The best investment ideas are often right in front of us. As individual investors and everyday consumers, we have an advantage over Wall Street because we can identify products and services emerging and get a feel for them early in the game. In other cases, we may see products that seem boring or mundane, but enjoy a steady stream of recurring loyal customer purchases that grows over time.
In my experience, I came across an interesting phenomenon. Namely, when I see a company whose products or services are loved by customers, it is usually a good idea for further research. While this isn’t always a dividend growth company, the principle remains.
It makes intuitive sense why a company whose products or services are loved by customers is a good investment idea at the right price. If customers love this product, you’ll have an intangible moat close by, especially if it’s one of a kind.
On the other hand, you shouldn’t throw common sense out the window either. You still need to review the financials, make sure the business is on solid foundations, and make sure you are not massively overpaying for future growth.
Examples of companies where I have observed that people love the product are chocolate or alcohol.
People love Lindt, they love Hershey (HSY) or Cadbury (MDLZ) or Lindt. You can love Doritos (PEP) too.
People love Johnnie Walker whiskey or Jack Daniels or Jim Beam or Heineken. They may love Coca-Cola (KO) or Pepsi (KO) or an energy drink like Monster (MNST).
People love Apple (AAPL) products and are waiting in line for a new version of the phone.
Some people love to shop at certain types of stores like TJ Maxx (TJX), Target (TGT), or even Home Depot (HD) or Dollar General (DG). Costco (COST) members love to shop there.
Others love Chipotle (CMG) or Buffalo Wild Wings, Taco Bell (YUM) or McDonald’s (MCD).
Even during the pandemic and lockdown, people stood in line to buy their Starbucks (SBUX) coffee. That should tell us something.
These are just a few examples that came to mind while brainstorming. It is good to keep an eye out for great tasting products to add to your list for future research. This is one of the methods I use to come up with investment ideas.
UK fund manager Nick Train says if a company’s product tastes good, buy it:
The years of development of the holdings in AG Barr, Diageo, Heineken, Mondelez, Remy Cointreau and Unilever confirm the validity of this simple but strong proposal. In fact, Mondelez ‘Oreos, Unilevers Hellmann’s, and Magnum and Remy Cognac did particularly well (and increased the proportions of their owners) during the pandemic as consumers turned to home cooking and comfort. Accordingly, we are always vigilant about opportunities to add popular or trusted consumer brands to our portfolio and have had stakes in Fever-Tree, whose products definitely taste good, and PZ Cussons (“PZC”), whose products definitely don’t, for the past 18 months are good, initiated. t. Nevertheless, the general principle applies to PZC. The same affection that drinkers have for Tanqueray or Chocaholics for Cadbury can be seen in the confidence that consumers have placed in PZC’s largest brand, Carex – the UK’s # 1 hand sanitizer – with spectacular growth this year.
The Ash Park team seems to have confirmed this with some of their research. For example, an investment in Swiss chocolate company Lindt & Sprungli would have resulted in some sweet dividends and total returns for its shareholders over the past 50 years:
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