But as we see the market climbing higher, this gives us no reason to rest on our laurels. The approach that worked quite well for those fund managers who in 2009 relied on the well-established principle characteristic of all recent bear market recoveries that ‘a rising tide lifts all boats’, will not cut it in 2010. The time when it was good enough to pick a stock with the most attractive P/E ratio is over.
As Goldman Sachs put it in its recent Portfolio Strategy report, “with the P/E expansion phase of the market rebound now behind us, future equity returns will depend on earnings growth, marking the transition from a ‘hope’ driven to a ‘growth’ driven market.” At Kai Consulting, we like to call this transition from ‘hope’ to the ‘Outthinker’.
In our vocabulary, a true Outthinker is much more than a company that is able to generate alpha every so often. An Outthinker delivers sustainable growth and systematic outperformance by following a set of principles that not only distinguish it from its competitors but also unlock sources of innovation that others won’t copy. In summary, Outthinkers are companies that are able to think of the Fourth OptionTM when everyone else only thinks of three.
Over the past decade, we studied over 9,000 publicly traded companies worldwide and have identified specific principles that, when truly understood and adopted by companies, lead them to dominate their market and outperform their competitors. In the months that follow, Kai Consulting will bring to your attention multiple such Outthinkers so you not only gain a deeper insight into the companies we believe the market will favor but most importantly become empowered to make better investment decisions leveraging our rigorous analysis and proprietary strategic methodology.
In the coming weeks, keep an eye out for our next post on two such companies that can proudly call themselves Outthinkers – Lego and Vistaprint (VPRT). In our view, VPRT has not only managed to disrupt a six-century-old industry but, through its innovative approach to much more than printing, has put specific strategies in place that will continue propelling it forward despite the challenging economic environment.
Disclosure: No positions