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AA-rated Graham Campbell: the stockmarket in 1984

by Graham Campbell on Jun 10, 2014 at 14:31

However, either as a result of the presence of the well-financed multinational which is able to acquire smaller competitors or through the ‘natural’ process of competitive advantage, we would expect many of these industries to increase in concentration over the next decade.

There is a large body of economic theory which relates the concentration of an industry to its profitability, with the implication that the more concentrated (monopolistic) the higher the profitability. In contrast industries with low concentrations are more likely to be more competitive and generate lower returns. The relationship between concentration and profitability is unlikely to
be a linear.

We suspect that while this is a logical theory, it is still too early to tell as many businesses are still in the investment and acquisition mode and concentration may not yet be sufficient to improve significantly the profitability of the champions.

Technology changes can be very disruptive to the status quo. Many industries in the more mature economies are already quite concentrated and the largest businesses have already built up strong positions in Emerging Markets. Some of the winners from trends in globalisation are likely to be businesses which are domiciled in Emerging markets.

These businesses will be able to exert cost advantages or apply a new business model or approach which engages with customer needs or aspirations. We believe that significant concentration in Emerging Markets is inevitable and it will be fascinating and rewarding to identify the global winners.

Campbell manages the Saracen Global Income and Growth , which has returned 10% in the three years to the and April, earning Campbell a Citywire AA-rating.

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