Take a Simple Idea and Take it Seriously
The article points out how companies that seem to do one or two things but do them really well have outperformed big name (read: "sexy") stocks over time.
McCormick makes garlic powder. Its stock is up 1,423% since 1995. Oracle has a near-monopoly database management software. Its stock is up 1,419% since 1995.
V.F. Corp makes jeans and flip-flops. Its stock is up 1,444% since 1995. Cisco Systems connects the entire world together in one place. Its stock is up 1,018% since 1995.
Valspar makes industrial coatings, and has returned 1,521% since 1995. Adobe makes some of the most popular software in the world, and has returned 1,230%.
Google is one of the most exciting companies of all time. Its stock is up 345% since 2008. Altria makes cigarettes in the rapidly declining U.S. market. Its stock is up 494% since 2008.
I cherry-picked these examples, but the idea holds up with broad indexes. The best-performing industry over the last 50 years, by far, is consumer staples – things like food, toothpaste, and toilet paper. The worst-performing industry, by far, is technology.
The article summarizes with a few key points. Here is the one that resonated most to me:
Value isn't necessarily created by innovation or complexity. It's created by solving people's everyday problems for the longest period of time. This is why toilet paper and garlic powder have been better investments than some of the most innovative technology companies. Lots of technology has solved people's problems, but few to the degree toothpaste and deodorant have, and will continue to do for the indefinite future.
I couldn't agree more!
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