This article is based on TheStreet's Stock & Markets Podcast, Episode 8. Hosted by the veteran Wall Street investor Chris Versace, the weekly podcasts are available early to members of TheStreetPro investing club. The podcasts are also available on YouTube.
More than 40 years ago Tina Turner famously asked the world: "What's love got to with it?"
If the subject is investing, David Miller has a simple answer: not much.
Miller, chief investment officer of Catalyst Funds, spoke with Chris Versace, lead portfolio manager for TheStreet Pro Portfolio, in the June 4 edition, episode 8, of TheStreet Stocks & Markets Podcast, to talk about what his firm is looking for in a candidate for investment.
Catalyst Funds' chief investment officer, David Miller, and TheStreet Pro's lead portfolio manager, Chris Versace. Catalyst Funds looks for companies with very strong market positioning.TheStreet
"I think the sweet spot is where you have such a good business that even if people hate them they continue to grow and grow with high margins and high EPS growth," he said.
Fund manager Miller: Aim for strong market position
Miller cited the billionaire entrepreneur, venture capitalist and political activist Peter Thiel, who advises founders and entrepreneurs to aim for a monopoly and avoid competition.
"You're either in perfect competition or you have a monopoly or an oligopoly," he said. "And clearly, anyone who owns a business wants to be in that position where you have a monopoly rather than being in perfect competition."
He described how airlines historically haven't even earned their cost of capital and frequently end up going bankrupt. Restaurants, he said, have very high fixed costs and "just never earn outsized economic profits."
"Whereas you look at a company like a Visa (V) or Mastercard (MA) or a Microsoft or an Apple or an Adobe (ADBE) or an Nvidia," (NVDA) Miller said. "Phenomenal businesses, phenomenal margins, great tailwinds, really strong free cash flows."
So why invest in companies that aren't monopolies when many of the best returning stocks in history have turned into monopolies?
"[Frankly,] you don't have to try to pick which stock is going to be the best stock," Miller said. "You can just take these categories that are far superior businesses and invest in those. That's the ideology behind that fund and why we launched it."
Miller pointed to Apple (AAPL) , explaining that "once you're in the Apple ecosystem, they own you."
"You don't have a whole lot of choices and they can get great margins," he said.
"As someone who's been trapped in the Apple ecosystem willingly since 2005 I am perfectly content and happy," Versace responded.
"I certainly understand why a lot of people love Apple," Miller said. "I have the iPhone. I like Apple and I don't particularly like Microsoft, but I'm definitely a customer of Microsoft. I think the best businesses are those where you'll do business with them even if you don't like them."
Miller said Tesla (TSLA) fits this dynamic, as the electric-vehicle maker "launched a new monopoly or an oligopoly depending on how you look at it certainly from a market share perspective."
Investor says court action a good sign
"Once you decide you're going to get an EV, it's a lot easier to go ahead and buy a Tesla and be part of their ecosystem than it is to ... buy an EV that's not part of that Tesla ecosystem," he added.
Tesla shares have been thrashed lately — off 14% in regular trading June 5 — in light of Chief Executive Elon Musk's controversial involvement with the Department of Government Efficiency and backing of President Donald Trump.
(The two have fallen out and Musk has rankled the White House by describing what the president called his "big, beautiful" budget bill as pork-laden and a “disgusting abomination.”)
And while Tesla stock is down nearly 22% in 2025, it remains up about 60% from a year ago.
Miller said the courts provide one of the most telltale signs of a monopoly.
"Once the courts start coming after you for being a monopoly, that's a pretty good indication that you have some monopolistic characteristics in your business whether or not you want to admit it," he said.
Companies that historically been the targets of court action for their monopolistic characteristics have been phenomenal investments, he added.
"If you look at a company like Microsoft, (MSFT) if you got into [it when] the courts first came after them pretty hard, you'd be sitting pretty today," he said.
Monopolies to avoid include electric and water companies.
"If you're in a space where you have a product where your profits are regulated as to how much return on equity you can actually generate, we avoid those because what we want to go for is those that are growing monopolies."
And Miller prefers to leave emotion out of the equation.
"If people like a product, that's great," he said, "but what I really prefer is that they need the product rather than they like the product, and that there's some growing demand around it."
