Investors buy shares in companies for a range of reasons. Most investors, like myself, tend to stick to investing in what they know (an old Warren Buffett trick), and focus on companies with some sort of durable competitive advantage that will allow them to thrive over long periods of time.
I’d suggest another wrinkle to consider when looking for companies to add to your portfolio. Choose companies with some sort of secular, long-term driver behind their business that will support growth over a long period of time, if possible. I’ll use Canadian telecommunications providers as an example in this article.
First of all, before I get to the key secular growth story for these giants (spoiler alert: the 5G revolution), it is important to point out that these companies operate in an oligopoly, and therefore have much better pricing power and profitability than companies operating in a highly competitive environment, so that’s a pretty good starting point.
Canada’s telecom giants are in a very enviable position in that they control wireless networks and cell receptions, and are able to easily (and quite cost-effectively) upgrade their networks to extract additional value from a consumer base that continues to use more and more data each year, a secular trend which shows no signs of stopping, and is likely to remain over the long term.
Invest wisely, my friends
