Saut: 5 Things That Makes America Great!

Jeffrey Saut is the investment strategist over at Raymond James.  In his weekly commentary he often serves up what I think are insightful views of the markets, stocks and the economy.  This week he discusses five factors that makes our economy great and offers up six definitions of what makes a company great.  Some of these factors are now being replicated in other places now in the world but I still think we're one of the few places that has them all.  {Excerpt}

1) The United States is the home of the entrepreneur.

2) The U.S. is the most open/flexible society the world has ever seen.

3) The brightest minds from around the world dream of coming to the U.S.  {My note:  This may not be so true anymore.}

4) English is the universal language.

5) Americanization remains a powerful and growing – though resented – economic and social trend throughout the world. (To quote the advertising/marketing giant WPP Group’s CEO, Sir Martin Sorrell, “Globalization is a misnomer. The better word is Americanization.”)

....“Subscribing as I do to the Charlie Munger dictum that a great business at a fair price is superior to a fair business at a great price, we buy shares in what we believe are ‘Great Companies.’ Since the stock market currently makes little distinction in valuation between fair and great companies, the normal dilemma – Do I pay up for quality? – does not exist.....

....“First,...what makes a company ‘Great.’

1) A great company brings value to its customers, its suppliers, its shareholders, and a culture of fulfillment to its employees.

2) As a customer, you can’t beat it and what the company sells is good for its customers.

3) A great business generates a lot of free cash for reinvestment and is able to reinvest at high rates of return.

4) The chief executive does not ‘alternate between smart and dumb.’ He/She is smart all the time and demonstrates respect for shareholders, first because it is right and second because the CEO is a significant owner.

5) The socio/economic wind is at the back of the company.

6) Ideally, there is a ‘moat’ around the business that Buffett and Munger define as a sustainable competitive advantage. ‘Moats’ are problematic in practice because the world changes so fast that most of them are not sustainable. My concept of a ‘moat’ is superior management with superior brains fixated on adjusting to and capitalizing on rapid change.”

Link:  Saut: Market Commentary.