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Invest in America's Innovative Companies

That's the title on the front cover of an American Funds annual report I recently received.  My value crusader engine started to rev up.  With great anticipation, I flipped through the pages looking for serious value creation fodder. And then I hit the feature article title: "U.S. Companies Gain Strategic Advantage by Innovation." 

Well, that was all there was to the good stuff. The article just highlighted a couple of companies that the American Funds invest in because they define them as innovative. In my opinion, the companies fall way short of meaningful innovation plans, organizations, and outcomes. Nice try American Funds, but you failed to explain to your readers that:

1. Innovation drives the creation of proprietary assets,

2. A stable of proprietary assets that meet customer needs and wants leads to sustainable competitive advantage,

3. Sustainable competitive advantage is required to earn excess earnings,

4. Excess earnings are necessary to create shareholder value, and

5. Maximizing shareholder value is the objective of the firm. 

As an investor in your funds, I want my wealth maximized; therefore, invest in companies that innovate.  And, for goodness' sake, impress me with your knowledge of innovation (I am not convinced that Home Depot is a paragon of innovation).


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