Why is it that we often find ourselves holding long-term investments in companies that align with our interests, or visions for the future?
We can all appreciate that profits are important – nay, necessary – to an investment over the long term. Yet, vision holds increasing importance on capital allocation to many… there might be some solid logic behind that.
In the book, The Infinite Game by Simon Sinek, the concept of business as an infinite game is explained. A game whereby the objective is not to 'win', but rather to stay in the game.
The reasoning is, simply put, there is no 'winning' in business. The rules and the competitors are ever-changing – making it impossible to declare victory. By what metrics? In what time frame? Against whom? Simon Sinek argues, there is only ahead or behind.
In that case, the real ambition of the company is to stay in the game for as long as possible.
The infinite investing game
Well, you might be scratching your head wondering how this relates to investing. To put it in a nutshell – there are infinite and finite-minded led companies listed on the ASX, as there is throughout the world. Simon Sinek makes the case the short-sightedness of finite-minded leadership leads to the premature demise of companies.
If we are playing the long game, ourselves as investors, we certainly don't want our investments to disappear before we do.
We'll run through a few ASX shares that hold, what Simon Sinek would describe as, a 'just cause' – a vision that people are willing to make sacrifices in order to help advance, and ultimately, stay in the infinite game.
People caring for people
Ramsay Health Care Limited (ASX: RHC) was founded in 1964 by Paul Ramsay AO, to which he would be chairman of for the remainder of his life, passing away in 2014. Today, the healthcare operator is now a global group, spanning 11 countries. This speaks to the inspiring nature of the 'people caring for people' mantra.
The Ramsay share price has taken a hit over the last 12 months, falling 13.74%. This is, in part, due to the operational impacts of coronavirus. Unfortunately, elective surgery was restricted in most operating jurisdictions.
In addition, Ramsay also entered partnership agreements with governments to make its facilities available to assist with the pandemic response. Ramsay only sought to be compensated for net receivable costs.
This hurt the bottom line, as reported in its 2020 annual report, net profit after tax for the group decreasing by 43% compared to the prior year. Although, by taking this action, the value to human life that may have been added is incalculable.
Ramsay Health today sits at a market capitalisation of $14.23 billion. Since listing in 1999, the share price has come to return 3,815% across the nearly 21 years.
Build a connected future so everyone can thrive
Telstra Corporation Ltd (ASX: TLS) origins extend as far back as 1901. Originally, the telco was a part of a combined entity, known as the Postmaster-General's Department, that eventually separated into Telecom Australia and Australia Post in 1975. These days, Telstra is the largest wireless carrier in Australia, serving 18.8 million subscribers.
The telecommunications behemoth has faulted over the last few years, with dividend cuts and other substantial cost cutting initiatives. However, the company appears to be setting its sights on being the Australian leading provider of 5G. In its annual report, it boasted 5G coverage of a third of the Australian population.
Head of networks at Telstra, Nikos Katinakis, recently spoke with The Australian Financial Review. Nikos mentioned he is working to "maximise the utilisation" available from the 'ultra-fast' 5G millimetre wave spectrum. The first auction for which will be held in March.
Goldman Sachs recently reiterated its buy rating on Telstra with a $3.60 price target.
We help people hear and be heard
Cochlear Limited (ASX: COH) started with a vision of one man, after watching his father suffer from the hardship and isolation of hearing loss. Graeme Clark knew from that point that he wanted to "fix ears". Cochlear was founded in 1981 in Sydney.
From humble beginnings, the company now has operations in more than 20 countries and is a dominant player in the implantable hearing device market. Currently, more than 450,000 people now have the ability of hearing, thanks to Cochlear.
Cochlear's operations were also heavily impacted as a result of non-essential surgery restrictions earlier in the year. Resulting in underlying net profit decreasing by 42% to $153.8 million. Once patent litigation expenses and innovation fund gains were factored in, Cochlear recorded a net loss of $238.3 million for FY20.
The impact prompted the company to initiate a $1.1 billion capital raise and a $225 million increase to its debt back in March and April.
Cochlear remains optimistic for the future outlook, with its continued investment in R&D of $185 million for the year. Reportedly the company had received approvals for new products, and others currently in the approval pipeline.
The shares have traded 11.6% lower in the last months. While Macquarie analysts have an outperform rating and $241 price target on the shares.
Foolish takeaway
Take from this what you will. To have an impactful vision for a company alone won't lead to its success. Those that do though often can attract good talent to the business, as what they are aiming for inspires others to join in the mission.
If nothing more, this reminds us when looking for long-term investments, that there are qualities of companies that aren't necessarily quantifiable, that still hold significant value. You just mightn't find them on a balance sheet.
