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  • joliveras33 commented on Mitchell Mauer's article 04-24 14:22
    Crossing Your Fingers: The Best Way to Identify Stocks With Competitive Advantages
    When selecting a long-term stock investment, most investors take a page out of Warren Buffett (Trades, Portfolio)’s playbook and look for companies...
    View all 11 comments
    joliveras33 04-24 15:22
    • "Wall Street analysts grade stocks almost exclusively on the strength and sustainability of a company’s competitive advantage."

      Wall Street analyst can barely see beyond their bellies. They do not grade stocks. The rate stocks and the do so based, among other things, based on how much IB are getting from the company, to bond with management teams, and to attract trading business on the stock. They only care about the next quarter EPS and most of the time have no clue as to the CA. It is evident than only a handful of companies acquire "competitive advantage" (it would have been good for the article to define what CA is). Wall Street analysts rate anything that moves and gives their employer trading business. 

      "Value investors demand stocks that have track records of fending off competition and sustaining high profit margins."

      Ben Graham could not care less about fending off competition and sustainable profits. He tried to find cigar butts, get a couple of puffs and move on. Ben is the FATHER of value investing. VI is about getting more value than the price you pay. If you do this with perfectly disadvantaged companies you are still value investing. Buffett only moved to the CA style of investing in the 70's after having spent 20 years investing a la Graham, and according to him at the urge of Charlie.

      "Furthermore, predicting which companies will have strong competitive advantages in the future can be downright impossible."

      This is what this all about! You do not have to predict which companies will have CA. You need find the ones that have and are likely to continue enjoying of competitive advantage. This is you need to get comfortable about the stability of the moat. Substitures are the worst enemies of SCA because they make it irrelevant. Change is the enemy of SCA.

      However, things started to turn south quickly for Apple. While both founders – Steve Jobs and Steve Wozniak – moved on to other ventures, the company started losing market share. By 1996, industry experts and Wall Street analysts had left the company for dead.

      At the time, no one could foresee the return of Steve Jobs and the innovative products he would bring to the company. Rather than competing head-on with Microsoft (NASDAQ:MSFT) in the PC market, Jobs decided Apple would gain a competitive advantage by focusing on music-related products."

      As WEB has said: "I invest in companies that even a moron can run because one eventually will". This is to say that CA is INDEPENDENT of management. CA is a structural attribute related to the POSITION of the company in the industry. It has nothing to do with someone coming or leaving the company. It has to do with with the economics of the business.

      I could go on and on and on....



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