In his recent interview with WealthTrack, Tom Russo explains why he invests in companies where the customer doesn’t believe there is an adequate substitute. Here’s an excerpt from the interview:
Russo: Our portfolio companies would tend to concentrate as you’ve indicated on global consumer companies and businesses that provide consumers with fairly priced day in and day out products.
It’s not the sort of portfolio of companies that requires borrowing to afford to buy, so they’re everyday consumables, and so the battle there is fought on brand loyalty and brand superiority.
It’s at the heart of our investment philosophy, which is we look for businesses where the consumer doesn’t believe there to be an adequate substitute. And so, if they are a Hershey bar consumer and not a Cadbury bar consumer, you’re going to have a very hard time peeling the money out of the hands of your Hershey to buy the Cadbury.
Similarly if it’s Budweiser versus Heineken, it’s going to be very difficult to pry. That gives manufactures an enormous benefit because it allows them to… pricing power because of the price inelastic demand, or something that you can’t do without.
And so, we look for in every investment whether the business offers a service or a product or… that the user or consumer doesn’t think there’s an adequate substitute.
You can watch the full interview here:
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