August 1, 2014
We cannot simply evaluate companies based only on their financial metrics and innovations. Rather, we must consider who is behind the brand and how they work. This additional layer of analysis provides insights for holistic decision making when it comes to which companies you want to own now and in the future.
Take, as an example, Microsoft and Apple. When you think of Microsoft, do you think cutting edge growth? Most likely not anymore. When you think of Apple, you probably think of Steve Jobs, as an innovator and ultimate technology trendsetter. Microsoft is a financially healthy company that pays a decent dividend for your dollar, but has yet to provide a glimpse of what's to come in the future except for additional iterations of Windows. In the end, this could potentially lead to less than ecstatic shareholders.
Driving this point close to home is Kodak. At one point, it was the largest employer in Rochester with a strong balance sheet. But in the last two years Kodak has gone through bankruptcy and has had to start anew. What really happened? It wasn't poor technology or poor engineering and it wasn't even mistiming the digital market space. No, it was years of leadership, focused on personal profits. The leaders who spun off the best parts of the corporation like Eastman Chemical and Kodak Health Group/CareStream, should have held on to what was already working. Rather they chose to sell and created one of the key potential events that lead to Kodak's demise, and ultimately, a huge loss for employees, retirees, and public shareholders.
Investing must be a two pronged approach: quantitative and qualitative analysis. Next time you are thinking about a specific company, make sure you understand how they work and who they are before you pay to become part of their team.
For a bit more on Apple and Microsoft, check out this interview in the link below.
Caroline Hill, Financial Advisor
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).