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Ramadan’s Shifting Dates Have Complex Effects on Businesses

The holy month of Ramadan affects companies and products differently each year, and it is essential for investors in Muslim-majority countries to understand these effects. The holiday, during which Muslims fast from dawn to dusk, starts 10-12 days earlier each year, unlike fixed holidays such as Christmas. This year, Ramadan starts at sunset on March 10 and lasts until April 9.

Ramadan’s Slowly Shifting Seasonality

Timing of Ramadan relative to Northern Hemisphere seasons, 2010-2040

The fact that the holy month moves each year means that the effects of Ramadan on businesses change over time. Recently, when Ramadan was during the summer, it was a significant headwind for companies such as brewers, as the fast suppressed demand for beer during what would otherwise be a peak month. But now as Ramadan is moving earlier in the year, that headwind will lessen.

Learn more about Ramadan’s effect on businesses in Muslim-majority countries, or those with significant Muslim populations, in our extended analysis.

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How Persistent Are Quality and Growth?

At Harding Loevner, we are quality growth investors, which means we seek to invest in well-managed, financially sound businesses that can sustain profitable growth across economic cycles. But what do we mean when we talk about quality and growth as attributes of a company? While there is no standard definition of quality or growth in the investing world, our quality rankings consider factors such as the stability, level, and trend of a company’s profitability as well as its balance-sheet strength, and our growth rankings consider historical and estimated future changes in sales, earnings, and cash flows.

How companies perform on those measures can change over time. Industry dynamics evolve, which can lead to a shift in competitive positioning. Macroeconomic cycles and deviations in management strategy can also alter the long-term outlook. Even companies that consistently rank highly for quality and growth must be continuously assessed for signs of deterioration in their financial health, competitive advantages, and other factors. The challenge isn’t just determining the businesses that meet our criteria today, but also which businesses will sustain their quality and growth characteristics over the long run.

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Fewer Babies Means Better Business for Diaper Maker

Japan has been undergoing a baby bust for decades. In the early 1970s, there were years where more than 2 million babies were born in Japan, but since then, those numbers have declined steadily. By the 1990s, there were about 1.2 million babies born each year in Japan, while in 2022, births fell below 800,000 for the first time.

Source: The Statistics Bureau of Japan

Analyzing Industry Structure through Porter’s Five Forces Model

As bottom-up investors, we aim to invest in high-quality growth businesses at reasonable prices to provide superior risk-adjusted returns over the long term. To determine what constitutes a high-quality growth business, we research a company’s management, financial strength, growth prospects, and we closely examine the industry in which it operates to determine the company’s competitive advantage.

It’s as important to examine a company’s industry as it is to examine the fundamentals of a company. An analysis of industry structure can inform how well-positioned a company is relative to competitors, as well as the profit potential for the company.

Our analysis is guided by Harvard University professor Michael Porter’s Five Forces, which were first introduced in a 1979 issue of Harvard Business Review and later detailed in his 1980 book, Competitive Strategy: Techniques for Analyzing Industries and Competitors.

In this six-part video series, we examine each Porter Force and discuss how we use them to analyze industries. Watch the series introduction below and click through to see how we leverage Michael Porter’s Five Forces framework for industry analysis.

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