is really only one: buying
cheap assets.
No Silver Bullets in Investing (just old
snake oil in new bottles)
James Montier
Not sure this is still the case? There are huge economies of scale in the internet. If you have more money and you invest it back into the business it's difficult for the biggest not getting even bigger. (Amazon)
The only space where size gets into the results is Asset management, big funds with lots of assets start under performing big time.
JASON ZWEIG
Mar 3, 2017 8:41 am ET
“Let
your winners run” is one of the oldest adages in investing. One of the newest
ideas is that the winners may be running away with everything.
Modern capitalism is built on the idea that as companies get big, they
become fat and happy, opening themselves up to lean and hungry competitors who
can underprice and overtake them. That cycle of creative destruction may
be changing in ways that help explain the seemingly unstoppable rise of the
stock market.
New research by
economists Gustavo Grullon of Rice University, Yelena Larkin of York University
and Roni Michaely of Cornell University argues that U.S. companies are moving
toward a winner-take-all system in which giants get stronger, not weaker, as
they grow.
That’s the latest among several recent studies by economists working
independently, all arriving at similar findings: A few “superstar firms” have
grown to dominate their industries, crowding out competitors and controlling
markets to a degree not seen in many decades.
Consider real-estate services. In 1997, according to Profs. Grullon,
Larkin and Michaely, that sector had 42 publicly traded companies; the four
largest generated 49% of the group’s total revenues. By 2014, only 20 public
firms were left, and the top four — CBRE Group, Jones Lang LaSalle, Realogy Holdings and Wyndham Worldwide — commanded 78% of
the group’s combined revenues.
Or look at supermarkets. In 1997, there were 36 publicly traded
companies in that industry, with the top four accounting for more than half of
their total sales. By 2014, only 11 were left. The top four — Kroger, Supervalu, Whole Foods Market and Roundy’s
(since acquired by Kroger) — held 89% of the pie.
The
U.S. had more than 7,000 public companies 20 years ago, the professors say;
nowadays, fewer than 4,000.
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