69 | In Defense of Actively Picking Companies: A Walk Down Franklin Street

Actively picking companies is a style of investing in which, instead of owning the entire group of companies available, you decide to intentionally own a subset of companies from a group.

This is how investments have been evaluated since the very first investment opportunity came about - investment opportunity presented, due diligence performed, and decision to own or pass on ownership made.

Actively selecting companies implies a belief that individuals have the ability to evaluate, buy, and hold companies whose value will increase more than the value of other companies over time.

A Walk Down Franklin Street

I went to school at UNC-Chapel Hill from 2006 to 2011. Four years of undergrad followed by one year of grad school.

The campus buts up against Franklin Street - a bustling street full of restaurants, retailers, condos, and all other types of businesses that are often packed with people, especially during most Marchs and Aprils.

Some storefronts have been the same for decades and others have turned over every other summer for decades.

Franklin Street isn't that different from hubs of activity in cities and towns across the world - its history is marked by companies that have stuck around, newcomers that have taken off, and old and new companies alike that have gone belly up.

Some of the businesses have been around for ages and seem like they could stick around for ages more...

  • Top of the Hill
  • Yogurt Pump
  • Julian's
  • Chapel Hill Tire
  • The Carolina Inn
  • The Bicycle Chain
  • Sutton's
  • Cat's Cradle
  • Johnny T-Shirt

Some of the businesses have popped up in recent years and have become stalwarts of their own very quickly…

  • Al's Burger Shack
  • Target
  • Trader Joe's
  • Hampton Inn

Some quality businesses have succumbed to the harsh reality that all business can't last forever...

  • Ye Olde Waffle Shop
  • The Rathskellar
  • Walgreens
  • Spanky's

Some businesses were bad ideas or sketchy from the start and failed immediately, or worse, are still limping along today. Out of respect, I won't list these by name.

I'd wager that many people could have "predicted" some of these outcomes - maybe not the precise timing or the magnitude of failure, but certainly the inevitability of failure.

The reality is that an investment in any of the companies in the first group or second group could have returned 10x or 100x or 1,000x, while those in the third group and fourth group may have not returned the initial investment to an owner.

If given $100,000 to invest in any mixture of these companies, how could you not make an honest effort to pick the ones that would stick around and avoid the ones that seemed destined to fail?

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70 | In Defense of Values-Based Investing: The Mysterious Third

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68 | In Defense of Actively Picking Companies: You Can See It and You Can Feel It