Friday 7 August 2015

Is the past preventing the future?

Horses or not

Due to a discussion that I started up with the famous Swedish blogger 4020 in the comments field of an article linking to an excellent interview he delivered at börspodden I ended up thinking a bit more on the topic and I decided to write this article. 

The reason is that I get the feeling that my past knowledge of companies and their products are blocking my future when it comes to investments. What were companies doing in the past when I first got to know them and what are they doing today? Are they still the same? Do they make the same products? What do I have in my mind that they are doing?

The thing is that much of this is truly also based on the past which means that I, as a Swedish person, will probably be the most messed up in my mind when it comes to Sweden and companies on the Nordic market. Still, often the first impression / product that one are interacting with from a company will leave its mark for a long time to follow.

Now I will do this in a stupid fashion because I do know a bit more than what I write here but still:

Company - Back Then - Now According to My Mind (reality in short)

Nokia - Mobile Phones - Mobile Phones (mobile networks)
Ericsson - Mobile Phones - Mobile Phones (mobile networks)
SAAB - Cars - Cars (defence industry)
IBM - Computers - Internet Services (internet services)
Telia - Fixed Phones Lines- Fixed Phones Lines (network access & telecommunication services)
IKEA - Cheap Furniture - Cheap Furniture (furniture)
Microsoft - Software - Software (after some failed hardware attempts they are back to software)
Volvo - Cars - Cars (cars)
Assa Abloy - Padlocks - Padlocks (security devices)
Boliden - Mining - Mining (selling metal)
Doro - Fixed Phones - Fixed Phones (mobile phones for seniors)
H&M - H&M Stores - Several Stores & Brands (several store concepts & brands & online)
SCA - Forest - Forest (personal hygiene products)

I will not go on any further with the list because it can be made as long as one wants; With companies still producing and offering what I first encountered them doing as well as companies making a mixture of old and new things and companies that have gone into a completely new direction as can be seen above.

What is then the problem with the list above? The problem is simply that due to my poor, obviously useless mind, that I keep thinking that Ericsson are still making their mobile phones. I also consider them to have no chance against Samsung and Apple which then also means that I do not invest in them. This is far from the truth and it is then blocking me from maybe making, what could be, an excellent investment. I am not saying here that it is a good investment to buy Ericsson today I am just saying that my old picture of them is preventing me from looking upon them as I correctly should.

This axe must also swing the other way. By this I mean that when a boring company announces that they are stepping into a new cool market I am almost certain that the investors are getting overexcited and push up the share price to P/E levels which the company does not really belong at.

Conclusion: As the stupid person I am I guess the only way forward is to keep reading quarter and annual reports from different companies and to make analysis of them to create more true pictures of what the companies are actually doing today. When it comes to companies stepping into a new market then I guess I will just have to stick to the P/E valuation and say that no, your hygiene products does not mean that I want to wait for ~30 years to get my investment back when I only had to wait for ~10 when you were a forest company having the same growth in both cases.

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