This week, I had a brief discussion with a very bright individual regarding future economic growth and potential investment opportunities in the United States. His comments were in complete alignment with my thoughts: moving forward, there will be two types of companies which will matter: 1) disrupters, which are companies providing technologies, products, and/or services which fundamentally change our lives and how we conduct business, and; 2) base, which are those providing the essentials of our day to day lives.
Frankly, we agreed this is already the way it is.
Intuitively, there will be a small number of true disrupters, which means there were be a lot of base companies. As a result, the competition between the latter will simply be for market share, as opposed to absolute growth in any one economic sector. By the time the dust settles and the smoke clears, a large segment of current corporate America will be, as Charles Dickens might have said, “without a situation.” The trick will be choosing the likely winners and avoiding the losers, but make no mistake about it: unless the government gets involved and/or there is an evaporation of capital in the global economy, there will be an enormous amount of consolidation in the US economy over the next decade as corporate Darwinism weeds out those ‘stuck in the middle’ firms.
Historically, this would suggest there would be an enormous amount of merger & acquisition activity, and there might be. However, I believe it is more likely the healthier firms in an industry will be far more apt to let lagging firms fail on their own, as opposed to buying their capacity. Why? Because there is already ’too much’ capacity in much of the economy. Currently, Sears Holdings is a perfect example. …Read More…
The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees.