“Monopoly” is turning 90. It was on 31 December 1935 that heating engineer Charles Darrow received the patent for his board game. In the nearly nine decades that have elapsed since then, more than a billion people have tried to buy as many streets, houses, waterworks and railway stations as possible, get the better of their competitors and triumph with a mountain of money. According to the game’s manufacturer, Hasbro, there are more than 300 licensed versions of the timeless classic, which has long since also found its way into the world of mobile gaming. Just in time for the 90th birthday, Swissquote is borrowing the name of the game for an investment idea. The Swiss broker has expanded its themes trading platform with the “Market Monopoly” strategy. There is no cause for concern, though: the experts are not searching for particularly aggressive property sharks. “This is a different kind of monopoly,” they explain. The new index is geared towards exploiting trading opportunities in monopolistic and oligopolistic markets.
Monopolies and oligopolies – what makes competition watchdogs prick up their ears and does not always benefit consumers has corporate bosses licking their lips. By definition, the two terms indicate an environment in which individual companies (monopolies) or a small group of suppliers (oligopolies) manage to control markets. Such a constellation may arise as a result of high entry barriers, economies of scale or regulatory protection. “A good example of this are airlines,” say the Swissquote strategists. In many countries there is only one, in others a limited number. They appear to exercise their pricing power flexibly. However, monopolies and oligopolies are not just able to control the rates they charge: another lever that can be used to influence consumer behaviour and shape industry dynamics is sales and distribution.
“Companies which operate in these environments have business models that are designed to endure and adapt on a daily basis,” the experts continue. This dominance gives them the latitude they need in order to achieve steady and calculable revenues alongside healthy profit margins. It almost goes without saying that such companies are particularly adept at navigating their way through the various economic cycles and enjoy relatively high profitability in recovery periods especially. Whether brands of cola, commercial aircraft or particular software, consumers and business clients frequently find they have little option but to use certain market players.
The new Monopoly Index offers investors access to the world of industry leaders. Its managers employ a raft of systematic and disciplined methods to select the shares of companies which operate under monopolistic conditions or as part of a highly competitive group. This allows them to exploit the structural advantages of such sectors. “The aim of this theme is to create long-term value through companies which can master the rules of the game,” say the Swissquote managers, summing up their idea in a nutshell. In addition to the advantages of concentrated markets, such as stability, scalability and resilience, investors can profit from the confidence the stock markets have in some of the world’s most influential leadership personalities. In short, it brings together companies that have nothing to fear from comparison with the classic eponymous game in terms of success, name recognition and history.