Three stocks creating value via innovation

Professional investors James Dowey and Storm Uru of the Liontrust Global Innovation and Global Dividend funds, tell us what they’d buy now.

American Express stand
American Express is gaining market share from Visa and Mastercard
(Image credit: © Budrul Chukrut/SOPA Images/LightRocket via Getty Images)

Innovation is not necessarily dependent on the latest tech. Rather, an innovative business is one that creates genuine value for customers by delivering a product at a lower price or a higher quality-to-price ratio than what was available before. In terms of lower price, think of Costco, which beats Walmart and even the mighty Amazon by welcoming its members directly into its warehouse premises. In terms of quality-to-price think of the ever-growing value proposition of the Apple iPhone, now a 15-year-old invention.

But not every great innovation is a good investment. A successful innovative business must capture an adequate share of the value it creates. If an innovative product is easy to replicate, then everybody does it and nobody makes any money. Think of Peloton and its copycats. As such, we only invest in innovative businesses that possess or are in the process of building lasting barriers to competition to protect their profits, and whose market valuations present significant long-term upside to shareholders.

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James Dowey

James Dowey co-manages the Liontrust Global Dividend and Liontrust Global Innovation funds