Kingsmill’s Investment Miscellanea: Friday May 1 2020

May 01, 2020 | Joshua Kingsmill


Focus on companies that can grow, and / or have sustainable dividends, and strong balance sheets, with an ability to manage their debt.

Key Takeaways:

  • Some of the largest companies in the World vs the economies of the World
  • The importance and intertwining between these companies and society and the markets are significant.
  • Growing, Dividend-paying companies who manage their debt (or don’t have debt), are important.

What is the economy and World going to look like? I came across a really fascinating graph this week. It gives an idea I thought of the importance and relative size of some of the largest companies in the World, and how their size compares to the annual GDP (so the annual economy) of different countries:

Grandolas: Europe Top 10 Chart

We should all know Facebook, Amazon, Alphabet, Microsoft and Google (FAAMG). This chart lists a European acronym I wasn’t familiar with: GRANOLAS. Also included are China’s two largest companies: Alibaba, which often dubbed as the “China Amazon” (which isn’t entirely correct), and Tencent: sometimes referred to as “China’s Facebook.”  

Some of the takeaways I find surprising (can be used to impress your friends!): Google, for instance, is worth more than the entire production of Canada’s economy for one year. This does not mean, of course, that Google is worth more than Canada. Still, it does give an appreciation for the size, complexity and importance of many of the largest global companies: they genuinely are significant participants in the economies and the markets.  

When thinking about what types of sectors and companies to invest in, most of these largest companies share a lot of similar characteristics:

  • Sell goods and services and much lower margins than were imaginable even a decade ago (contrast the $150+ cable bill a decade ago vs. the free or freemium content now, or the subscription content available for $12 monthly).
  • The continued move towards being digital and online, becoming even more efficient.
  • Consolidation, as these large companies grow and continue to take-over smaller, complementary businesses (YouTube, Whole Foods, WhatsApp, LinkedIn, etc.)

This does not mean just own only a few massive technology companies. But in the future, some things we can be sure of:

  1. The high levels of debt that have been created as a result of “bailing out” economies have to mean lower economic growth, when things get back to normal, as we deal with this debt.
  2. Interest rates are going to remain low for an extended time.

Focus on companies that can grow, and / or have sustainable dividends, and strong balance sheets, with an ability to manage their debt.

This week, as a tribute to Canada’s Group of 7 (which had their 1st art exhibition 100  years ago), in the absence of being able to visit museums, thought this might be interesting to attend, virtually