Michael Moe
Who wouldn't want to find the next big thing in investing? Michael Moe thinks he can help you do exactly that. Moe is a former director of global growth stock research at Merrill Lynch and the cofounder and chairman of ThinkEquity Partners, an investment advisory and research firm based in San Francisco. He is also an expert on the "new economy" and entrepreneurship. Moe, the author of Finding the Next Starbucks: How to Identify and Invest in the Hot Stocks of Tomorrow, spoke with U.S. News Assistant Managing Editor Tim Smart.
Is there a systematic approach to finding hot companies to invest in?
One of the things I found as a research analyst was that the best companies tend to be systematic and strategic and consistent over time.
But can individual investors really beat the market? The statistics suggest they can't.
The statistics are what they are. Clearly, as a general observation, most people would be better off investing in low-cost index funds. To outperform the market is very difficult. Most people shouldn't try. They don't have the skill set, the time, the passion, whatever it is. Investing in growth companies isn't speculating. You really have to do your homework.
You focus a lot on broad societal trends like demographics. Why?
I think demographics is an extremely important trend to understand. Demographics is like this big, slow curveball coming over the plate. The aging population is a phenomenal demographic from an investment point of view.
So you should just buy healthcare companies that cater to this aging demographic?
Medtronic, Stryker, Johnson & Johnson have been phenomenal growth companies over a long period of time. But where the 10-baggers are going to be found are in the small-cap or emerging-type companies that are focused on products such as knee replacements or whatever. I can't even tell you what that is.
Your book talks about searching for the four p's: people, product, potential, and predictability. Which is the most important?
The people is the most important thing to get right. The predictability piece is probably the hardest on which to make the right call.
So you find all four? Is that it? Just buy and enjoy the ride?
When you find a company that has these four p's, the worst thing you can do is sell prematurely. It's just too hard to find the next one.
Looking forward, what is the biggest trend that investors should try to take advantage of?
There are probably 100 trends. China clearly is one; you just can't argue against the numbers. But probably the overarching trend is this whole knowledge economy-brainpower, innovation, and knowledge. Look for companies that have the ability to attract and retain the smartest people.
Like Google?
I happen to believe Google is the most important growth company in the world. But based on the math involved, it will not be the best-performing stock 10 years from now. It's just too big.
This story appears in the February 26, 2007 print edition of U.S. News & World Report.
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