The Inflection Point Inc.

Copyright ©​ The Inflection Point Inc.

Diversifying means something different to everyone depending on your plan and expectations.  If you are expecting to make 100% return on investment this year, a 42% return may seem shockingly low.  Chasing diversity may cause you to lose sight of your vision.  Diversification itself won’t make you rich in value, but investing time in your most valuable assets will. 

All companies are not created equal.  Many investors fear investing in individual stocks can only lead to future discomfort.  They don’t believe in any one company enough to stray from the return of their mutual funds or different structured financial tools.  This belief that the best company will outperform is how you can crush your competitors. 

If you had $100 dollars invested in the DJIA in 1981, it would be worth approximately $1,299 dollars in 2015.  That’s an annual rate of return of approximately 7.9 % over 34 years. However, all returns are relative. In retrospect, The Home Depot was the best performing stock in the DJIA since its IPO in 1981, with an Annual Rate of Return of 27.6%.  If you invested $100 dollars in Home Depot in 1981, you would have $369,833 dollars.  That’s over eight pounds of hundred dollar bills. One trade could change your life.

The growth of The Home Depot is not a good representation of the market.  It is a great example of a company that has made investors rich.  This top performer is an outlier in the statistical realm of probability.  It has everything to do with the business they chose and the vision they had.

If the investors are happy, the customers must be happy as well.   If a customer wants an item that is not in stock in The Home Depot store, any level employee has the authority to order that item without asking permission. 

This delegation of authority flattens the hierarchy and shortens the time to get materials.   Any employee or customer can admire the efficiency of the process.  Furthermore, it shows the company is listening to the customer and has the simplest processes in place to get the customer what they need in the fastest time possible.

Looking back at another positive outlier in the DJIA, Disney is up 59,040% since 1962.  This is an Annual Rate of Return of approximately 12.8%.  The DJIA’s Annual Rate of Return since 1962 is 5.0%.  If you had $100 dollars invested in the DJIA in 1962, it would be $1,321 today.  If it were invested with Disney, you would have $59,040.  What a big difference 7.8% makes year over year in an investor’s lifetime.  Walt Disney was a true visionary, but most important was Mr. Disney’s ability to pass on his vision by supplying the proper knowledge needed to ensure the company’s success. 

Some companies create the magic, and others don’t. In Lee Cockerell’s book “Creating Magic,” he explains what makes great Leaders.  In the book, he gives the Walt Disney World® mission.

“Our mission is to honor our heritage and continually reinvent Walt Disney World® …

By making dreams come true, creating magical memories and developing lifetime friendships with each Guest.

By valuing, respecting and trusting each other as dream makers and honoring our individuality, ability and contributions as Cast Members.

By fostering a fun and enriching environment in which creativity, teamwork, openness, diversity, courage, balance and accountability are celebrated.

By being innovative and embracing new ideas.

By eliminating bureaucracy and all the barriers that get in the way of operating simply, quickly and efficiently.

By achieving the financial successes that will enable us to grow and fulfill our Vision.” *

The Walt Disney Company’s current CEO is Robert A. Iger.  His strategic vision focuses on three pillars: ‘generating the best creative content possible; fostering innovation and utilizing the latest technology; and expanding into new markets around the world.’  The ability to adapt to changing times is an ideal fundamental component of any extraordinary company. A magical experience also creates loyalty. Loyalty is royalty in investing.

*Lee Cockerell,  “Creating Magic,” Crown Publishing Copyright ©2008.