Thursday, April 5, 2018

A Possibly Useful Heuristic to Avoid Losing Money

I watch with bemusement in recent days the stoush between Glaucus and Blue Sky Investments (BLA). The nosebleedingly high valuation which BLA managed to achieve before Glaucus came out firing could possibly be attributed to investors' thinking that BLA could be the next Magellan.

Indeed, Glaucus has labelled BLA as the Brisbane-based wannabe KKR.

I do not have a beef in this stoush, and frankly, I do not know enough to make a judgment.

But I do adhere to a useful heuristic. I stay away from companies that tout themselves as the "Next XYZ".  The next Microsoft, the next Google, the next CSL, the next Berkshire, the next Ebay, you have probably heard them all. Where are they now?

Each successful company is a byproduct of its surrounding circumstances. The combination of circumstances that gave rise to a very successful company is always unique. And it is this exact uniqueness which accounts for its success. To replicate the company would required replication of both its internal composition AND its surrounding circumstances. How likely is that to happen?

Furthermore, what does it tell you of the ethos, drive, or culture of a company which is merely content to be the next XYZ? Are you likely to find a hungry owner-operator with a vision beyond just mere filthy-lucre?

Something to think about as our weekend approaches. Comments welcomed.

Yours One Legged


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