JRo’s Notes: Durable Value Creators, Lynchpin Assets, and Monopoly Market Structures

There are only so many durable value creators over decades-long periods! And by “only so many,” I mean a surprisingly tiny, almost infinitesimal, amount. 

According to Hendrik Bessembinder at Arizona State University, of the 29,081 companies in the United States that issued common stock from 1926 through 2025, 1,082 firms accounted for all of the net shareholder wealth creation and only 46 firms drove 50% of the shareholder wealth creation. In other words, 3.7% of businesses created 100% of the returns above T-bills and, you’ll have to squint to see this, but only 0.2% of companies created fully half of the shareholder wealth over the last 100 years. That number rounds to zero. Like I said, infinitesimal. 

And if you examine the list of stocks that generated the highest returns, the most common quality, IMO, is that most of them had some sort of monopoly (or duopoly or oligopoly) power. And I think specifically “earned” market leadership rather than a “regulated” monopoly of some sort. And the concentrated market structures (for example where three companies generate 70%-80% of global industry revenue) helps to create sustainably wide moats and high barriers to entry.

And so, what I do, at the risk of over-simplifying (but it’s not really over-simplifying at all), is I limit my investing universe for the Bastion Industrial and Infrastructure portfolio to mainly earned monopolies, duopolies, and triopolies that provide critical, indispensable hardware and other physical assets that the U.S. (and other parts of the world) desperately need. And in doing so, these companies serve as foundational lynchpin assets that national and world economies are built (and run) on. 

Let’s quickly examine the ultimate lynchpin asset. Taiwan Semiconductor (NYSE: TSM) is today, almost without question, the most important company in the world. It manufactures more than 60% of all the semiconductors in the world, and about 90% of the world’s most advanced (leading-edge and AI) chips, and as we all know by now, semiconductors are the foundational infrastructure technology that the world runs on. As far as I can tell, Taiwan Semiconductor manufactures roughly 100% of the most advanced chips from NVIDIA (Nasdaq: NVDA), Apple (Nasdaq: AAPL), Alphabet (Nasdaq: GOOGL), AMD (Nasdaq: AMD), and Amazon (Nasdaq: AMZN). This is why the island of Taiwan is one of the most geopolitically-important regions on earth, and I presume why NVIDIA CEO Jensen Huang just announced that NVIDIA plans to invest $150 billion per year into Taiwan. Jensen called Taiwan the “epicenter of the AI revolution.”

Now, Taiwan Semiconductor is not in the Bastion Industrial and Infrastructure portfolio because the portfolio is domestic-only, but let’s look at some lynchpin assets that are…

NVIDIA designs roughly 80%-85% of the world’s AI chips. NVIDIA CEO Jensen Huang is the architect of the global AI infrastructure buildout and has assembled the largest AI partner ecosystem, and NVIDIA is the company that is setting the pace of the AI race. 

KLA Corporation (Nasdaq: KLAC) operates in a global oligopoly for semiconductor capital equipment (or wafer fabrication equipment) with 56% global market share of process control, which is 6.5x higher than the #2 player. (As a third-party manufacturer (foundry), Taiwan Semi purchases KLA’s machines to help it churn out roughly two-thirds of all the chips in the world free of defect).

Including its 50/50 joint venture with Safran, GE Aerospace (NYSE: GE) is the world leader in commercial aircraft engines, powering roughly 75% of the world’s narrow-body engine cycles and 55% of wide-body cycles (note: one cycle is one start, takeoff, landing, and shutdown with everything in between such as thrust, climb, and descent…important because the higher-margin service business is driven by how long an engine runs but also how many cycles it goes through). 

Here are some more…

Heico (NYSE: HEI) is the world’s largest manufacturer of FAA-approved aftermarket (non-original equipment manufacturer) commercial aircraft replacement parts with an estimated 50% market share. GE Vernova (NYSE: GEV) operates in a global triopoly for large natural gas turbines and its equipment powers over 50% of the electricity in the U.S. and about 30% of the electricity in the world (outside of China). 

Quanta (NYSE: PWR) has built 50% of the long-distance, high-voltage transmission lines in the U.S. and about 15% of all the electrical transmission and distribution infrastructure in the U.S. Quanta’s business growth is supported (buoyed) by the almost-programmatic regulated spend requirements of utilities, and utilities across the board are increasing their medium-term five-year CapEx guidance because there is a general idea that we need to double the size of the U.S. electrical grid to support AI, reindustrialization, decarbonization, and the electrification of everything. So as utilities grow in size, Quanta will grow right alongside them.

Trane Technologies (NYSE: TT) has an estimated 30% global market share of commercial HVAC equipment. Linde (Nasdaq: LIN) also operates in a global triopoly, is the largest industrial gas company in the world, and provides about 30% of the world’s industrial gases (neat fact: Linde is also powering about 4 out of every 5 space launches in the U.S). Eaton (NYSE: ETN) is the largest supplier of electrical equipment in North America with about 30% market share. Cadence Design Systems (Nasdaq: CDNS) operates in a global triopoly (and one could argue even a duopoly) and has roughly 30% global market share of electronic design automation (EDA) software, which is the software used to design semiconductors. Amazon is the largest infrastructure cloud provider in the world with about 30% global market share. Amazon also controls about 40% of U.S. e-commerce. I could do this for most every business in the portfolio, but I’ll stop here for now.

So, if I think about the one filter (constraint) that would cull my universe down to the smallest number of companies most likely to create durable value for shareholders over the next ten to thirty-plus years, monopoly/duopoly/oligopoly power, combined with exemplary management, would probably be it. 

And so that’s what I do…I focus on what I think are durable moats and owner-operator-minded management (the M and M’s of investing, so to speak). I don’t sacrifice quality, and I limit my investing universe to only what I think are the 50 best-of-the-best companies in the United States. There are only so many of what I think are superbly-managed, sustainably-wide moat, market share leaders operating in large, long-duration growth markets so adding stocks to the investing universe is an extremely high hurdle and a slow process, but it does happen. If you’d like to read more thoughts on how I define quality, I wrote extensively on it here.

These companies earned (fought) their way to the top of a list of what I think are not only some of the highest quality companies in the world, but also the most important and consequential, and I think they have the cultures (based on resilience and adaptability) to maintain and even grow their market dominance and strategic importance over time. 

Why do I think this? Because they have some combo of technological leadership across wide product offerings (so they can provide the integrated, modular, prefabricated all-in-one solutions that hyperscalers and neo-clouds are demanding), the largest R&D budgets and long-term co-design relationships (meaning they have a seat at the table and are working on rack-level and broader data center designs two or three generations into the future), the manufacturing capacity to meet customer demand (speed-to-token), the balance sheets and free cash flow generation to fill in any missing puzzle pieces with acquisitions, a large and growing installed base of hardware providing a long tail of higher-margin, recurring services revenue, and 24/7 global service teams to keep everything running as efficiently as possible.

I don’t think it’s an exaggeration to say that reindustrialization is a matter of national security or that these businesses are strategic assets for the United States (and in some cases to the world). If we perform the David Gardner snap test on these companies and asked ourselves what would happen if any one of these companies were to mysteriously disappear (cease to exist), my answer is that I think the earth would cry!

So how am I different?

Well, for example, a lot of professional portfolio managers remain fully invested at all times (with no more than a low single digit percentage of cash) on the notion that professional investors should always be able to use skill and research ability to scour a larger investable universe to find 30 or 40 or 50 stocks to populate a portfolio with. I think that is the right strategy for most clients. And some portfolio managers can surely do this with great success. But that is just not me. I don’t pride myself on idea generation, but rather on whittling away and saying “no” to almost everything. My whole universe is only 50 stocks, so I sometimes end up sitting with a large (roughly 20% – 30%) cash position waiting for the right time to invest in what I think are the best-of-the-best businesses on behalf of my clients. I think a lot of portfolio managers take pride in always being able to populate a portfolio on behalf of their clients (and I think this is very commendable). But I take pride in resisting the temptation to get fully invested and not chasing, and instead having the patience to wait for VIX spikes, market sell-offs, and what I think are asymmetric opportunities. I take pride in saying “no” and avoiding FOMO.