Money and Finance
From The Little Book That Builds Wealth:
- The Truly Exceptional Business...
From The Small-Cap Advantage: How Top Endowments and Foundations Turn Small Stocks into Big Returns:The truly exceptional business can operate with little capital. When U.S. securities markets function normally, most healthy businesses have no trouble...
- Brands And Competitive Advantages
From The Little Book That Builds Wealth: One of the most common mistakes investors make concerning brands is assuming that a well-known brand endows its owner with a competitive advantage. In fact, nothing could be further from the truth. A brand creates...
- Notes From A Meeting With Warren Buffett On November 15, 2013 - By Dr. David Kass
A big thanks to Peter for passing this along. My Alma Mater, Coastal Carolina University, also happened to be one of the 8 universities that attended the meeting. (11) You were the first person to use the term “moats” as competitive advantage. Morningstar...
- 5 Questions To Ask Yourself Before Buying A Stock
1. What do I know about this stock that other investors don't? Every investor who has ever bought a stock believes it to be undervalued or under-appreciated by the market, but before you press the "buy" button it's absolutely critical to...
- Why Moats Matter
I read Why Moats Matter while on Martha's Vineyard. This felt especially appropriate. The moat concept that Morningstar pioneered is all about different kinds of structural competitive advantages. When you are on an island like Martha's Vineyard,...
Money and Finance
Market Share and Moats
From The Little Book That Builds Wealth:
Surely, companies with large market shares must have economic moats, right?Unfortunately, bigger is not necessarily better when it comes to digging an economic moat. It is very easy to assume that a company with high market share has a sustainable competitive advantage—how else would it have grabbed a big chunk of the market?—but history shows us that leadership can be fleeting in highly competitive markets. Kodak (film), IBM (PCs), Netscape (Internet browsers), General Motors (automobiles), and Corel (word processing software) are only a few of the firms that have discovered this.In each of these cases, a dominant firm ceded significant market share to one or more challengers because it failed to build—or maintain—a moat around its business. So, the question to ask is not whether a firm has high market share, but rather how the firm achieved that share, which will give you insight into how defensible that dominant position will be.And in some cases, high market share makes very little difference. For example, in the orthopedic-device industry—artificial hips and knees—even the smaller players crank out very solid returns on invested capital, and market shares change glacially. There is relatively little benefit to being big in this market, because orthopedic surgeons typically don’t make implant decisions based on price.Also, switching costs are relatively high because each company’s device is implanted in a slightly different fashion, so doctors tend to stick with one company’s devices, and these switching costs are the same for all industry players, regardless of size. Finally, technological innovations are incremental, so there is not much benefit to having an outsized research budget.So, size can help a company create a competitive advantage...but it is rarely the source of an economic moat by itself. Likewise, high market share is not necessarily a moat.
- The Truly Exceptional Business...
From The Small-Cap Advantage: How Top Endowments and Foundations Turn Small Stocks into Big Returns:The truly exceptional business can operate with little capital. When U.S. securities markets function normally, most healthy businesses have no trouble...
- Brands And Competitive Advantages
From The Little Book That Builds Wealth: One of the most common mistakes investors make concerning brands is assuming that a well-known brand endows its owner with a competitive advantage. In fact, nothing could be further from the truth. A brand creates...
- Notes From A Meeting With Warren Buffett On November 15, 2013 - By Dr. David Kass
A big thanks to Peter for passing this along. My Alma Mater, Coastal Carolina University, also happened to be one of the 8 universities that attended the meeting. (11) You were the first person to use the term “moats” as competitive advantage. Morningstar...
- 5 Questions To Ask Yourself Before Buying A Stock
1. What do I know about this stock that other investors don't? Every investor who has ever bought a stock believes it to be undervalued or under-appreciated by the market, but before you press the "buy" button it's absolutely critical to...
- Why Moats Matter
I read Why Moats Matter while on Martha's Vineyard. This felt especially appropriate. The moat concept that Morningstar pioneered is all about different kinds of structural competitive advantages. When you are on an island like Martha's Vineyard,...