There are many ways to invest, but to me the most important way is to look for vision.
A broad vision, with a long runway of profits and a clear strategy to accomplish the goal, can usually be summed up in a very short sentence. It is the job of an entrepreneurial CEO to come up with this sentence, to set and approve the strategy needed to reach the goal, and to push the whole company toward that goal.
While I favor corporate democracy, as a check against father time [looking at you Viacom (VIA.B)], great companies are always dictatorships, and whether the CEO has a clear vision matters to long term results.
Elon Musk has put vision in bad odor here (NASDAQ:TSLA) but not all visions are Earth-shaking and controversial, as his is. Home Depot (NYSE:HD) has a vision. Kinder Morgan (NYSE:KMI) has a vision. So does Costco (NASDAQ:COST).
Companies can lose vision, then regain it under a new entrepreneur. Microsoft (NASDAQ:MSFT) lacked one under Steve Ballmer, but has regained its swagger under Satya Nadella. It has taken 15 years to realize Jeff Immelt's vision at General Electric (NYSE:GE) but now the markets understand and endorse it. The key point for investors is that vision doesn't come from marketing. It comes from product.
You can look for vision in any investment, even biotech. A company that just as a bunch of drugs and a business model, like Valeant (NYSE:VRX), is always going to be weaker than one which has a clear idea of its research objectives, like Regeneron (NASDAQ:REGN). Product vision is why a company like Alnylam (NASDAQ:ALNY) has $1 billion in the bank and a market cap of nearly $6 billion even without any income to speak of.
The pros are on to this.
As an investor, choose companies whose vision seems reasonable to you, whose execution you respect, and whose entrepreneurs you believe in. You'll overpay, at first, but you'll get value.
When it comes to entrepreneurs whose vision you don't agree with, or whose execution you find faulty (my criticism of Tesla) just don't give them a thought. Move on to people you do believe in, and let those backing losers fail on their own.
How can you tell when someone has vision? It's simple. Can they articulate their long-term strategy in a clear sentence without long words? I can do that with Amazon.com (NASDAQ:AMZN) - e-commerce infrastructure. Look at your own portfolio and try it. Cull those stocks that fail the test.
Now, some companies lose their vision along the way. How do you know when that has happened? I think it's when marketing people replace product experts at the top, when serving internal goals replaces satisfying each customer. I saw that at IBM (NYSE:IBM) a generation ago, when the Watsons were replaced by nice marketing guys like John Akers. I think I'm seeing it at Apple (NASDAQ:AAPL) today, which is building a spaceship for a campus like it wants to take the cash to outer space. It became obvious at Hewlett-Packard (NYSE:HPQ) even before Carly Fiorina, when parts and companies became mere chess pieces in a great game.
Investing is a game anyone can win at. You can bet the quants, you can beat the averages. Just focus on clear, understandable visions, delivered by real entrepreneurs who believe in what they're doing and see their customers as individuals, not "the market."
Disclosure: I am/we are long AAPL, AMZN, COST, GE, HD, KMI, MSFT.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.