In this interview with AJ Bell, Terry Smith discussed where to find the great businesses of the future. Here’s an excerpt from the interview:
Smith: The same place they came from in the past actually.
I will go back once again, third time in one interview, to the Warren Buffett quote on Coca-Cola. The chances are that many of the great businesses of the future are already out there and already pretty darn good.
Truly great businesses don’t mostly emerge out of absolutely nowhere. We can probably go and look at them already and they’re probably in a relatively small set of sectors of the market as well.
I mean do you think they’re going to be many great businesses that are going to emerge out the airline sector in the future? I’d bet against it. The mining minerals oil and gas, oh I don’t think so!
Utilities, think any utilities companies are going to be great businesses of the future? Banks, any banks?
So you can quickly boil it down… I mean the Stern Business school in New York does a regular update on a table that they just do where they look at sectors of the market and they look at their return on capital.
They give you a list of things that make returns above cost of capital, and things that don’t by sector. And it doesn’t change.
You look down, you go wow those are great returns in Consumer Staples, Consumer Discretionary, Information Technology, Medical Equipment and Devices, Pharmaceuticals, some elements of Communications and so on and so forth.
You can watch the entire discussion here:
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