USA Today's July 5 article, entitled “Scandals Nothing New to Business Guru” shares a message from Peter Drucker, 92 and still going strong, one of the foremost management consultants in America. A deeper look provides several valuable lessons.
The article says that he sees the current plight of many large businesses as just the latest example of a cycle he has seen again and again. His comment was, “These are businesses that start legitimately and overreach themselves, and then they begin to play games. It all begins with the management having a brilliant idea. The brilliant ones are always the ones that get caught. And the things they invent, by the way always become the successes of the next period, cleansed of their excesses and their risks.”
Here is the first valuable lesson. Planted in today's scandals are the seeds of great profits. The tendency of investors is to shy away from industries where there has been a great scandal. Many investors will avoid investing in Enron and WorldCom type businesses now. The reverse should be true. Someone has just seen a huge competitor wiped out, and that someone will pick up asset bargains. Look for these companies. They may be a great place to invest.
This may be why Warren Buffet has just invested $500 million in the telcom industry. An article “Friends-turned-foes complicate Buffet's foray into telecom”, page 3b in the Money section of the July 10 USA Today is a must read. www.usatoday.com
This article shows who may profit most from the downfall of Worldcom, and why Qwest could crash as well, how Qwest's crash could destroy AT&T and how all of this could allow Bill Gates to own the whole internet! This article shows some good investing fundamentals, but is also frightening in its implications for our wired future and we should be thinking about what to do now!
We will be looking at such bargains at the upcoming International courses this next week in London and then in Copenhagen. I hope to see you there!
The second lesson comes in the message we share tomorrow! We will look at how to find and invest in such firms at the upcoming International Investing course in Copenhagen August 28 to September 3 – see https://www.garyascott.com/courses/534/ – I hope to see you there.
Until then, good global investing! Gary