Some Basics of the Consumer Products Investment Market, A Service of the Office of Gary Pagar

November 30, 2012

Many seasoned investors and financial professionals advise new investors to focus on market areas in which they possess the most personal knowledge, a concept known as “circle of competence” investing. This insight can add a more in-depth understanding of the product, the market for it, and the strengths and challenges of its industry. The Fortune 500 includes an array of restaurant chains and makers of breakfast cereals and popular snacks, as well as multi-consumer products companies, such as Proctor & Gamble and Johnson & Johnson, whose familiar household products possess a global reach.

The recent economic slowdown posed problems for manufacturers of items such as clothing and consumer food products as discretionary spending sometimes lagged, yet many analysts believe that the industry’s prospects remain sound overall. In mid-2012, the Standard & Poor’s Ratings Services foresaw a relatively steady and stable prospect for investment in most consumer nondurables.

Some investors elect to position funds in small business consumer products companies. Today’s continuing market uncertainty makes it a good idea for these investors to pay particular attention to the day-to-day practices of these companies. In particular, investors should evaluate the vetted quality and experience of a company’s corporate leadership, the strength of its brand and level of positive media presence, and the ratio of production costs to actual market revenue. A small business consumer-oriented company should also be able to explain to its investors whether it is creating strategies for future acquisition by a larger corporation, and what those strategies are.

Senior investment banker Gary Pagar has extensive experience in the consumer products, health care, and media industries gained through his service in senior-level management positions at several major firms.

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