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How to find a new flagship among companies?

How to find a new flagship among companies?

Every investor wants to make a long-term profitable investment, which in the future will pay for itself several times and bring hundreds of percent of profit. And do not think that this is impossible, a vivid example of such a project is Microsoft, which with small drawdowns during the dot-kom crash has grown its capitalization by more than five times, starting from the two thousandth year. In this material, we analyze how to find such a company and what criteria you need to pay attention to.

 

Capitalization

 

The greatest importance, as practice shows, is the level of capitalization of the company. The fact is that even the most successful small companies, which at the moment can show rapid growth dynamics, tend to be absorbed by already existing giants of their sphere. Moreover, if such a relatively small company does not agree to a deal that is beneficial for their owners, a confrontation will begin, in which, due to large resources, the giant will certainly win. This is the harsh truth of life - the big eats the small and this truth, unfortunately, is true for the business world.

 

With companies that have an average level of capitalization, things are a little better. The bottom line is that absorbing them is quite large deals with huge sums, which companies rarely go to. This is because if investing in a small successful company is likely to quickly recoup itself, then with medium-sized companies things are much more complicated.

 

The same applies to large companies, transactions for the acquisition or merger of which are a meager number. Nevertheless, too expensive companies, the capitalization of which exceeds 200-250 billion, will also not work, because they have moved to the stage of slowing down growth.

 

Thus, the most favorable companies for investment in terms of their value are those whose capitalization is above 20-30 billion dollars and below 300 billion.

 

Developments and technologies

 

The second rather important criterion when choosing a future trillion-dollar company will certainly be the percentage of investments of the company's capital in development and technology. The fact is that it is this item of expenditure that allows enterprises to continue to increase their value and feel confident among competitors. According to research, the most appropriate level of investment in technological development is 10-20%.

 

The fact is that if a company invests more - it ignores other possible industries, including the expansion of production, advertising services and so on, and if less, it does not fully use the potential of the development sphere.

 

Absorption of others

 

In addition to the development of its own potential through the correct allocation of capital, a rather important criterion is the absorption of other companies, because it is this process that allows you to significantly increase capitalization, as well as enter other markets, which is important for large companies.

25.08.2021
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