We've seen 10 or 12 stocks be the market in recent years. Now we'll see many different companies par

Mar 22, 2023
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We've seen 10 or 12 stocks be the market in recent years. Now we'll see many different companies participating, said Mike Wilson

A more democratic stock market. And more idiosyncratic. The company within a sector that can actually capture this margin and not squander it away when they get a headwind.

In 2020 and 2021 operating leverage was positive, and now it's negative (it will eventually turn positive again but not next year).

Look for companies that will benefit from Real Investment (versus Financial Investment). Past 30 years real cost of capital was below the rate of growth, and it didn't make sense to invest capital in risky projects, but rather to borrow at negative real rates and buy back your stock. Anything that has long duration and any growth can do this, investing in M&A, buybacks, things that are like financial engineering.

Now, who's gonna benefit from real investment? Industrials, financials, some of the commodity complex including materials, energy, technology (which is basically capital investment, it's a growth industry but it's also deeply cyclical).
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<div>We've seen 10 or 12 stocks be the market in recent years. Now we'll see many different companies participating, said Mike Wilson</div><div><br></div><div>A more democratic stock market. And more idiosyncratic. The company within a sector that can actually capture this margin and not squander it away when they get a headwind. <br></div><div><br></div><div>In 2020 and 2021 operating leverage was positive, and now it's negative (it will eventually turn positive again but not next year).</div><div><br></div><div>Look for companies that will benefit from Real Investment (versus Financial Investment). Past 30 years real cost of capital was below the rate of growth, and it didn't make sense to invest capital in risky projects, but rather to borrow at negative real rates and buy back your stock. Anything that has long duration and any growth can do this, investing in M&A, buybacks, things that are like financial engineering.</div><div><br></div><div>Now, who's gonna benefit from real investment? Industrials, financials, some of the commodity complex including materials, energy, technology (which is basically capital investment, it's a growth industry but it's also deeply cyclical). <br></div>
We've seen 10 or 12 stocks be the market in recent years. Now we'll see many different companies participating, said Mike Wilson

A more democratic stock market. And more idiosyncratic. The company within a sector that can actually capture this margin and not squander it away when they get a headwind.

In 2020 and 2021 operating leverage was positive, and now it's negative (it will eventually turn positive again but not next year).

Look for companies that will benefit from Real Investment (versus Financial Investment). Past 30 years real cost of capital was below the rate of growth, and it didn't make sense to invest capital in risky projects, but rather to borrow at negative real rates and buy back your stock. Anything that has long duration and any growth can do this, investing in M&A, buybacks, things that are like financial engineering.

Now, who's gonna benefit from real investment? Industrials, financials, some of the commodity complex including materials, energy, technology (which is basically capital investment, it's a growth industry but it's also deeply cyclical).

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