These wise words from Warren Buffet are a simple ‘recipe’ for being a contrarian investor: ‘Be fearful when others are greedy and greedy when others are fearful’.
Hardly a week goes by without another high street name collapsing or more experts predicting the death of our high streets. But as always, savvy investors look beyond the headlines in search of opportunities.
What’s driving rapid change in the high street?
Changing shopping habits: We all know that shopping habits are changing as more people shop for products online. Personally, I find shopping for products in the high street a complete waste of time. Driving to the shops through the traffic, finding somewhere to park then traipsing around shops simply to be told that what I want isn’t in stock! Far simpler to order it online!
Financial incompetence and/or mismanagement: Several of the casual dining chains have found themselves in trouble recently. When you look in detail at the company financials you find that many of these chain restaurants have taken on huge debts to fund their expansion programme. Coupled with overpriced mediocre food offerings, it’s hardly surprising that they haven’t attracted enough punters to help chip into their debt mountain. However, to save face, it is far easier for the directors to put the blame on business rates or Brexit than to face the reality of poor business decision making.
Bank closures: It’s too simplistic to say that high street bank branches are closing because of the growth in internet banking. A far bigger trend is the move towards a cashless society. I have seen quite a few old bank branches up for sale. They all have massive basement vaults which were used to store cash. That’s because local businesses received cash payments and needed somewhere local to bank their cash. Also, above the ground floor banking hall, there are typically offices. This stems from the era of relationship banking where so many decisions were made at local branch level. To summarise, the march towards a cashless society means there is now no need for basement cash vaults; the rise of internet banking means there is no need for the ground floor banking hall and the centralisation of decision making and back office processes means there is now no need for the upper floor offices. That’s why many entire freehold bank buildings are coming onto the market.