Some sports, notably Olympic high-diving, gymnastics and figure skating, award points based upon the "degree of difficulty" of the routine being performed. More difficult performances properly executed result in more points and a potential trip to the podium to collect a medal.
Leaving aside the subjectivity that results from judges being occasionally inconsistent and sometimes intentionally rigging the scoring process, the bottom line is more difficult maneuvers lead to more competitive success.
While this may be a competitive necessity in such sports, when it comes to investing, we have choices. We can seek out complicated, difficult to understand businesses, in the hope that we can decipher the situation better than the next guy or gal. Or, we can look for businesses with inherently less complexity.
No triple Axel with a reverse double Pike, to use a diving example. Actually I just made that up. But you get the idea. At Triad, we prefer a plain dive, off the 10 meter platform straight into the water. Something even I could do.
Avoiding complexity makes sense when you consider another aspect of investing. Unlike those Olympic judges, markets don't award investors any extra credit or investment returns for "diving" into a complex situation.
Ultimately, markets reward businesses that increase earnings and cash flow over the long run, regardless of their complexity. Not always in a smooth manner, and occasionally patience is required.
How about a recent example? Ok, ketchup. Who doesn't love the stuff? I know, some "foodies" consider it sacrilegious to use ketchup (not me). Warren Buffett, who has about 70 years of investing experience, recently agreed to invest $12 billion in the purchase of H. J. Heinz Company, makers of famous Heinz ketchup.
Warren's about as smart as anyone, been investing longer than 99.999% of the investing population, and yet where does he choose to park billions? In ketchup. Buffett also has a giant stake in Coca-Cola. Pretty ordinary-looking businesses, but the results over time have been extraordinary.
The bottom line is that stock markets don't care if you invest in potato chips or computer chips. It's cash, not complexity, that counts.
So when thinking about investing, most investors would do well to leave aside the three and a half triple Axel pike or the double double Kasamatsu Tuck with a Yurchenko backflip, or even the triple Axel with a Lutz half Loop...oops, I think I got these names wrong also. Focus on simple. When investing, less is very often more.