Here’s what an old programming language can teach you about legacy companies.

From the desk of Miles Everson:

I’m thrilled to talk about another investing insight for today’s  “The Independent Investor.”

Every Wednesday, I feature investing insights and strategies in the hopes of helping you gain financial freedom through this activity.

Today, let’s talk about legacy companies, and why some of them are still poised to rake in billions of dollars despite the market’s thirst for the latest and greatest.

Continue reading below to know more.

Here’s what an old programming language can teach you about legacy companies.

Do you know what the biggest threat to the U.S. financial system is?

It’s not some foreign cyber entity.

It’s not rising debt levels.

… and it’s definitely not cryptocurrency.

It’s actually  old age .

You see, the bones holding the U.S. financial system together were largely built between the 1970s and 1990s—around the time computer systems proliferated and banks started hiring developers to digitize processes.

Back then, the biggest banks needed developers who were proficient in Common Business-Oriented Language (COBOL), a programming language that was used to move data around and do basic calculations.

During its heyday, programmers who were proficient in COBOL built millions of programs that handled various aspects of the U.S. financial system, including digital stock trading and paycheck calculations.

By now, one would probably assume that the U.S. financial system has moved away from COBOL as other programming languages like Python and Java have taken center stage.

That assumption couldn’t be farther from the truth, as the country’s financial systems still run on COBOL even though most of the developers who are proficient in this programming language are in their 60s, 70s, or older.

If It Ain’t Broke, Don’t Fix It

Even though young programmers can rebuild the U.S. financial system in modern programming languages, banks won’t pull the trigger, as they’d rather keep on using a tool that does the job well for them.

In fact, banks are more than willing to compensate retirement-aged COBOL developers hundreds of dollars an hour just to keep their systems running.

Needless to say, banks are willing to take as long as they can to completely replace their systems that run on this programming language.

COBOL’s story shows that sometimes, the speed of innovation just doesn’t matter. As long as an existing tool can do the job well, users are more than willing to use it for decades before replacing it.

This doesn’t just apply in the world of programming, but also in energy.

Right now, the technology exists for most cars to pivot from gas to electricity. Unfortunately, this transition is easier said than done.

Even though the government mandates help, it’s still going to take years and billions in spending for the entire world to fully pivot to renewable energy.

Take California for example:

The state introduced a plan in 2022 to wind down the sale of internal combustion engine vehicles as part of its effort to reduce carbon emissions.

However, California will only ban combustion-powered cars starting with 2026 models with a goal of a total ban by 2035.

Since the state implemented this plan, eight others have followed suit.

Yet, electric vehicles (EVs) only make up 1% of all cars on U.S. roads as of 2024, a figure that’s expected to reach only 13% by 2035.

At that rate, EVs won’t make up the majority of cars until 2050, even if the sale of gas-powered vehicles are banned by 2035.

The bottom line?

These companies often trade at a discount because the market is quick to assume they are doomed.

However, legacy oil and gas companies are still in a position to rake in plenty of cash because the world is still more than a decade away from phasing out gas-powered engines and it’ll take even longer before the use of clean energy surges ahead.

So, as an investor, don’t dismiss legacy companies so easily. They are much more resilient to change than you might think.

Hope you’ve found this week’s insights interesting and helpful.

Stay tuned for next Wednesday’s The Independent Investor!

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Learn more about  this “unnatural and insincere” guide  in next week’s article!