You're surrounded by profitable investment opportunities.
Legendary investor Peter Lynch argues that investors should invest in what they know and that an investor, whilst going about their normal everyday activities, can sometimes spot a good investment simply by seeing what goods and services are selling in the shops.
I followed this theory when I saw the first Spider-Man movie, buying shares in Spider-Man's owner, Marvel Entertainment, the comic-book company which owns several thousand other characters including Iron Man and the X-Men. Marvel is currently in the news following Monday's announcement that it was being bought by Disney for about $4 billion.
My view was that the state of computer-generated imagery would enable Marvel to "mine" its character bank for highly profitable superhero films. So far, so good; every film based on Marvel's characters over the last decade has made a profit at the cinema (the majority of Hollywood films fail to make a profit at the box office).
Spotting Investments Whilst On Holiday
Recently I went on a few days holiday to Bruges, a decision that was in part driven by having seen the film In Bruges, and decided to follow Lynch's advice and pay attention en route.
To get to Brussels I took the Eurostar train from St. Pancras. Eurostar is a far more efficient method of transport than going by plane, if only because you don't have to spend a couple of hours waiting at the airport so that you can be tempted into buying stuff in BAA's shopping malls. Eurostar nowadays carries a majority of passenger traffic from London to Paris and Brussels. Unfortunately for investors, Eurostar is a private company, mostly owned by the French National Railway operator SNCF.
Eurostar uses the Channel Tunnel which is a fabulous piece of engineering but a financial disaster. Investors who bought shares in Eurotunnel when it floated in 1987 have seen their investment plummet in value thanks largely to the massive cost overruns incurred when building the tunnel.
Last year Eurotunnel's creditors wrote off most of its debts in return for them getting 87% of the company and the new Eurotunnel has been profitable since the restructuring. I plan a closer look at their shares in a couple of weeks.
The Ubiquity Of Many Consumer Goods
In my travels around the world I've discovered that Coca-Cola can be found everywhere, from the Santa Claus Village on Finland's Arctic Circle, to mountain huts in Slovenia's Julian Alps. Coca-Cola CEO Roberto Goizueta said in the 1980s that his aim was to place Coke vending machines or retail outlets within arm's length of every consumer. It looks like they are getting there.
Warren Buffett is a big fan of Coca-Cola and his company Berkshire Hathaway owns about 8.6% of the company. Coke's shares are on a historic P/E ratio of about 19.7 and yield 3.1%, so they're not especially cheap. But a business of this quality rarely is.
Checking the shops it turns out that products made by multinational consumer goods companies such as Reckitt Benckiser (LSE: RB) and Unilever (LSE: ULVR) can be found everywhere in Belgium. Every "drinking establishment" I visited served Diageo's (LSE: DGE) Guinness and many of Diageo's other brands.
Tobacco is another consumer product which seems to be everywhere. The smoking ban in Belgium bars and cafes is ineffective and this clearly accounts for a big chunk of the Belgian tobacco sales. Smokers should consider buying the shares of British American Tobacco (LSE: BATS) and/or Imperial Tobacco (LSE: IMT) in order to get some of their expenditure back as dividends and benefiting from these firms' strong financial performance.
The efficiency of the distribution systems of the companies mentioned in this section, combined with the fact that they are serving a mixture of "needs" and relatively low-cost "wants" all over the globe, ensures that their shares are lower risk investments than most of the stock market.
Invest In What You Know (And Use)
Investors who are looking to dip a metaphorical toe into the stock market for the first time really should consider the consumer goods multinationals. They are relatively boring investments and you already "know" many of their products. Compare their performance with the "excitement" that investors in the supposedly safe-as-houses clearing banks and former building societies have had in the last couple of years!
However, avoid the trap of assuming that because you understand the product you also understand the business. This fallacy brought down a lot of investors in high-technology companies during last century's dotcom boom; because they understood the internet they assumed that anything with the .com suffix was a good investment. Not a good idea.
The final potential investment was prompted by the beer "Westmalle" which was discovered on a day trip to Antwerp. Alas, it turns out that Westmalle is brewed by an order of Trappist monks who most definitely are not quoted on the stock market!
Potential investments lurk everywhere often in plain sight. Keep an eye open.
Epilogue
I should point out that my first stop, the night before setting off to Belgium, was in central London for the monthly Fool Social. Whilst chatting with other fools at the social is a good source of investment ideas, my priority was to track down one of the legendary fridge magnets. Clearly the demand was overwhelming since none were to be seen when I arrived!
> With The Motley Fool's Share Dealing Service you can buy and sell shares in real time for a flat rate of just £10. Open an account for free today.
> Tony owns shares in Berkshire Hathaway, Marvel Entertainment and Unilever.
