The Competitive Edge (Part 5)

By |2014-09-11T09:48:27-04:00October 28th, 2011|Global Market Update|

So how do you acquire a competitive edge? The answer is simple: you already have one. As in sports, all people have something that they’re good at. Whether it’s understanding how a store’s layout might be confusing or knowing what kind of computer games kids are playing, everyone has some kind of expertise. As we go about our daily lives, we all have favorite activities, favorite stores, favorite brands that we use. We become experts on motorcycles, camping gear, or farm equipment. Suppose you [...]

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The Competitive Edge (Part 4)

By |2014-09-11T09:47:31-04:00October 27th, 2011|Global Market Update|

Everyone’s looking for an edge. How can you be sure that you have one? There are three roads to outperformance: working harder, working smarter, and working calmer. Working harder is a simple notion: do more research about stocks, bonds, and commodities than others, and apply this knowledge to your portfolio. It’s simple, but it’s not easy. It requires more reading, more phone calls, more meetings, and more effort. It can be physically challenging. Working smarter requires a deeper understanding of the way the world [...]

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The Competitive Edge (Part 3)

By |2014-09-11T09:45:44-04:00October 26th, 2011|Global Market Update|

It’s not so easy. Picking growth companies that can benefit from social or technological trends isn’t like going to the grocery store and buying a gallon of milk. A case in point is Amazon. That company would seem to epitomize a growth stock. They’ve expanded from selling books online to selling pretty much everything; they’ve designed and delivered a powerful e-reader that’s re-making the publishing industry; and their web-site hosts hundreds of other companies that want to pursue e-commerce. Their sales have increased from [...]

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The Competitive Edge (Part 2)

By |2014-09-11T09:43:19-04:00October 25th, 2011|Global Market Update|

How do you pick winning stocks? That’s the question that many people ask. Security selection is a key way to add value to a portfolio, one of the three approaches I mentioned yesterday. Critical to finding winning securities is having a way to identify them. One commonly cited approach is the value method. This practice looks at a company’s financial statements and compares them with its market value. If the company is cheap enough, it’s a buy. An example is the A&P chain store. [...]

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The Competitive Edge (Part 1)

By |2014-09-11T09:40:38-04:00October 24th, 2011|Global Market Update|

Investment is like sports. Performance can be measured, and compared with others. It’s important. One percentage point of excess return over 20 years can add 25% or more to a portfolio. The market’s return is just an average of every investor, weighted by size. For someone to beat the market, someone else has to get less than the market. It’s like a running race: each competitor has his or her individual time, but each contributes to the course average. How you do relative to [...]

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Rating the Raters

By |2014-09-11T09:38:50-04:00October 21st, 2011|Global Market Update|

What do credit ratings mean? Once again the credit rating agencies are in the news. In the aftermath of S&P’s announcement that if Europe falls into another recession they will likely downgrade France, Spain, Italy Ireland and Portugal, an EU commissioner has suggested that sovereign ratings be banned for countries in bailout talks. Of course it is fundamentally foolish to outlawing a messenger when the news is bad; kind of like banning weather reports when we don’t like the weather. But we can also [...]

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Outward, Ho!

By |2014-09-11T09:36:58-04:00October 20th, 2011|Global Market Update|

There’s another place to invest: the frontier. Frontier markets are emerging markets that are “out there.” They’re developing markets that are smaller, less liquid, less regulated, and more volatile than the BRICS. They include places like Bangladesh, Kenya, and Romania. Emerging markets like Brazil or China were once considered exotic, but now they’re home to some of the largest companies in the world. Their economies are large and diverse, and their politics have matured. Twenty years ago they were exotic. Now they are an [...]

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The Developing Middle

By |2014-09-11T09:36:15-04:00October 19th, 2011|Global Market Update|

So where do you invest now? One approach is to look for emerging social trends and climb aboard. By investing in companies that cater to a growing market, you can start small and watch your investment grow over time. T. Rowe Price developed the discipline of “growth investing” some decades ago, and it is still a valid approach. What’s growing today? One such trend is the expansion of the global middle class. As China, India, Africa, and Brazil develop, billions of people are moving [...]

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Germans and Euros and Bears

By |2014-09-11T09:35:34-04:00October 17th, 2011|Global Market Update|

Oh my. It looks like the bears have gotten loose again. Just when we thought it was safe to go back into the market, along come the Germans to shoot down any dreams of a comprehensive fix to the euro-area debt crisis. Angela Merkel has said that dreams of a solution as early as this weekend are likely to be disappointed, and in Greece Finance Ministry workers began a ten-day strike. Hey, if the IRS doesn’t collect taxes, will people file? The Germans are [...]

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Back to the War

By |2017-07-17T12:35:00-04:00October 16th, 2011|Global Market Update|

Don’t look now, but there is a labor shortage looming. I’m talking about the global war for talent. From cloud computing hackers to system administrators to marketing specialists with developing economy experience, skilled personnel are in short supply. Newly minted college graduates with almost no experience are being snapped up by start-ups and mid-sized firms with salaries in the middle five-figures. Top recruits going to Apple or Google can get offers in the high five-figures. And don’t even ask what experienced programming team-leaders are [...]

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