Value investors will tell you that you’re better off investing in a great company at a good price and then not letting the day-to-day vagaries of the market upset your mood too much, but even then they’re usually looking out a couple of years. In a recent article, Farmhouse Equity Research president J.P. Mark goes to the far extreme and asks what stock you would pick if you and your children could never sell. What stock would you buy today if the investment was locked up until 2114?
“This is not meant as purely an abstract exercise, but instead is a method of looking beyond current and obvious trends and finding winners that will ride out the next big depression, war, climactic change or other disaster, all of which will surely arrive,” writes Mark.
Michael Gelband’s Exodus Point launched in 2018 with $8.5 billion in assets. Expectations were high that the former Millennium Management executive would be able to take the skills he had learned at Izzy Englander’s hedge fund and replicate its performance, after a decade of running its fixed income business. The fund looks to be proving Read More
Tech, pharma stock face the need for constant innovation
To simplify the exercise, and because market cap is a fair indicator of survivability, Mark restricts his picks to the 20 largest companies on the market, but he also quickly dispenses with the world’s largest company – Apple Inc. (NASDAQ:AAPL). Mark isn’t bearish on Apple by any normal standards, but if there’s one thing we’ve learned over the decades it’s that once great tech companies can quickly fall on hard times. Nortel is basically just a bundle of patents at this point, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) barely survived 2013, and the list goes on. Sudden changes in technology or taste can humble any IT company, and the odds that Apple missteps sometime in the next century is still too high. The same argument goes for International Business Machines Corp. (NYSE:IBM), Google Inc (NASDAQ:GOOG), and the other tech megacaps, as well as big pharma stocks like Pfizer Inc. (NYSE:PFE) and Merck & Co., Inc. (NYSE:MRK) which have a similar need for constant innovation.
Mark likes the megacap banks, but he sees finance as too competitive and commoditized to be the best choice over such a long period of time. Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX) will see their reason for existing disappear as alternative energy replaces oil; maybe they make the transition, maybe not.
Mark likes Disney for his 100 year investment
The only company that Mark really likes for his 100 year investment is The Walt Disney Company (NYSE:DIS), because it produces content that it can mine for value for years and years.
“Disney has the unique ability to manufacture, organize, distribute, market and spin-off nearly infinite iterations of content. Every winner will spawn new characters, themes and product tie-ins; every loser, however few those may be, will quickly be forgotten,” Mark writes.
Maybe The Walt Disney Company (NYSE:DIS) really will grow and prosper as Mark predicts, but the real takeaway from his argument seems to be the impossibility of picking a winner so far in advance. He’s impressed by the 14% annualized growth that Disney has had since it went public in 1957, but most of that time was before the commodification of content online. Content isn’t as media-neutral as Mark seems to believe, as any number of newspapers, publishing houses, and recording labels will tell you.