![My three rules of investing](/content/dam/invesco/emea/en/insights/Investing-in-structural-change.jpg)
My three rules of investing
Randall Dishmon shares his three simple rules for investing in stocks.
One of the easiest ways to find advantaged companies is simple: look at how the world is changing structurally and get on the right side of that change. It’s how I’ve approached investing my entire career and it matters to the results. If you want a strong investment outcome, you’d better understand the difference between structural and cyclical.
I’m sure you’ve all heard the ‘Growth’ vs ‘Value’ debates. It’s not the first time those arguments have occurred. In the early 1990s there were several publicly listed companies that made fax machines. They had been growth stocks but were depressed. The narrative at the time was that these growth stocks were underperforming because the “Value” style was popular, but when this dynamic mean reverted and went the other way, you’d make a lot of money owning these “Growth” fax machine companies. The problem was that those companies were depressed because email was on the rise…a significant structural change in how information was sent around the globe. All of those companies went bankrupt.
The same narrative about ‘Growth’/’Value’ mean reversion is in the market today, but many of the underlying changes I see are structural. It’s important to recognize that the argument of ‘Growth’/’Value’ mean reversion is a cyclical argument based on a cyclical idea. Better make sure the underlying phenomena is cyclical.
Right now, as back then, it is not. This is critical to get right, because cyclical change separates the world into growth and value and those things do mean revert. However, structural change? That separates the world into winners and losers, and the losers usually don’t mean revert…they go bankrupt. As I said, better get it right.
So here are the structural growth themes I see today that I expect to be invested in for the at least the next several years:
All of these trends have a long way to go and are creating significant value for the right companies. We focus our investments in these areas of structural change because its where significant compounding begins. It also makes short-term considerations irrelevant.
We spend all of our time identifying the globally leading companies and making sure we own enough of them to matter for our clients. Our process is completely focused on earning superior returns for our shareholders in a sensible, repeatable way balancing risk with reward over long periods of time.
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