Dimitry Nakhla | Babylon Capital® (@DimitryNakhla) “𝐂𝐡𝐫𝐢𝐬 𝐇𝐨𝐡𝐧 𝐨𝐧 𝐰𝐡𝐚𝐭 𝐭𝐲𝐩𝐞𝐬 𝐨𝐟 𝐜𝐨𝐦𝐩𝐚𝐧𝐢𝐞𝐬 𝐡𝐞 𝐰𝐨𝐮𝐥𝐝 𝐧𝐞𝐯𝐞𝐫 𝐢𝐧𝐯𝐞𝐬𝐭 𝐢𝐧: “We have a long” — TopicDigg

𝐂𝐡𝐫𝐢𝐬 𝐇𝐨𝐡𝐧 𝐨𝐧 𝐰𝐡𝐚𝐭 𝐭𝐲𝐩𝐞𝐬 𝐨𝐟 𝐜𝐨𝐦𝐩𝐚𝐧𝐢𝐞𝐬 𝐡𝐞 𝐰𝐨𝐮𝐥𝐝 𝐧𝐞𝐯𝐞𝐫 𝐢𝐧𝐯𝐞𝐬𝐭 𝐢𝐧: “We have a long list of companies we don’t invest in… banks, commodity businesses, most manufacturing industries, fossil fuels, utilities, airlines, wireless telecom, advertising agencies… Why? Because they’re competitive. And the most important thing I’ve learned in investing is that investors underestimate the forces of competition and disruption.” ___ 𝘐𝘯𝘥𝘶𝘴𝘵𝘳𝘪𝘦𝘴 𝘏𝘰𝘩𝘯 𝘦𝘹𝘱𝘭𝘪𝘤𝘪𝘵𝘭𝘺 𝘢𝘷𝘰𝘪𝘥𝘴: • Banks • Commodity businesses / manufacturing • Insurance • Tobacco • Fossil fuels • Utilities • Airlines • Wireless telecom • Advertising agencies • Most traditional manufacturing ___ Hohn’s point isn’t that money can’t be made in these areas — plenty of investors have done well in some of them. The deeper lesson: 𝙄𝙣𝙫𝙚𝙨𝙩𝙞𝙣𝙜 𝙞𝙨 𝙖𝙨 𝙢𝙪𝙘𝙝 𝙖𝙗𝙤𝙪𝙩 𝙙𝙚𝙘𝙞𝙙𝙞𝙣𝙜 𝙬𝙝𝙖𝙩 𝙣𝙤𝙩 𝙩𝙤 𝙤𝙬𝙣 𝙖𝙨 𝙞𝙩 𝙞𝙨 𝙖𝙗𝙤𝙪𝙩 𝙙𝙚𝙘𝙞𝙙𝙞𝙣𝙜 𝙬𝙝𝙖𝙩 𝙩𝙤 𝙤𝙬𝙣. Highly competitive industries tend to: • Erode returns on capital • Compress margins over time • Require constant reinvestment Contrast that with businesses that have: • Pricing power • High switching costs • Network effects • Structural barriers to entry Those are the environments where 𝘭𝘰𝘯𝘨-𝘵𝘦𝘳𝘮 compounding becomes far more predictable. ___ Another subtle takeaway: Most investors focus heavily on upside narratives. Great investors spend just as much time thinking about downside structures. ___ Source: In Good Company | Norges Bank Investment Management (05/14/2025)