Five Characteristics for the Unforgiving New World

Tom Stevenson writes yet another thoughtful column in the Daily Telegraph. He says we're in the "Great Deleverage" and lists five traits the best investments will share in this world:

They will have rock-solid finances. They will not be dependent on external funding because they will be well-capitalised and throwing off cash. Because their weaker rivals will be going to the wall, they will see plenty of opportunities to reinvest this spare cash in the business because their return on capital will be high.

They will be market leaders, with strong brands and near impregnable barriers to entry. In an uncertain world, customers will return to the names they trust. People will look back with incredulity on the idea of scraping an extra percentage point of interest by depositing their savings in an Icelandic bank they'd never heard of.

They will be run by people with years of relevant experience. Don't expect investors to accept banks run by retailers or retailers run by bankers for many years to come.

They will start to behave a little more like private companies, investing for the long-term and not just the next quarterly earnings figure, because short-term gains are only achievable with high levels of leverage that won't be available or acceptable.

Read the whole thing. Always good to read the thinking of a sound fundamental investor in times like these.