This is not financial advice but my perspective is a bit more nuanced than most because of observations I've made over the last 20+ years working with the F500 in two capacities.
I spent many years selling data centers and IP related services to Microsoft, Amazon, Meta (when they were still called Facebook) and many, many others. I managed a team of salespeople in Asia and Europe from my office in Seattle. For the past 6+ years, I've gotten a deeper perspective, working with the corporate development departments of nearly all the F500 as the head of business development for a small $100M PE firm headquartered in London.
First off, what the hell is "Corporate Development?" Y
ou may know what that is but I didn't know what it was coming into the job and I had a law degree and was racking up huge annual bonuses per year selling dark fiber and triple redundant data centers to Dell in northern England and Japanese data centers with Zen sand gardens in the middle to Microsoft.
Corporate Development or "CD" as they call themselves, are the "deal guys." When you hear about an M&A deal or an investment in an adjacent company or the spin off of a division or the sale of IP, you can bet the CD team was involved. When you see a F500 company putting out job listing for CD help, your spider sense should start tingling. Deal flow must be happening soon.
Great. Why should I care?
Because you shouldn't be investing in companies unless you understand how their CD team works. I'm old enough to remember teletype, punch cards and fax machines. All gone. And those who invested in them likely lost money if they stuck around.
I haven't talked to all of the F500 - I avoided Biotech - but I spoke to nearly all of them. What I learned changed my perspective on investing. The entire F500 is a pack of Zebras. The overwhelming majority of them don't want to be the first or last Zebra in the pack. Aside from a small handful, the pressure is too great for people to come in to work, use M&A to add a bit or revenue here, add an adjacent product line there, or maybe fill in product line with a tuck-in technology. Nothing that rocks the massive ship that cranks out a consistent 10% growth and 1.5% dividends.
What's with M&A in the first place? Why is that needed?
M&A, like strategic investments, is the innovation lifeblood of the vast majority of companies because they have lost the ability to innovate. Entirely. The people who show up at Coca Cola Inc can't think of any new products that are going to meaningfully move the needle so they wind up acquiring a small African firm that has highly caffeinated coke-flavored carbonated Yak milk and await their bonus check.
The Zebras that don't give their CD team any meaningful work eventually lose their best CD people because great deal people are always in demand and so those companies... slowly.. drift... to the back of the zebra herd in innovation and eventually go the way of fax machines. They'll up their dividends to keep your attention while they show up for work and reap the rewards of their hard working, innovative predecessors.
When you're investing in a company you need to know this.
Because ALL of investing is RISK in and REWARD out.
Too often we get laser focused on the Reward and we overlook the risk. Many times we don't take enough risk and that's just as big a problem as it is for someone who goes YOLO on Fartcoins.
The companies that are innovating are taking calculated risks. You're betting that the CD team at Google or Tesla or a very, very small handful of others are sharp enough to win the majority of their risk taking bets because, over time, those Zebras out in front get a good long look at the opportunities on the prairie while the rest of the Zebras are staring at black and white striped asses.
There's nothing wrong with getting 10% growth + 2% yield each year if that's what you want. But if I were younger (I'm older than dirt) and knew what I knew now, I would invest half my money in the innovators. Because, over time, the market has taught us that you must put some amount of risk in if you want some amount of outsized returns. NFA/DYOR and thanks for reading.
TL/DR: Most of the F500 either refuse or are incapable of innovation and that means that you may be betting on fax machines to continue up and to the right.