[[Start here]] → [[What works in stocks?|what works]] → [[expose to return drivers|drivers]] → something new --- ![[somethingnew.png]] Jim Slater[^1] identified four categories of change that could significantly impact the underlying economics of a business: - New Management - New Products - New Acquisitions - New Events in the industry (e.g. new legislation) The key impact of "something new" is that the stock's narrative becomes easier to understand. A good story is a catalyst for increased market demand. When you find good underlying fundamentals, the existence of "something new" is a confirmatory signal, and often the cause. ## New Management Slater believed changes in management could have the most transformational and lasting impact. Though, as Warren Buffett has said, "*when a manager with a reputation for brilliance tackles a business with a reputation for bad economics, the reputation of the business remains intact*". ## New Products Ensure that the product impact is long term meaningful for the bottom line. Patented products, or those that reinforce competitive advantage, are more profitable and less easily attacked by competitors. Ignore gimmicks. Also ignore products that may be highly successful, but are relatively small compared to overall group sales. ## New Acquisitions Companies can either make a single transformative acquisition, or make a chain of acquisitions at valuations favourable to earnings - "buy and build". Beware of diworseifications.[^2] ## New Events in the industry Stay attuned of current affairs and consider the broader ramifications. Some examples: - The collapse, or financial troubles, of competitors can help a stock gain dominance in an industry. Be mindful that often the change may only last a few years. - Significant changes in consumer or business habits create lasting changes (e.g. shift to cloud, working from home) - Regulatory or legislative change can create significant opportunities. - Political change, such as wars, trade agreements or otherwise. [^1]: [[Slater - The Zulu Principle]] - chapter 6 [^2]: [[Lynch - One Up On Wall Street]]