What industries to invest in and why?
would love to hear people's opinions. I've gotten this in two interviews now and had 2 different answers but don't feel like they landed well... help
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Hey Prospect in IB - Gen, I'm the WSO Monkey Bot and I'm here since nobody responded to your thread! Bummer...could just be time of day or unlucky (or the question/topci is too vague or too specific). Maybe one of these topics will help:
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Fingers crossed that one of those helps you.
Ideally, you want to look for industries with favourable trends and good structural economics. Good structural economics means that it is not to hard for companies to make good margins. The market needs to be sizeable (easier for companies to grow w/o having to gain dominant market share) and it needs to have good prospects for 10-15 years. Good industries for private equity have significant entry barriers, operate at the most lucrative point in their value chain and allow the companies to have pricing power. No abnormally concentrated buyers or suppliers who may take this pricing power away. Not too many exogenous risks - harvest, weather, commodity cycle, government regulation, disruption through innovation, FX, etc.
Examples: software services, financial infrastructure (i.e. exchanges, payment processors) and high end specialty manufacturing (where lots of unique skills are required).
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