3 tips for beating the stock market — from a fund manager who keeps doing it (via Michael Brush)
With trading commissions approaching zero and cool mobile apps making the stock market look like just another video game, it’s more tempting than ever to “entertain” yourself with rapid-fire trading.
Once again, the buy-and-hold message comes through loud and clear. “We think our edge comes from having a longer-term orientation. We have a holding period of four or five years, if not longer,” says Chris Mack, who helps manage the fund. Consider Microsoft MSFT, -0.12% Its cloud efforts grab the headlines because this is one of the sexy areas of tech right now. But good old Microsoft Office, now called Microsoft Office 365, is a core source of growth. “Everyone questioned that a few years ago,” says Mack. That’s because cheap knockoffs seemed attractive. When even free products like competing software from Alphabet GOOG, +0.35% GOOGL, +0.33% fail to lure customers away, “that’s switching costs,” says Mack.
Mack is skeptical of one sector that has historically been a good place to hunt for the protective moat that comes from brand power: Consumer packaged goods. The brand power of companies like Nestlé NSRGY, +0.39% NESN, +0.27% is getting leveled by e-commerce. In a world where sales are migrating to Amazon.com AMZN, -0.08% the power of big brands to wrangle scarce shelf space in supermarket chains is less important than it used to be.
For Energizer Bunny growth, Mack also likes WuXi Biologics 2269, +1.01% which also trades over the counter. WuXi help biotech and pharma companies develop “biologics.” These are therapies manufactured via processes that involve living organisms and a lot trickier than mixing chemicals. Because developing biologics is so complicated, Mack thinks biotech and pharma companies will be outsourcing this kind of manufacturing more often.
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