What A View to a Kill teaches you about profitability
The James Bond flick starring Roger Moore is not only a great film – it can teach also teach you a thing or two about investing.
A View to a Kill, released in 1985, is the 14th film in the James Bond series, starring Roger Moore (pictured), Tanya Roberts, Grace Jones and Christopher Walken. Multimillionaire Max Zorin (Walken) attempts to destroy Silicon Valley through a massive earthquake triggered by explosives placed at strategic locations near theSan Andreas and Hayward faults. Zorin hopes this will give him (and his investors) a monopoly on the entire microchip industry. The film was a box-office hit, making $152m from a budget of only $30m.
The key moment
In order to investigate what Zorin is doing, Bond goes to San Francisco to look at records relating to Zorin's mining operations, and to speak to officials who might have some information on what is going on. To avoid becoming too conspicuous, he decides to pretend that he is a journalist with the "London Financial Times". He changes his name to "James Stock", an alias he uses repeatedly throughout the film.
The lesson for investors
Having monopoly control (or at least a dominant position) in an industry or product market is always good news for a company. You rule the market instead of having to share it with competitors, allowing you to maximise sales. Another benefit is high margins, a result of pricing power and the ability to lower costs by pressuring suppliers.
A greater proportion of your revenue reaches the bottom line, boosting earnings per share and encouraging shareholders to assign a higher valuation to the company. The downside, however, is that monopolies don't tend to last all that long. Complaints about high prices or unfair competition trigger investigations and potential penalties from antitrust authorities or other regulators; an enforced break-up is often the result.
Other financial wisdom
The film's nod to "stock" as well as "bond" is a reminder of the benefits of asset diversification. Given that the stock and bond markets frequently don't behave in the same way, including both assets in your portfolio can improve the trade-off between risk and return; stocks are more cyclical than bonds. Real estate and gold will diversify a portfolio further.