Ugly Duck Investments Can be a Beautiful Thing
Everyone loves to hear about the likes of Apple, Tesla, Nike and other decidedly “hot” companies when it comes to investing. But there are other opportunities for investing outside of these popular retail companies. I was recently included in the article, “8 Unusual and Unglamorous Investment Opportunities,” by Lou Carlozo in US News & World Report about ‘ugly duck’ or ‘odd duck’ investing. We see odd ducks as companies that don’t make “cool” stuff that average consumers can identify, mostly business to business companies that are out of sight from the average investor.
Odd ducks can be great investments, but companies doing very outlandish things are ones to avoid. It’s important to stick to companies with revenues and earnings that may be out of the limelight, but that have a business model you can understand. You should be able to understand what a company is doing for you to want to put your money into it!
Understanding odd ducks
The most important thing when dealing with odd ducks is to understand what needs to go right for the company to gain traction against investors. If the opportunity is too small or unlikely to gain investors, we’d advise to pass on the risk. Retail investors love a fast-growing company, but once the growth stops investors quickly move on—there’s a long road to continual company growth.
Microsoft is one company that shocked investors, many investors counted the company out and look where it is now! Once in the trash bin of most investors, today investors better understand the company’s customer base and likelihood for growth.
How to spot good odd ducks
We love B2B companies as odd duck investments, especially within the world of technology. Tech companies like IBM, CA and NTCT offer software systems and networking technology that help run datacenters. Although these companies aren’t out of sight of the ordinary investor, they also aren’t the retail companies that are discussed every day. These types of products are fundamental for business operation and are the type of odd ducks we find as strong investments.