In Focus

A Leader In It's Field

Note: This article focuses on Step 4 of the Chicks' Dozen. For articles focusing on other Steps, see the links listed at the bottom of the page.

In boxing, it was Mohammed Ali. Basketball? Michael Jordan. In hockey, it was Wayne Gretzy (Well, to the general public it was. To Chick Megan it 's that retired Bo-hunk, Killer Kaminski.) All leaders in their fields. Figuring out who are the leaders in their fields can be as simple as Chicks Dozen #1: Buy What You Know... basic name recognition and product familiarity. If the industry is a little vague to you, do a little research on it and see what you find out. Sites like SmartMoney.com will compare the company you're looking at with it's competitors.( I chose Gap for the example) You could even take a quick scroll down the S&P 500 to check out some other leaders.

So why do we place such importance on companies we own being Leaders? Well, let me 'splain, Lucy..

Leaders have proven records. They didn't get to where they are by making rash decisions and fly-by-night products. Like Wayne Gretzky's goals (and Killer's penalty minutes) their numbers are high and consistent. As Chicks, it's important that we put our money into companies we trust, and we don't trust just anyone. If you take a moment to see how we run our investment club, you'll see the effort we all put into the discovery aspect of each company that makes the cut. It's by no coincidence that these companies turnout to be... you guessed it... leaders in their industries!

Let's just say you're perusing the Chicks Research a Company segment on the website. You come across a company or two that you've really been wanting to sink your teeth into and to your dismay you find the numbers to be, well, not so appetizing. You can't imagine that this particular company, a sure leader in its field, would be on the downside. Well, like the 1999-2000 Detroit Redwings, every year can't be a dance with Lord Stanley. The Wings are practically destined to have grandiose years because they are a terrific franchise and in hockey terms, they're the leader in their field. (I'm strictly speaking from the head here; my heart goes to the Mighty Ducks these days.) But if tomorrow, the NHL introduced the new Americus Americans and they went all the way to the finals and took home the cup, would that make them the new leaders in their field? Uh-uh. At the end of the day, today's numbers have less to do with a successful business then the past decade's numbers.

Another example, a little more true to life, is what we've encountered as an investment club. Pfizer, America Online, Coca-Cola, The Gap, Yahoo!, Nokia -- just some of the companies the Chicks have invested in -- all leaders. If you follow the stock market (or are just learning... good for you!) then you may be shaking your head at two of the above-mentioned companies. I'm talking about Coca-Cola and The Gap, of course. These companies haven't exactly boosted our numbers in the last year. So as Chicks, how should we view this? Does this make us/them failures?

Hardly. Our philosophy is to buy and hold. Are we thrilled that these companies have under performed for us? Are we embarrassed by our selections? Absolutely not. These companies are true leaders. Historically, they are proven. Financially, they are stable. Almost always, things are cyclical and these companies will rebound. And even if it isn't tomorrow, in my eyes Coke will always be The Great One. And my Gap Jeans? Positively Killer.

Articles focusing on the 12 Steps of the Chicks' Dozen:

Step 1: Buy What You Know

Step 2: Keep It Simple, Sister (K.I.S.S.)

Step 3: Industry

Step 4: Leader In It's Field

Step 5: Repeat Profitability

Step 6: Gross Margins, GM: Service Related Industries

Step 7: Net Margins

Step 8: Cash To Long-Term Debt

Step 9: Flow Ratio

Step 10: Increasing Growth

Step 11: Strong Management & Operating History

Step 12: Buy On Sale