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Invest in Companies That Do This One Rare Thing

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Friday, 12 October 2018 09:40 AM Current | Bio | Archive

There are plenty of ways to beat the market.

I prefer simple strategies that have stood the test of time.

One such way is by investing with corporate insiders, as I do in my Insider Trader Alert service.

Corporate insiders tend to do better than the market by more than 40 percent per year, earning an extra 3-4 percent on top of the market’s average of 7-8 percent per year.

Again, it’s simple, and effective.

But you can narrow down your investment ideas even further using a simple strategy as well.

It’s one that doesn’t rely on corporate insiders. Or even screening for companies with interesting financial metrics like high profitability or low valuation.

So what’s the one thing?

Treat customers right.

In fact, there’s really only one rule in business. That’s it. Treat your customers well. If you don’t, some other competitor will.

That’s true of whatever business you’re in. It doesn’t matter if it’s for profit or a non-profit.

And when it comes to your investments, companies that invest with their customers in mind may not have the best price point, but they’ll win out over time on repeat business.

It’s an easy and simple way to think about investing. We’ve all heard a horror story from a friend or colleague about a horrible experience they had at some company or another. I have plenty as well.

But what isn’t heard are all the good experiences someone has at a company—unless it’s something amazing, like a once-in-a-lifetime vacation.

Even then, we all have those friends who go on the exciting world trip, then spend the entire time complaining to anyone who will listen about their luggage being lost or their data plan not working properly.

Hey, I get it. I’ve had to deal with flight delays from every major airline, and a few of the smaller ones too. I don’t even travel that much. But that’s part of the journey, and how you react to that kind of minor issue says more about your character than the company involved.

Customer satisfaction doesn’t necessarily rank high on the list of issues CEOs and boardrooms are dealing with these days. Bigger issues seem to be what the competition is doing, and hitting quarterly numbers so investors are happy.

Somewhere in there, the customer just doesn’t seem to get very high on the list. That’s a real shame, considering the cost of acquiring a new customer is usually double or triple the cost of keeping an existing customer in most industries.

I think it’s part of the world we live in. It’s a tough, fast-moving, rapidly-changing age. And basic courtesy often seems out of touch with the times.

But good customer experience matters. That’s why customers of Disney (DIS) or Harley Davidson (HOG) will get tattoos of the products on their body, and why other competitors don’t.

Or why companies like Apple (AAPL) or Tesla Motors (TSLA) will often be accused of being something of a cult stock because of their die-hard fans of followers. (Accusations that can seem true to some, but ridiculous to others, of course). But people who love their products really love them. Apple hasn’t innovated a new product in years, but they can get lines out the door creating updated versions of new products for a reason. Just as a poor customer experience gets around via word-of-mouth (often a digital mouth these days), so too will great products and a great customer experience.

Customer service isn’t all just about a checkout clerk having a pleasant tone. It often involves dealing with issues before they develop. That’s why Amazon (AMZN) bought Ring, the door-video phone app. Part of good customer service in the information age means making sure your package goes from an online order to your physical location without running into trouble. Amazon works on lesser considered innovations like these to improve their customer experience. How well this level of detail will pan out once Amazon really gets into brick and mortar retailers remains to be seen.

But there are plenty of companies out there that simply take their customers for granted. Or at least their executives do. They’re only going to last as long as they can make a product that’s reasonably good, but also the cheapest on the market. Some customers will always remain cost-conscious.

When investing, folks often consider what a company does to earn its hard-fought revenue. What most folks fail to think about in the critical next stage, where big winners are separated from small ones, is what companies are doing differently than others to keep the customer satisfied. Consider that, and you’ll find great companies to invest in.

You may not always find great companies to invest in at the right price. But in time, the market’s gyrations will allow you to buy these great companies when they do fall out of favor. And that’s another secret tool, based on information hiding in plain sight that gives you insight into how to beat the market.

Andrew Packer is a Senior Financial Editor with Newsmax Media. He currently writes the Insider Hotline investment advisory, serves as investment director for the Financial Braintrust, and writes the monthly newsletter Crisis Point Investor.

© 2018 Newsmax Finance. All rights reserved.

   
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AndrewPacker
What most folks fail to think about in the critical next stage, where big winners are separated from small ones, is what companies are doing differently than others to keep the customer satisfied. Consider that, and you’ll find great companies to invest in.
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Friday, 12 October 2018 09:40 AM
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