Buy the boring not the pompous ones

Bricks, drinks and razor blades are things people often don´t associate to big business, because these things sound so boring. Isn´t it much more intelligent to invest in things like microchips, fiberglass cables or super innovative mobile companies? This sounds plausible for most people because they connect big business with people in suits, complex activities and big companies with pompous images. When they hear more simple things they connect losers, insolvencies and empty cash tills with it.

But what would you say when I tell you that the most successful investors always prefer simple things. For example, Warren Buffett, he holds shares of Coca Cola, American Express or Wall Mart. Another example is Carlos Slim Helu, the second richest man of the world, has a bit more complex portfolio but still easy to understand, like Telmex a telecommunication provider or Philip Morris today Altria Group. So let´s reckon that it´s more effective to buy companies with simple activities, but how can this be explained? Here are a few reasons why the boring ones beat the exciting.

First of all very complex high tech companies just eat your money. Just imagine how much money you need to build up a company with laboratories, infrastructure and how much more millions you need for the costs of the research and progress department this companies usually have. So you have to put in a huge amount of money before you´ll ever earn one cent.

The second thing is that you even don´t exactly know if your investment will pay out one day. How can you know that you bought the second Microsoft or just a random Dot-com Bubble company?

The last thing is rather it´s more a personal opinion. Who do you trust more, the solid, money-saving, hard working little man, or the guy in the suit who comes in his new Ferrari? If you drift to the first one, you should really think about the management and the image of the companies you prefer.

However boring companies are understandable you can comprehend what there are doing, I think this is the most attractive reason to buy a company. Another reason which speaks for simple companies is that the people always need their products, so these companies may exist over 100 years. Image a company which grows over a period of 100 years, imagine the annually dividends or the market capitalisation after 100 year and you know why the best investors always buy the boring.