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Investment View

Last week was a good time to take stock as the uncommonly difficult month of October drew to a close. The recovery in the UK market, which had started the week before, gave us all heart, even if yet more shudders through the Nasdaq were enough to bring it all to an abrupt halt – hopefully temporarily. Certainly, shares regained their poise as the week ended but the trading range remains narrow and the jury is still out on whether we can finish the year higher than when we started.

What was most interesting last week, though, was to hear the views of experts at two conferences I attended. Capital International, probably one of the best-kept secrets in the investment world, held its annual conference on Wednesday. A major money manager in the US, it has a growing presence in the UK but, as it does not advertise or offer retail funds over here, it is little known outside the professional investment community.

Our chief analyst described the company as the best stockpickers in the business. Certainly, it views its strengths as principally an ability to research and invest in good companies on a global basis. It is remarkably upbeat over investment prospects for both the old as well as the new economy.

What is clear, though, is that the world is changing at ever greater speed, so you have to be certain you pick businesses that are adapting. In real estate, it cited the growth of serviced accommodation – for both commercial and industrial enterprises – as an area where nimble management is gaining advantage in an industry where businesses have largely failed to recognise the changes taking place.

In the automobile industry, it is the change in the business model to watch for – with value-added services now beginning to play an important role in terms of generating revenue for companies which traditionally have only profited from the sale of the car itself.

Our own conference, held in the magnificent Porter Tun room in the heart of the City of London, concentrated more on the new economy. With media as a theme, a sparkling array of speakers extolled the virtues of the “piggy in the middle” (as part of the presentation was styled) of the new economy sectors. Media, we were told, had started the last decade with an equal value in index weighting terms to general retailers, a position that remained pretty much unchanged until the middle of 1998. The divergence since then has been quite remarkable.

From representing around 4 per cent of the total UK market – interestingly a percentage that was overall little changed from the beginning of the decade – media had advanced to 6 per cent of the total market, having been 8 per cent at the top of the new economy boom. General retailers, on the other hand, has declined to only 2 per cent. And all this in under two years.

But media, like so many industries, is diverse both in terms of the nature of the types of businesses it embraces and with regard to the individual companies that go to make up the sector. There are advertising agencies, newspaper groups, television companies, internet businesses – and many, many more. One thing is certain, though, this industry is changing just as fast as any, with technological advancement creating new opportunities.

Bronwyn Curtis of Bloomberg – a company in which we cannot invest – was particularly enlightening. She promp-ted me to consider the possible effects of the US presidential campaign. But that needs very careful consider-ation another time.


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